All the Presidents' Bankers (48 page)

It was a clumsy, desperate notion on Kennedy’s part; to ask Wriston to find ways for foreign banks to fund US companies abroad would be to ask
him to detract business away from his overseas branches. He had no incentive to put the country’s economic issues ahead of his own.
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Nor did he try to. There was too much money to be made.

The bankers did support Kennedy’s foreign aid budget—or at least the part that aligned with their goals. On October 11, Rockefeller and nine other prominent business leaders protested a cut in Latin aid from $600 million to $450 million that the House had just passed and urged the Senate Foreign Relations Committee to restore the $150 million to the Alliance for Progress. In a cover letter to Senator J. William Fulbright, Rockefeller wrote that the actions of the House were “deeply disturbing to many in the business community.”
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Rockefeller, First National City president George Moore, and Kennedy got their wish. The Senate restored the $600 million in their November 7 budget vote, even as it voted to reduce Kennedy’s foreign aid budget in general.

As one of his last personal requests to Kennedy, McCloy asked him to give a speech at his alma mater, Amherst College, for the groundbreaking of the Robert Frost Memorial Library. Kennedy flew to Massachusetts to address a crowd of ten thousand people and pay homage to the recently deceased poet. He also received an honorary law degree. At a time when 50 percent of the students at private universities came from the top 10 percent of the wealthiest Americans, Kennedy said, “Privilege is here, and with privilege goes responsibility.”
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He also said, “When power leads men towards arrogance, poetry reminds him of his limitations.” But rather than taking Kennedy’s words to heart, bankers were working hard to increase their power around the globe.

Bankers Forge Ahead

As the mid-1960s approached, private investments by Americans and companies abroad totaled $60 billion, exceeding foreign holdings in America by $25 billion.
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The US banks that operated through their British arms were free of the constraints of the Glass-Steagall Act. In London, they could underwrite securities and perform other related deposit and lending activities, a combination off-limits to them in the United States.

This international loophole stoked First National City Bank’s global profits. For instance, Shell Oil called First National City Bank requesting an immediate $100 million term loan to buy an international company. In a matter of days, Wriston put together the world’s first Eurodollar syndicated loan.
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From that point onward, the amount of syndicated Eurodollar loans escalated. With their rise, the days of true relationship banking and individual
banker culpability became numbered. A new era of anonymous banking was being born. Rather than one bank being predominantly responsible for a major loan, a whole syndicate would share the risk, which meant they could afford to care less about the risk and the client. That spelled the end of the illusion of personalized service, even for major corporate clients.

The “syndicate” was evangelized by “tombstone” advertisements that listed the participating banks on the pages of glossy financial publications, in order of their importance in the deal. Banks jockeyed for the top spot to attain bragging and selling rights. First National City and Chase topped many tombstones. Flashy young salesmen with little knowledge of finance itself infiltrated the banking business, pitching loan deals at lavish dinners, exclusive sports events, and upscale stripper joints.

With more capital finding its way over national borders, cracks began showing in the Bretton Woods system of fixed exchange rates. Wriston (like Rockefeller) considered attempts to control monetary flows detrimental to the US role as a preeminent financial center, but more so to free-market banking philosophy generally. Kennedy, on the other hand, didn’t support that view. In October 1963, Congress considered doubling the price of gold, or freeing up $12 billion in gold, to counteract foreign governments and central banks that were calling in the gold that backed their US dollars.

Wriston later wrote, “In 1963, the United States began a futile bout with capital controls, triggering a further exodus of American capital. In this period, New York banks began to finance projects in America with dollars deposited in European banks.”
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This deregulatory argument would be used widely from that point onward.

First National City president George Moore also wanted the government to back off. He explained, “Any prolonged debate in Congress over the enactment of such legislation would further damage confidence in the dollar.”
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As it turned out, further decisions as to what would have happened to the dollar and to gold under a Kennedy administration were cut tragically short. Shortly after noon on November 22, 1963, Kennedy was assassinated.

Country in Mourning, Bankers in Flux

Treasury Secretary Dillon immediately telegrammed his condolences to Vice President Lyndon B. Johnson upon hearing the news.
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Similar wires, telegrams, and letters began streaming in from around the world. Every Wall Street titan quickly offered his sympathies to the Texan who would assume the Oval Office.
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Within an hour of the announcement, all major exchanges had ceased trading. The Federal Reserve moved to prevent a possible panic. Alfred Hayes, president of the New York Fed, signaled to investors that the Federal Reserve and European central banks would cooperate to thwart speculation against the dollar in the foreign exchange markets.
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Bankers were summoned to the New York Fed headquarters for a damage-control meeting, where they were asked to buy dollars around the world.

New York governor Nelson Rockefeller declared November 25, 1963, a state holiday. Banks, securities exchanges, and commodity markets would be closed to mourn Kennedy and avoid the possibility of related losses.
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Along with the rest of the nation, Joseph P. Kennedy watched his son’s funeral procession and his grandson’s salute to the motorcade carrying the flag-draped coffin on television. He sat virtually speechless and crippled from a stroke two years earlier.
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There had been much talk about frosty relations between father and president, not least because, as columnist Drew Pearson recalled, it was only once “Joe, Jr., was shot down by a Nazi pursuit plane off the coast of Portugal during the war” that “Joe, Sr., concentrated on his next son, Jack.”
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Joe had also lost his daughter Kathleen at the tender age of twenty-eight. Regardless of the status of their relationship at the time, in the days that followed the death of his son, Joe Sr. brimmed with personal, historical loss.

Young Bankers Rising

In the shadow of Kennedy’s murder, his young adversary stood poised to grab a larger role influencing international financial policy. Wriston’s international division opened its 100th and 101st foreign branches, in Durban, South Africa, and New Delhi, India, respectively.
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First National City Bank now had more overseas branches than any other American bank, spanning thirty-four countries on five continents.

In a piece it decided to run just two days after Kennedy’s death, the
New York Times
glowed, “Tall, lanky, youthful Walt Wriston looks, talks, and acts like anything but the ‘typical banker’ . . . whose fingers rest on the levers that make the big money flow.”

The paper was oblivious to tension between Wriston and Kennedy before his death. According to the article, Wriston “knows the bankers who count from London to Tokyo, from Cape Town to Cairo,” yet he never “served a pitch on foreign soil.” Technological advances in banking and communications, the offering of more flight routes, and an eager set of bankers willing to jet anywhere to push a deal enabled Wriston to do much from his New York office.

Of the recent rush of American banks opening offices in Europe to take advantage of the Eurodollar market, Wriston quipped, “Europe is a pretty girl everyone has just discovered at the dance.”
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In truth, as Wriston knew well, the Eurodollar market was more than a fad. It was a means to circumvent US banking regulations and establish an international command station from which to dominate an increasingly globalized financial arena.

David Rockefeller’s Unfolding Agenda

Under Johnson, the globe remained David Rockefeller’s theater, and his connection to Washington would solidify. He became the banker with whom Johnson had the most frequent communication on policies. (Johnson had the closest personal contact with his banker friend Sidney Weinberg.)
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Rockefeller was also the first banker to follow his condolences to Johnson with his agenda.

He saw Kennedy’s Alliance for Progress program as a support mechanism for his expansionist economic policy, and he had no intention of letting Kennedy’s death change the momentum. Less than a week after Kennedy was laid to rest, Rockefeller informed Johnson that Kennedy had sent him a letter two days before his death in which he said he “would welcome having the appropriate agencies of government” meet with Rockefeller’s Business Group for Latin America.
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Rockefeller needed Johnson’s approval for the plan to come to fruition. Johnson responded with unequivocal support for the Alliance for Progress, particularly the private enterprise component that Rockefeller so earnestly advocated. The initiative served both men. For Rockefeller it provided broader entry into a region rich with financial promise, and for Johnson it meant business-sector support for an area rich with political promise. Backing non-Communist countries in Latin America with a combination of private and public capital would provide another signal of Johnson’s strength against the Soviets.

“I . . . want . . . to reaffirm the important role that private enterprise has to play in helping to achieve the goals of the Alliance for Progress,” Johnson replied.
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Over the next few years, several critical meetings took place between Johnson, Rockefeller, and the Business Group for Latin America. As a result of the alignment of Johnson and the financial sector, US banks more aggressively set up branches and bought ownership percentages in locally established banks in the region.
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The financialization of foreign policy would continue to disperse globally with impunity.

CHAPTER 12

T
HE
M
ID
-
TO
L
ATE
1960
S
: P
ROGRESSIVE
P
OLICIES AND
B
ANKERS
’ E
CONOMY

“We are willing to offer our free-world friends access to American markets, but we expect and we must have access to their markets also.”

—President Lyndon Johnson, April 21, 1964

T
HOUGH
K
ENNEDY
’
S ASSASSINATION GAVE STOCKS AN INITIAL SHOCK, THE
New York Stock Exchange scored its largest one-day percentage gain since 1940 the day after his funeral.
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For much of Wall Street, Kennedy’s death seemed like a minor obstacle to be discarded, not unlike the capital-flow restrictions he had supported as president. The country required a sense of continuity after the emotional trauma of his murder, and that was something Johnson could provide. The bankers, on the other hand, supported Johnson because they knew that he supported them—politically and personally. Their mutual power reinforcement would last through much of the Vietnam War, waning only as Johnson’s own power faded in its dark shadows.

George Keith Funston, president of the New York Stock Exchange, equated the buoyancy of the market with the American spirit, concluding that “the emotional selloff of Friday did not reflect a real appraisal of the country’s economy and its strength.”
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It was also indicative of how little the nation’s executive leadership meant to Wall Street, since its lead bankers now felt more firmly in command. If anything, Johnson would enable their influence over the US economy and international trade partners to grow. After congratulating Funston, Johnson shrewdly capitalized on the stock market’s resilience to solidify his business credibility. He invited ninety top members of the Business Council to the White House Fish Room. There, he rallied their endorsement with his signature booming voice.

“We need the can-do spirit of the American businessman,” he told them. “So I ask you: banish your fears, shed your doubts, renew your hopes. We have much work to do.” His speech achieved its intended goal of strengthening his alliance with the financiers and their clients. “No one has ever made a more stirring address to businessmen,” pronounced Goldman Sachs head Sidney Weinberg, “and in thirty years I’ve heard a lot of them.”
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