All the Presidents' Bankers (50 page)

Weinberg’s Help

Johnson had Wall Street on his side. In particular, Sidney Weinberg gave him more than election or anti-Communism advice. He cofounded the 1964 National Independent Committee for Johnson to raise money for his campaign. Later, in mid-1965, he became a chief contributor to the American Friends of Vietnam, a nonprofit organization created “to support a free and democratic Vietnam.” In this role he raised $22,500, including $10,000 from his client the Ford Motor Company Fund.
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Weinberg’s relationship with Johnson spanned decades, going back to the FDR days. Under Johnson, he became a regular on the list of White House invitees for everything from sixty-person “businessmen luncheons” to intimate White House Family Dining Room dinners confined to Johnson’s inner circle.
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On September 17, 1964, the
Washington Daily News
ran the fourth segment of its “Big 10 in Business” series. Highlighting Weinberg, the paper described him as “short (5 feet 4), effervescent, energetic, smartly-dressed, owl-eyes and brimming over with ego . . . a perky and pragmatic 72 year old [who] remains today the highly influential businessman he has been for the past four decades.”
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The article captured Johnson’s attention and appreciation. The next day, in a letter of gratitude, he recalled the days when the two were “Roosevelt men”: “You don’t know how good it is to have that Happy Warrior of FDR, Sidney Weinberg helping me out in the year 1964. Having you here the other day made me remember my days as a young Congressman when both of us were Roosevelt men. It makes me proud that you stand with me as you did with him.”
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Weinberg worked tirelessly during the campaign, courting the press and raising money. At a White House dinner in October 1964, Johnson asked him if he would deliver a message to “Jock Whitney” (referring to John Hay Whitney, publisher of the
New York Herald Tribune
), thanking the paper for endorsing him. Weinberg happily did.
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With his media, business and banking, and popular support, Johnson decisively won the 1964 election with 61 percent of the popular vote, the highest of any president since 1820. His campaign deftly mixed his progressive initiatives with an attack on Goldwater’s extremism while escalating war in Vietnam. He reserved enough goodwill to launch his Great Society plan.
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And he never forgot his friends.

Weinberg continued to provide regular recruitment recommendations for the Johnson administration. For the next few years, he also regularly reported on the pulse of the business community.

As a matter of reciprocity for his assistance, Weinberg, like the other bankers, balanced supporting Johnson with pushing his own agenda. For instance, at congressional appearances, Weinberg would strike a perfect chord between endorsing Johnson and equating the ongoing health of the national economy with the need for more lenient and favorable investment and foreign expansion related legislation.
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Johnson and the Bankers’ Economy

In his spirited inaugural speech on January 20, 1965, Johnson declared, “In a land of great wealth, families must not live in hopeless poverty. In a land rich in harvest, children just must not go hungry.”
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He made good on his word. When Johnson began his second term, 20 percent of people in America were living in poverty. Between 1965 and 1968 he raised federal expenditures addressing the War on Poverty from $6 billion to $12 billion (Nixon would double the figure again to $24.5 billion by 1974). That spending, in conjunction with a booming economy, made a big impact. When Johnson left office in 1969, the poverty rate in America had dropped to 14 percent.
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On February 18, 1965, Johnson increased his focus on his friends in finance. He invited Rockefeller, Weinberg, and other prominent bankers to an intimate White House dinner to discuss his voluntary program for an early reduction in the balance of payments deficit. His plan would require each of their firms to curtail their international transactions so as to limit dollar outflow, a request that brought the ire of Wriston when it came from Kennedy but solicited no such reprimand under Johnson.
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Johnson also established a nine-member advisory committee on balance of payments, which included Weinberg, George Moore, and railroad mogul Stuart T. Saunders to keep the business community engaged, and on his side, on the issue.
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That same day, Rockefeller, in turn, invited Johnson to a Business Group for Latin America gathering the following month. Johnson informed Rockefeller that he would be pleased to meet with the group in Washington. Johnson knew how to swap favors.
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After the event, Johnson wrote Rockefeller a warm note: “I appreciate more than I can express every line of your fine and thoughtful letter. To put it in a Johnson City way, I got more than I gave from being with you and your associates on the Council.”
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Even when the two were at odds, Johnson maintained a deferential tone with the financier. “Thank you for sending me your views, which I am always glad to have, even when we disagree,” the president wrote on November 30, 1965, after Rockefeller described some of Johnson’s Great Society policies as “handouts.”
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The bankers acted against their own profit motives and for the economic strength of the United States, possibly for the last time in American history, when they responded to Johnson’s request to streamline some of their international capital outflows. On March 3, 1965, Johnson thanked Morgan Guaranty Trust Company president Thomas Gates for “the response of Morgan Guaranty and other banks to my request to voluntarily limit their foreign lending.” He assured Gates, “You can count on our willingness to work with you closely.”
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Everything was up for bargaining between Johnson and the bankers, and everyone would get something out of it, including the Main Street economy.

Like other key bankers, Gates, who was appointed to the Committee on Voluntary Overseas Activities in February 1967, earned Johnson’s gratitude and supported his efforts over the years. His backing included a crucial press release in August 1967, in which he regarded “a war tax essential to the support of our effort in Vietnam and the conduct of vital domestic programs,” hoping it would “be enacted without delay.”
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Wall Street and Johnson’s New Treasury Secretary: “Joe” Fowler

By early 1965, Dillon wanted to return to the private sector. There was speculation in Washington that the Treasury secretary post would go to Johnson’s friend and unofficial adviser Don Cook. Congressional insiders wanted Rockefeller.
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Dillon wanted Rockefeller too. He penned a fervent four-page letter to Johnson equating Rockefeller with US dollar strength on December 29, 1964. “I have given a great deal of thought to the Treasury position,” he wrote. “The more I have thought the more certain I have become that David Rockefeller has unequalled qualifications for the job. . . . At 49 [he] is young, vigorous and at the very height of his capacities. . . . Another important consideration is David Rockefeller’s unique, worldwide reputation. . . . His appointment would signify, as nothing else could, your own resolve to protect the value of the dollar.”
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The
idea
of the value of the dollar and the value of the dollar itself represented two sides of a coin. One, the political ideological-narcissistic side,
had the ring of global dominance to it (strong dollar equals strong country equals American “exceptionalism”). The other, the economic side, concerned the amount of dollars that were needed to pay for certain imports or would be received for exports. In practice, the two sides canceled each other out. The more dollars dispersed throughout the world, the more their economic value would be diminished. However, the more the United States supported the dollar through its monetary or trade policies, the more that value would be artificially buoyed. This paradoxical role would manifest through various banker, Federal Reserve, Treasury Department, and White House policy decisions for the next half-century.

Although Johnson respected Rockefeller, he trusted his loyal supporter Sidney Weinberg more. At Weinberg’s suggestion, Johnson chose Democrat Henry “Joe” Fowler, Kennedy’s undersecretary of the Treasury, for the position. Fowler had worked on Kennedy’s $11 billion tax cut plan. (Weinberg later enlisted Fowler to join Goldman Sachs as a senior partner. Fowler would be the first major Goldman executive to move from that elite public to private office; in the future, the direction would go the other way.)

In true form, Johnson didn’t announce his decision right away. He wanted to ensure all the bankers and the media were on his side. So he strategically built up a consensus in the banking community. On March 17, 1965, he held a select White House luncheon with half a dozen key bankers to broach the topic. Afterward, he made some follow-up calls to secure their approval.
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Then Johnson called Fowler: “Henry, I talked to all these bankers we met with yesterday: [First National City Bank president] George Moore, George Murphy, William Moore—there’s a Princeton meeting. I’ll have a Jetstar so you can land there. Go up there, no newspaper reporters, just say I don’t know if I want to be Secretary or not, but I want to work with you guys.”
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Next, Johnson called Moore, saying, “I talked to Fowler and told him to go up there tomorrow . . . you take charge of him. I want some good statements coming out. He’s going to be Secretary.”
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Moore replied, “You can rest assured the bankers will support him and his program in every way.”
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On March 25, 1965, the Senate unanimously confirmed Fowler. Johnson sent an effusive thank-you note to another advocate, Chase chairman George Champion, writing, “I do—and will always—appreciate your constructive support of him.”
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Political mission accomplished, Johnson wrote Weinberg the next day: “I am sure that Joe Fowler is going to make an outstanding Secretary. One reason is his talent and experience. The other is the support of men like Sidney Weinberg.”
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Wall Street embraced Fowler. Three months later, Johnson sent Champion a letter thanking him again, this time for a dinner he had hosted for Fowler, saying, “I agree with your observations that large corporate entities are essential for continued progress in this country, that business leaders have an awareness of the need for competition. . . . I asked Joe Fowler to explore your observations concerning the balance of payments, restrictions on bank credit and the effect on exports in detail.”
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A month after Johnson asked the bankers to curtail their operations on behalf of the balance of payments deficit, he was willing to have the matter renegotiated, having won the political victory of getting the bankers to embrace his Treasury secretary appointment.

Johnson and Mergers

Toward the middle of 1965, Johnson spoke widely of national economic growth, progress, and the Great Society. He presided over the enactment of the Medicare program, and when he signed the Medicare bill into law on July 30, 1965, at the Harry S. Truman Library in Independence, Missouri, he paid homage to a plan that “all started” with Truman.
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A year later, Johnson presented Truman and his wife, Bess, with Medicare cards number one and two.

With respect to financial regulations, however, Johnson was nearly as laissez-faire as his banker friends. Both Johnson and the bankers felt the country had moved past the more prudent restrictions of the Great Depression (the bankers more publicly so). Neither Johnson nor the bankers saw any reason to entertain legislative restrictions on the bankers’ desires to grow freely. Like Eisenhower, Johnson equated strong American banks with a strong America. He also equated the size of US companies with national strength.

The pace of US corporate mergers had already accelerated under Kennedy. In 1963, the number reached 1,311, the highest figure since the Federal Trade Commission began tracking mergers in 1951. The number of antitrust cases filed by the Justice Department had also risen—to twenty by the end of 1963.

This became a key concern for Johnson. As
U.S. News & World Report
noted, “For the first time . . . businessmen have sounded protest against this action in [Johnson’s] administration.”
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The FTC was launching more complaints against big companies like US Steel, GM, and AT&T, as well. Fortunately for him, the major bank regulator, the comptroller of the currency, sided on behalf of bank mergers. This helped Johnson’s and the bankers’ cause.

Johnson was not above using his muscle to support mergers that would increase political power. The
Houston Chronicle,
for instance, had been critical of him and endorsed Richard Nixon in 1960.
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But John Jones Jr., the
Chronicle
’s president, was also the president of Houston’s National Bank of Commerce and was attempting to merge with Texas National.

The merger had been agreed upon by both boards of directors but was stalling at the Federal Reserve, which tended to approve eastern mergers more quickly than other ones. But Johnson intervened; he made Jones guarantee him the
Chronicle
’s support as long as he held the presidency. Following an off-radar meeting at Johnson’s ranch, the president got his guarantee and Jones got his merger.
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