All the Presidents' Bankers (49 page)

As Johnson assumed the presidency, the country was enjoying an economic boom that had begun under Kennedy and surged after the Cuban missile crisis. Industrial production hit new highs. Companies reached an unprecedented $51 billion in pretax profit.
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Detroit’s automakers enjoyed their best year ever. Steel attained its highest output level in six years. By the end of 1963, the economy was only a few months away from its longest sustained peacetime recovery since World War II.
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Consumers were setting new spending records. That “buy now, pay later” mentality cradled the nascent credit card business, which had experienced growing pains in the 1950s but stood poised for an upsurge. Racking up debt inevitably trumped saving. That was good for banks, which would make more money on interest payments for the new credit they extended while seeking out fresh capital sources, internationally and domestically. Bankers were also becoming less conservative about maintaining that capital in reserve against potential losses. The risks that bankers would soon take was commensurate with the invincibility they felt, as the pain of the Great Depression, and the prudency it fostered, gave way to a recklessness of accumulation.

During the pre-Depression era, consumer credit had more than doubled, from $1.4 billion in 1925 to $3 billion in 1929.
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But that increase was nothing compared to what transpired in the early 1960s. Outstanding household consumer credit increased nearly $10 billion in 1963, from $69.3 billion to
$77.9 billion.
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Appliance manufacturers were having their best years since the early 1950s. Abundant mortgage money fueled a housing boom. The stock market hit records.

“The little man is buying stocks again,” noted
Time Magazine.

That vote of confidence meant that the financiers could profit further from the little man’s investments. In this quest, President Johnson would prove an able partner. If Eisenhower was a liberal Republican, Johnson was his doppelgänger: a conservative Democrat, friendly and respectful with bankers, progressive with the public. The banking community’s embrace provided Johnson with an easier platform from which to pass economic proposals that Kennedy couldn’t. For instance, Kennedy never managed to get his $11 billion tax cut bill through Congress, which wrangled obsessively over companion spending cuts and barely restrained antagonism toward the young president.

Johnson was determined to bulldog it through, Texas style. He privately enlisted bankers and businessmen to help him, and publicly assured the country of continuity with an adored Kennedy. In his November 27, 1963, speech before Congress, he said, “No act of ours could more fittingly continue the work of President Kennedy than the early passage of the tax bill for which he fought all this long year.”
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Johnson did not leave the result to chance. He utilized Wall Street’s backing.

Bankers were now supporting the very policy they had rejected, citing inflation fears, under Kennedy, who didn’t live to see his tax plans approved. For Johnson, the timing of Kennedy’s death could not have been better. With an economy on the rise, he had the political capital (and skill) to pass progressive acts like Medicare and the various Great Society initiatives that enabled people to achieve greater economic equality. He passed the 1964 Civil Rights Act. He would preside over the biggest drop in national poverty of any president—from 22 percent to 13 percent during his five years in office. He increased the minimum benefit of Social Security, lifting 2.5 million seniors out of poverty. He established higher education grants and scholarships; the Elementary and Secondary Education Act, which provided federal aid for the first time to local public schools; and the food stamps program. He managed to do all this while remaining the bankers’ ally. In short, he struck a perfect political-financial balance.

“So far, Pres. Johnson has won a reception from businessmen that is cordial beyond anything lately experienced by a Democratic president,” noted a December 1963
Time
article. “In homey speeches to them at White House meetings and in personal phone calls, Johnson has appeared a friendly,
conservative chief executive who understands business.”
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And he would do everything to keep it that way.

Dillon and Wall Street

Given the circumstances, Kennedy’s Treasury secretary, C. Douglas Dillon, remained in his post. But even if Kennedy hadn’t picked a Republican banker to run the Treasury Department, Dillon suited Johnson’s strategy of incorporating the business community in his policies in a bipartisan manner. Keeping Dillon in place further validated Johnson in the eyes of the Wall Street community.

Dillon had plenty of Wall Street ties from his banker days, along with the benefit of having been born the son of the founder of the prestigious US-based international investment bank Dillon, Read & Company.
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He was also uniquely positioned to offer contrasting observations between Kennedy and Johnson with respect to their economic policies and personalities. Notably, he considered Kennedy to have been narrowly obsessed with the balance of payments and his “phobia about gold,” whereas he considered Johnson’s conceptual scope about domestic and foreign financial polices much broader.

With respect to the tax program, he felt both presidents were on the same page.
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But regarding the budget cuts that accompanied the tax cut bill passed under Johnson, Dillon said that Johnson had more experience to negotiate them, having served on the Senate Appropriations Committee. In general, Dillon felt that Kennedy didn’t have a “particular interest in budget details,” and that he and Johnson were very “different kinds of men.”
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The difference in their personal styles, among other things, was reflected in the length of their conversations and the extent of their written communication. Johnson, Dillon recalled, liked to talk (a lot!) when someone came in to see him, whereas Kennedy would “sit down and talk for three or four minutes about something” and then say, “Bye.”
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The amount of time Johnson spent interacting with bankers and businessmen—talking to them on the phone, remembering details about their families, asking them for help directly and indirectly, writing them letters—greatly affected their support of him and his policies. The relationship was one of mutual use value.

Under Johnson, bankers didn’t need to worry about regulatory impediments to their practices. And with bankers’ support, Johnson could be
assured a host of positives, from campaign funding to backing for his progressive policies to support for the Vietnam War. The nature of the symbiotic relationship Johnson had with the financiers was something that Kennedy either didn’t fully understand until well into his second year or hadn’t successfully entertained. Perhaps his ego or personal style rendered him uncomfortable asking for assistance from these men until later in his term. Or he didn’t think he needed them until it was too late. But whatever his reasons, his behavior toward bankers made his policy progress harder to attain. Johnson was having none of that. Besides, he liked the bankers. They spoke the same “get it done my way” language.

In another contrast to Kennedy, Johnson was not a huge fan of John McCloy.
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Johnson’s friend J. Edgar Hoover, head of the FBI, didn’t like McCloy at all, having clashed with him over alleged Communist tendencies during the Eisenhower presidency.

Yet Johnson needed a loyal legal mind to probe into Kennedy’s murder—in order to move past it. So he appointed McCloy to the Warren Commission, established to circumvent a broader congressional investigation into the assassination.

Johnson wanted the investigation wrapped up by the November 1964 election. Lingering questions about Kennedy would detract from his power. But the commission got off to a slow start. McCloy expressed his doubts about this delay and lack of subpoena power at a January 8, 1964, dinner at CIA director John McCone’s home.

The next day, McCone informed Johnson that McCloy was concerned “over the lack of action on the part of the Commission.”
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Despite that concern, McCloy attended just sixteen of fifty-one formal commission sessions. He had been hesitant from the start despite his past collaboration with Kennedy and was now focused on private concerns. He forewarned Warren he had “a terrific schedule” that was “just piled up at this time.”
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Despite his reservation on the matter, he ultimately inserted a key phrase into the summary of the commission’s 50,000-page report indicating that “based on all available evidence” there had been no findings of any conspiracy.
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It was a legalistic cop-out that served Johnson’s goal of moving forward.

The exercise appeared to have left a bad taste in his mouth, though, for as soon as Johnson began his second term (first full term) as president, McCloy removed himself from Johnson’s administration. He tendered his resignation as chairman of the General Advisory Committee on Disarmament on January 20, 1965.
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Rockefeller, Russia, and Johnson’s Victory

Though the domestic economy was thriving, Cold War–related hostilities were hampering bankers’ international growth ambitions. The financial globalists sought to realign US foreign policy with their expansion goals. They wanted the US government to open trade relations with more countries; Kennedy’s Trade Expansion Act had not done enough to expand financial opportunities around the world.

As a result, on March 12, 1964, the Senate Foreign Relations Committee began hearings on the topic of East-West trade, specifically trade with Communist nations, which had been an almost forbidden topic since the Cold War began. But for the financiers, more than ideology or even military supremacy was at stake. US companies and bankers were starting to lose significant amounts of money to other countries that had emerged from the economic burdens of World War II and adopted more open trade policies than the United States was entertaining. They weren’t, in other words, tying trade and market activities to political ideologies. During 1962, for example, the non-Communist countries had sold $4.5 billion of goods to the Soviet Bloc in Europe, whereas the United States had sold only $145 million. Both the US manufacturing and banking industries wanted a piece of that activity.

The Cold War atmosphere made the idea of publicly supporting trade with the Communist nations less than fashionable, even detrimental vis-à-vis the domestic customer base, and thus something to be discussed only off the record. But certain businessmen began expressing their discontent at prevailing foreign trade policy in caged tones, such as:
If
the government would only support selling US products to the Soviet Union,
then
they would be happy to oblige.
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One businessman, David Rockefeller, had no interest in such chicken-and-egg equivocations. Chase had recently opened a branch in Hong Kong, after all. He directly called for the US government to explore an arrangement whereby if China abandoned its “belligerence” and started trading openly with the United States, then the United States could do the same.

Rockefeller’s political-financial diplomacy extended to the Soviet Union. During midsummer 1964, he and his daughter Neva arrived in Leningrad. They were subsequently collected from their hotel and transported to the Kremlin to meet with Premier Khrushchev.
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When the conversation that transpired inevitably centered on Cuba, Khrushchev pointed out that the
Cuban Revolution had occurred well before the Soviet Union was even recognized diplomatically by Castro, and thus the Soviet Union was not to be blamed for it. The Cuban Revolution, and Castro’s assent and subsequent nationalization of foreign banks, had placed a real damper on the affiliations that Chase and other banks had established in Cuba during the mid-1950s.

Rockefeller disagreed with Khrushchev, and the conversation became heated. The two men eventually reached an impasse. Khrushchev aptly summarized, “You are a capitalist and a Rockefeller. I am a Communist. You are a banker. I was a miner.”
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Upon his return to the United States, Rockefeller sent his meeting notes to President Johnson and Secretary of State Rusk, who had previously served for eight years as president of the Rockefeller Foundation. Johnson was grateful that Rockefeller had “expressed most effectively the American viewpoint on the key issue” that he discussed. On a more personal note, as he always found, Johnson added, “I understand your daughter, Neva, was a genuine asset to the American delegation in Leningrad.”
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Johnson subsequently invited Rockefeller to the White House to discuss Rockefeller’s impressions further. Rockefeller conveyed that Khrushchev was open to peace but warned Johnson that he couldn’t be seen as soft on Communism before the election against Barry Goldwater. Johnson had already been taking Rockefeller’s advice. Following the Tonkin Gulf incident, in which North Vietnam and the US engaged in two instances of sea and air combat, Johnson declared in his August 5, 1964, speech to Congress that Vietnam was “not just a jungle war, but a struggle for freedom on every front of human activity.”
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Channeling Eisenhower’s policy of providing US military support to countries subject to Communist revolt, and JFK’s decision to dramatically increase the number of troops Eisenhower had placed in Vietnam (“We also have to participate—we may not like it—in the defense of Asia,” he declared in September 1963), Johnson recommended Congress pass a resolution expressing its support “for all necessary action to protect our Armed Forces and to assist nations covered by the SEATO Treaty.”
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Further, as per Rockefeller’s advice, he stressed that “an additional reason for doing so at a time when we are entering on three months of political campaigning” is that “hostile nations must understand that in such a period the United States will continue to protect its national interests, and that in these matters there is no division among us.” Johnson signed the Tonkin resolution on August 10, 1964.
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He positioned the fighting in Vietnam as a matter of national security and political unification. The strategy worked for him.