All the Presidents' Bankers (40 page)

Occasionally, Weinberg would get involved in specific issues. In February 1954 he wired former New Hampshire governor Sherman Adams (Eisenhower’s second chief of staff) to inform him that the Democrats were spreading the “fear deal” (as opposed to the New Deal), using Adams’s coined phrase to Adams’s delight. But usually, there was an element of political recruitment involved, as when Weinberg combined his support for the Road Committee (charged with carrying out the president’s interstate highway system initiative) with suggestions as to how to populate it in mid-1954. More letters came to Weinberg soliciting his opinion than he ever answered.

Ike’s Victory

Eisenhower handily won the 1952 election, backed by both Republican and Democratic bankers. His messages of peace interlaced with Cold War warnings also provided bankers the perfect angle from which to further engage the population in their services. This time, banks wouldn’t have to count on wartime patriotism to sell bonds; they could extend credit to Americans for all the things they had been denied during war.

Most accounts of President Eisenhower, including his own ample collections, emphasize his status as a war hero, his farewell warning about the dangers of the military-industrial complex, and his superhighway initiative. There are poignant moments in his diaries where he feared growing older and less important. Perhaps he felt that the extensive advisers he surrounded himself with were calling more shots than he was.

A moderate conservative (in today’s terms he might even be considered a conservative democrat with libertarian leanings), Eisenhower was opposed to US debt increases (many of his aides were debt hawks) and government intervention in the private lives of citizens, yet he acknowledged the periodic necessity of both.

On the foreign front, Eisenhower deposed the leaders of Iran and Guatemala, ended the Korean War by threatening an atomic bomb attack, and shunned the idea of too overt an association with Britain before, and after, the Suez Canal crisis.

From an alliance standpoint, Ike was a president who “belonged” to Wall Street in policy and personal ways. Truman’s personality and background didn’t lend itself as well to trust or interconnectivity with the wealthy elite. But Eisenhower, with his gregarious and commanding demeanor, coveted the counsel and company of bankers, as well as the leading industrialists upon whose boards they sat. Perusing hundreds of his letters and diary entries, it’s clear that Ike really liked them. He relied on their opinions more directly for counsel on his economic and domestic policies than any other president had during the first half of the century.

In return, the bankers found in him a staunch buddy, a chief commander they golfed with and engaged in conversations about changing times, sharing war stories and discussing the bright horizons beckoning America as the world’s sole superpower.

Eisenhower’s Wall Street Ties

At the advice of Sidney Weinberg and General Lucius Clay, who had worked with Weinberg on German reconstruction plans, Eisenhower appointed George Humphrey, former president of the Cleveland-based steel company M. A. Hanna and an industrialist fan of free-market doctrine, as his Treasury secretary. (Humphrey would return to M. A. Hanna afterward.)

In December 1952, following discussions with Humphrey aboard the cruiser
Helena
during his return trip from Korea, Eisenhower named three other men to round out the Treasury Department.
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W. Randolph Burgess,
chairman of the executive committee at National City Bank, would be special deputy on monetary and debt management policies; Marion Folsom, treasurer of the Eastman Kodak company, would be undersecretary with a focus on tax policies; and H. Chapman Rose, counsel for M. A. Hanna, would be assistant Treasury secretary.

Both Folsom and Burgess, who considered a balanced national budget “the most sacred principle of sound money” and favored more independence for the Federal Reserve, supported the idea of a foreign policy centered on trade rather than aid. Trade was profitable; aid was too socialistic.

Burgess’s responsibilities in public office were similar to the ones he had in the private sector, but in a more influential sphere: he oversaw Treasury financing and foreign operations, and made decisions about IMF activities.
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However, Eisenhower’s most trusted economic adviser was not his Treasury secretary; it was Gabriel Hauge, a young economist who would shape US policy behind the scenes for six years before leaving to become a senior executive at the Manufacturers Trust Bank. (Established in 1905, it would later become one of the legacy banks that would comprise JPMorgan Chase.)

Ike’s Right-Hand Economist-Banker

Hauge filled in the president’s “uneven” knowledge of economics, as he called it. The two also got along well. “I remember he always used to refer to me as ‘Dr. Hauge’ or ‘Hauge,’” he later recalled, “until one day he referred to me as ‘Gabe’ in a meeting. Then I knew we were all right.”
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A slightly jowly man with slicked-back black hair and light rimmed glasses, Hauge was born in Hawley, Minnesota, in 1914, son of a pastor at the local Lutheran church. After receiving his MA and PhD at Harvard, he became a prominent economics professor at Harvard and Princeton. From there he (like Burgess) became a senior statistician at the Federal Reserve Bank of New York. He joined Citizens for Eisenhower in November 1951.

Hauge served as Ike’s lead speechwriter during the 1952 campaign, and as his main economic adviser from 1953 to 1958. It was not just in economic policy but also in the perfect articulation of the messages behind it that Hauge’s influence shone. He was dogmatic about crafting, and measuring responses to, Ike’s statements: a skilled spinmaster.

For instance, in a June 22, 1953, memorandum to Eisenhower, he noted negative press reaction to Ike’s informal remarks about “creeping socialism” regarding FDR’s Tennessee Valley Authority. Hauge suggested the terms
“creeping centralization” or “creeping big government” instead.
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Though he technically served on the personal staff of the president and didn’t hold an official public post, Hauge’s free-market opinions would populate many of Eisenhower’s domestic policy speeches.
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Ike’s banker sphere also included his secretary of war, Thomas Gates, who would later chair the Morgan Guaranty Bank. The circle encompassed the globally minded Chase chairman Winthrop Aldrich, who would become Ike’s ambassador to Britain, and the ubiquitous power broker John McCloy, who spent the Eisenhower years as chairman of Chase National Bank. McCloy had met Ike during World War II while serving as assistant secretary of war and as one of Secretary of War Henry Stimson’s six “wise men.” He and the president shared a fascination with puddle jumper planes.
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Ike’s more domestically oriented Wall Street friends included Weinberg, who served as his behind-the-scenes headhunter but influenced little policy, and Morgan head George Whitney, who shared his populist opinions and golf club lifestyle. Rounding out the mix was Whitney’s successor, Henry Alexander, who presided over a mega-merger in 1959, recapturing the wilted power of the House of Morgan.
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These men, by virtue of their positions and ambitions, were more a part of Ike’s presidency and America’s legacy than any other official cabinet member. All of them would use the Cold War backdrop to usher in a policy of American freedoms, which in the heart of America meant free markets and a free banking system. This would translate to initial campaigns to reduce regulations and enable mega-mergers that fostered greater consolidation and thus decreased competition. Whereas competition was the theoretical cornerstone of the notion of “free markets,” these moves would foster the opposite: markets that were not free but that merely benefited the larger players.

George Whitney, Ike’s Progressive Banker

George Whitney counterbalanced the more conservative approaches of Ike’s Treasury Department and economic advisers. After nearly two decades at J. P. Morgan, he succeeded Leffingwell as chairman and served from 1955 to 1959. Like Weinberg and Aldrich, he played a major part in helping to finance Eisenhower’s campaign. He also had a warm personal relationship with Ike and served as his close unofficial adviser on a variety of issues.

Whenever he requested one, Whitney received an appointment with Eisenhower. He helped balance Eisenhower’s economic thinking relative to his more right-wing advisers. Whitney’s opinions were unique; he was one of the
few bankers advocating for policies to strengthen the middle class, even if the upper class was sacrificed in the process.

For example, while Hauge opposed cost-of-living increases for workers, Whitney advocated an equalization policy for the lower class. Whitney expressed as much to Ike in a private letter penned on January 19, 1954. At the time employment figures were dipping, and there were calls emanating from the business community to balance the budget and reduce corporate taxes. Whitney wanted to help the nonrich, ignore the deficit, keep corporate taxes where they were, and support the nation’s workers. His thoughts reflected Eisenhower’s, and Eisenhower was grateful for his perspective, which weaved its way back to the president’s advisers.

“It is not now the time to balance the budget,” wrote Whitney. “I couldn’t agree more that the further reduction in corporate taxes and excise taxes are not proper in principle and certainly not unless something is done in the income taxes of those in the lower economic brackets. That is the greatest shot in the arm to the economy because it puts the spending money in the hands of those who spend it. $75 in the hands of a $4,000 a year man is a lot of money when multiplied by some 50 million families.” He concluded, “The economic welfare of the whole country is still more important and the best way to stabilize it is to increase the spendable income of the lower tax brackets.”
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Whitney appealed to Eisenhower’s more public-spirited views. His brand of populist considerations also snaked its way into certain bankers’ views during the administration of Lyndon B. Johnson in the 1960s, but afterward it became a relic of a bygone postwar, post-Depression era, as bulging paychecks trumped self-sacrifice.

The End of the Korean War

In a June 10, 1953, statement, Eisenhower made it clear that US military isolationism was not an option. This enabled him to invoke US military intervention against Communism while promoting free trade, which entailed international financing and helped the bankers’ expansion plans. Two days later, in his role as British ambassador, Aldrich endorsed Eisenhower’s two-way trade program at a dedication of the Aldrich (in honor of his father, Fed founder Nelson Aldrich) and Kresge Halls at his alma mater, Harvard University. He pressed for immediate support for Eisenhower’s proposed program of “healthy two-way trade” with other nations, calling it vital to the political and security interests of the United States and the free world. He also stressed the importance of increasing US imports and admonished
the “archaic” policy of purchasing goods abroad only in “exceptional cases.” Absent extenuating circumstances, he recommended that the US make its public purchases “wherever goods of comparable quality can be found on competitive and advantageous terms.”
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Thus, Aldrich also served as an ambassador for globalized “free trade,” which in practice meant the removal of barriers around commodity-rich nations. His old colleagues at Chase were translating this into a business strategy that involved finding nations where cheap goods or raw commodities could be purchased and converted to products for external consumption and profit. These nations tended to be located in Latin America. The idea of prying open local markets into which new bank offices or branches could situate themselves dovetailed nicely with Eisenhower’s doctrine of increasing foreign trade with allies and non-Communist countries. The more countries that remained faithful to the US notion of democracy (equated with free-market capitalism), the more countries in which US bankers could operate.

Aldrich went so far as to claim that failure to initiate more open trade would be a political failure as well, undermining the prosperity of the United States and its allies. “The US learned by painful experience that it can afford neither political nor military isolationism,” he stressed. Americans “now must learn that we cannot afford economic isolationism.”

In that manner, Aldrich summarized the Cold War president-banker doctrine of political, military, and economic internationalism; all three elements coalesced to promote the export of American financial capitalism wrapped in a package called “free nations” with an added flourish of “free markets.” The doctrine would result in a world divide that wasn’t just between capitalism and Communism but also between the countries that produced cheap goods, like in Latin America, and the ones, like America and its major European allies, that exploited them.

Two weeks later, on July 27, 1953, Eisenhower ended the Korean War with the threat to drop another atomic bomb. The way he accomplished this left lingering bad feelings with British prime minister Winston Churchill because Churchill felt he had not been sufficiently consulted in the process. In a December 10, 1953, diary entry, Eisenhower was irritated by the Brit’s emotional response. “[Secretary of State John] Foster Dulles explained the position in Korea,” he wrote. “The only part of the discussion that led to opposition (this from Winston) was the assertion that in the event of renewed attack, we would feel free to use the atomic bomb against military targets.”
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