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A New Deal, a Great Depression: The Rockefellers take charge
A New Deal, a Great Depression: The Rockefellers take charge
April 11, 2020
‘Why
that’s just plain stealing, isn’t it, Mr. President?’
—Senator Thomas Gore to FDR on the President’s 1933 decision to repeal debt
repayment in gold
Decline of the House of Morgan
The first attempt at creating New York as the center of world finance under a US-dominated Gold Exchange Standard had collapsed in September 1931 when Great Britain abandoned gold, along with a host of other European nations. The collapse was lawful and entirely predictable, given the fragile international system of bank loans and bond underwriting that had been created by the House of J.P. Morgan & Co. after the Versailles peace conference in 1919.
Though a member of the plutocracy, FDR had enough vision to see that a
savage capitalism would finally kill the golden goose. History has proved him
(and other visionaries of the left) correct many times.
In
1930, as an agricultural depression in America reached its full force,
aggravated by record drought and Dust Bowl conditions fed by decades of
extensive farming without crop rotation, 1,345 banks failed, most of them small
rural farm banks. The spreading depositor withdrawals in the remaining banks
led to a self-feeding spiral of bank closures, credit rationing by remaining
banks, and even deeper economic depression leading to yet more bank failures.
By
1931, there were 2,294 more bank closings, almost double the year before. And
another 1,453 banks closed their doors in 1932. By that year, a Presidential
election year, the crisis had spread from individual banks to entire states.
State governors, beginning in Nevada, began to declare state-wide ‘bank
holidays’ to try to halt the panic cash withdrawals, which soon spread to the
industrial state of Michigan.
Fearing
an inevitable US devaluation of the dollar against gold, a rational move that
would stimulate American industrial exports and slow the rising tide of
unemployment, foreign central banks and other holders of dollars began to
redeem their dollars for gold. That made the ultimate crisis even more certain,
reinforcing Federal Reserve resolve to hold onto gold parity at all costs,
regardless of its domestic impact.
The
New York Federal Reserve raised its discount rate -- the interest rate charged
commercial banks on loans from it -- from a low of 1.5% in October 1931 to 3.5%
a week later. This was an enormous increase that more than doubled interest
costs, but was done in order to respond to the ‘gold loss and currency demands’
under the rules of the prevailing gold standard.
The
higher rates killed any chance of a domestic US bank recovery and further
aggravated the domestic crisis which, in turn, fuelled more bank depositors'
runs. Between August and November, the US money supply, including circulating
currency and bank deposits, dropped 8%, unprecedented in the short history of
the Federal Reserve. At the same time, the gold stock of the Federal Reserve,
which theoretically should have risen under the attraction of higher US
interest rates, fell instead by an alarming 11%.
Between the October 1929
stock market crash and the end of 1932, just three months prior to the
inauguration of Franklin Delano Roosevelt in March 1933, America’s national
wealth had evaporated on a scale never before imagined. National income or GDP
fell from some $88 billion to less than half that, or $42 billion, by the end
of 1932.[1]
Amid
the turmoil of the 1929-1933 New York stock market meltdown, and the failure of
the thousands of smaller regional banks across America, a titanic power
struggle was taking place within the highest ranks of the New York banking
elites over who would emerge strongest from the crisis.
For the first time in
United States history, other than during the 1861-1865 Civil War, the public
debt of the United States Government dominated the American capital market. In
1930, a few weeks after the October 1929 New York stock market crash, US public
debt had stood at just over $16 billion, or a mere 22% of national income. By
the end of the Second World War in January 1946, the public debt stood at $278
billion, or 170% of national income. This represented an increase in nominal
Federal debt of more than 1,700% in just sixteen years.[2]
The
business of US banking shifted dramatically from financing stock margin buying
and international loans, to that of financing the rise of an enormous Federal
Government debt. Banks became, in effect, government bond traders rather than
commercial business lenders. The stock market was not to recover its highs of
1929 for almost four decades.
The
longer-term consequence of the Roosevelt era policies was a dramatic shift away
from the power of international private banking, especially investment banking
as done by J.P. Morgan, Kuhn Loeb, Dillon Read and others. Their ability to
earn bountiful profits from underwriting bond issues in Europe or Latin America
collapsed in September 1931 when Britain left the Gold Exchange Standard.
With
no gold standard to serve as a psychological underpinning for the possible risk
of huge international loans, banks were forced to look closely at the actual
credit risk of their borrowers. What they saw was scary. The result was that
international credit dried up almost overnight. Banks, fearing default, called
in existing loans. The cumulative effect contributed to a self-fulfilling cycle
of default and deflation worldwide.
J.
P. Morgan & Co. was never to recover its previous dominance in New York and
international finance after that. From the years in which Morgan & Co. were
the exclusive bankers to the UK Treasury during the First World War—cemented by
the intimate friendship during the 1920’s between Morgan-protégé Benjamin
Strong at the NY Federal Reserve, and the Bank of England’s Montagu Norman—the
House of Morgan had built its growing international influence through deepening
and leveraging its ties to the power of the fatally weakened City of London.
During
frantic and fruitless efforts by the Bank of England’s Norman to keep Britain
within the Gold Standard in summer of 1931, the New York Fed’s Strong told
Norman that Britain’s government would have to work out a rescue package with
J.P. Morgan & Co, the United States Financial Agent to Her Majesty’s
government since 1914.
The British Labor
government of Ramsay MacDonald was brought down over the refusal of a majority
of the Government’s Cabinet members to accept the harsh cuts in British
unemployment benefits demanded by J.P. Morgan & Co. as a precondition for
their loan. Morgan had pledged to organize a syndicate of New York and other
banks to raise the sizeable sum of $200 million to save the Pound and, with it,
Morgan’s gold standard. [3]
In
the end, Morgan was too late. On September 19, 1931 MacDonald’s government
announced that Britain had decided to leave the gold standard entirely. That
decision effectively ended J.P. Morgan’s strategy of incorporating Great
Britain and the City of London as partners in a New York-centered financial
imperium.
From that point on, the
British Government never again would use J.P. Morgan & Co. as its exclusive
Government financial agents in the United States, a role Morgan had played
since 1914 to its enormous advantage.[4]This marked the
clear decline of the House of Morgan within the American establishment, as
well. Sharks are good at smelling blood, especially of their rivals.
The
second devastating blow to the primacy of the House of Morgan in New York
finance came in June 1933 when the US Congress passed the Glass-Steagall Act,
officially named the Banking Act of 1933. As a measure intended to curtail
future stock and financial speculation bubbles, the new act prohibited a bank
holding company from owning other financial companies, including insurance and
investment banks. In addition, it established the Federal Deposit Insurance
Corporation for insuring bank deposits.
The
only major New York bank that encouraged Congress to pass the Glass-Steagall
Act was Rockefeller’s Chase Bank. Chase chairman Winthrop Aldrich was the son
of Senator Nelson Aldrich, the same Senator Aldrich of the infamous ‘Aldrich
Plan’ that became the core of the 1913 Federal Reserve Act.
Winthrop Aldrich
strenuously lobbied Congress to pass Glass-Steagall, despite the strong
opposition from Morgan and other New York banks. Unlike J.P. Morgan, the Chase
Bank had become the world’s largest deposit bank largely through extending
traditional loans to the circle of Rockefeller companies such as Standard Oil.
Chase was less dependent than Morgan on the underwriting of international bonds
or the speculation in buying and selling of stocks. [5]
The Rockefellers
conveniently put the knife in the back of their Morgan rivals when they were
weakest. Chase emerged unscathed from the Congressional investigations into
bank improprieties by the Senate Banking Committee, and the bank was
prominently profiled as a ‘friend’ of the New Deal, a rarity in a Wall Street
milieu in which Franklin Roosevelt was scornfully referred to as a ‘traitor to
his class’ for his speeches attacking Wall Street greed and corruption, calling
them ‘economic royalists.’ Traditional conservative Wall Street bankers
regarded Roosevelt’s depression relief measures, such as the National Recovery
Administration, as a giant step to Bolshevism. [6]
The Glass-Steagall Act,
passed amid the national bank panic in the first days of Roosevelt’s
administration, dealt a devastating blow to the once almighty House of Morgan,
a blow from which it never fully recovered. [7] The
Rockefeller faction emerged on the ashes of the House of Morgan to dominate US
establishment policy as no other.
Gold Crisis and Dollar Debasement
By
January 1934, the flawed workings of the US-centered Gold Standard were
operating in effect to undermine public confidence in banking. Meanwhile, the
Government publicly disclosed which domestic US banks it considered to be in
danger and in need of government aid, triggering new panic depositor runs on
thousands of smaller, poorly capitalized banks.
Two days after his
inauguration as President on March 6, 1933, Roosevelt decreed a four-day
national banking holiday. The main aim was to prevent anyone from hoarding or
exporting gold or silver. [8] Every
bank in the United States was shut down. Neither deposits nor withdrawals were
possible, as Federal auditors were sent in to check the accounts of all banks
before certifying which were solvent and which must be closed. The
President showed his disdain for formal legal procedure and simply invoked the
unrelated “Trading with the Enemy Act” of 1917 as his legal basis. Presumably,
the foreign holders of gold-backed US dollars were now ‘the enemy.’
Within three days
Congress had passed the Emergency Banking Act that validated the President’s
actions and gave him near carte blanche powers to go further.
On April 5, 1933 Roosevelt signed an Executive Order declaring it illegal for
American citizens to hold or own gold coins, bullion or gold
certificates. [9] Violation
was punishable by a $10,000 fine or ten years in prison, making owning of gold
a felony.
The
Federal Government thus had confiscated its own citizens’ gold. As gold was
universally regarded as the ultimate store of value for a currency or for repayment
of debts, it was a massive, forced confiscation by the State of the private
wealth of its citizens in return for mere paper promises to pay. The citizenry
were powerless to act; they could merely hope for better times amid a deepening
depression. Few people understood the complex workings of gold. By confiscating
civilian gold holdings the US Government not only restocked its gold vaults at
the expense of its citizens, it also cut off any chance citizens could resort
to gold for a personal long-term store of value in the middle of the nation’s
worst economic depression.
Meanwhile, the Government
had stopped converting its dollars into gold. On June 5, 1933 Congress formally
abandoned the Gold Standard and declared the traditional gold-clause contract --
whereby a creditor, foreign or domestic, could demand repayment in either
currency or gold -- to be null and void. Some $100 billion of such contracts, a
staggering sum, were then outstanding for everything from mortgage deeds to
life insurance policies to railroad bonds. The gold-clause had been an
insurance against inflation and a guarantee of sound money repayment. [10]
Not any more. Creditors
could no longer demand private debts be repaid in gold coin. Senator Thomas
Gore from Oklahoma, when asked his opinion of the gold-clause repeal by
Congress, snapped back, “Why that’s just plain stealing, isn’t it, Mr.
President?” London referred a bit more diplomatically to the US Treasury’s
declaration that it would no longer honor its debts with gold as, “the American
default.” [11]
Baruch gains, others lose
One person emerged from
the financial crisis with vastly larger power and financial resources. He was
Bernard Baruch, one of the most politically influential of the Wall Street
Money Trust. Baruch was a financier, a political “contributor” of Wall Street money
to influence Congress, and an adviser to Presidents from Wilson to Hoover to
Roosevelt and even a British Prime Minister, Winston Churchill. His Wall Street
fortune had been tied to the railroad millionaire, E. H. Harriman as well as
the Rockefellers.[12]
One
of the most influential voices demanding rigid adherence to the orthodoxy of
the Gold Standard in those days, Baruch had made a fortune before and during
the First World War as a stock promoter for the American copper trust headed by
the Guggenheim family.
In 1916, prior to US
entry into the war, President Wilson had named Baruch to head the Advisory
Commission of the Council of National Defense, which later became the War Industries
Board. He was thereby made de facto wartime czar over US
industry for the duration of combat. In that position, as later Congressional
investigations documented, Baruch cartelized major sectors of American
industry, and helped create huge price-fixing trusts in copper and other
industries, enabling immense profits to be made from war production at
Government -- that is, at taxpayer -- expense. [13]
Baruch used privileged insider
information from his position at the Council of National Defense. In one
documented instance, he alerted his business friends in the cartel of copper
producers to sell a huge sum of copper, vital for war production, to the US
Government at a highly inflated price just two weeks before President Wilson
declared war on April 2, 1917.[14] This
all took place while Baruch was holding a sensitive position of public trust.
Insider trading and
conflicts of interest were never considered a problem by Baruch. After the US
entry into the European war in April 1917, when Baruch's obvious conflict of
interest was so brazen that it was attacked in the press, Baruch named his old
Wall Street crony and business partner Eugene Meyer Jr. to oversee all
Government purchases of copper. At the time, Meyer was Chairman of the
Government War Finance Corporation. Baruch was later to secure ownership of the
politically influential Washington Post for his friend Meyer,
most likely out of gratitude.
Throughout
the Republican presidencies of the 1920's, Baruch had built up his influence,
mainly by making large financial contributions to influential Congressional
Democrats. He was a power broker without rival in that day, widely known to
control the votes of at least 60 Senators and Representatives in Congress,
through his money and influence.
At
the time of the Wall Street crash, Baruch was considered the most influential
Democrat in Hoover's Washington and, with Congress increasingly under
Democratic control in the early 1930s, this was a position of enormous power.
After
1930, Republican Herbert Hoover increasingly sought out Baruch for advice on
what overtures a Democratic Congress might accept to counter the nation's
spreading economic crisis.
Baruch
made no secret that he had gained a fortune in the stock market by selling all
his stocks at peak prices some weeks before the October 1929 crash, thus giving
his public statements the weight of the oracle of Delphi in the crisis of the
early 1930s. He didn’t say that his close friend, Winston Churchill, had done
the same on Baruch’s advice. Both Baruch and Churchill, curiously, managed to
get out at the stock market peak, just before the Bank of England triggered the
events leading to the London market crash in September 1929. Suspicions in
certain quarters held that Churchill and Baruch both benefited from their
respective insider positions.
In
the critical months of 1931 and 1932, Bernard Baruch forged a Congressional
consensus of Democrats and Republicans that dominated legislation and political
debate. The influential Senate Finance Committee chairman and other powerful
legislators were frequent hunting guests at Baruch's South Carolina plantation
retreat in the early 1930s.
Baruch
thus held an unequalled position of power and influence over Washington
economic policy during those critical first few years of the depression. What
he did with that influence was to prove decisive to the course of subsequent events.
He urged Senate Democrats
not to embark on any course that would provide an alternative to the paralyzed
White House, but instead, to come to a consensus with Hoover's Republicans.
“The country is in a highly excited condition,” he told Senate friends. “What
it needs now is rest, not any more changes. Let us not try to rectify too many
things now.”[15]
Baruch’s unique influence
blocked any genuine Democratic alternative to the disastrous Hoover laissez
faire policy in those critical months. That lack of initiatives or solutions
from the Democrats in the 1930s was not unlike the deafening silence of
Congressional Democrats more than eight decades later during the 2008 Congressional
debate over an unprecedented $700 billion Republican bailout bill for Wall
Street.
Baruch argued that the
deflation of commodity prices had bottomed out in October 1930 and that,
“natural curative forces have set themselves in motion. I do not believe
government can do anything to help. Every time government steps in, they make
it worse.”[16]
He
told a group of Democratic Party academic economists at the time that,
“business must go through the wringer, and start over again,” as though the
national economy were a giant washing machine. When one economist present
protested that such a laissez faire approach by government risked riots in the
streets, Baruch snapped back, “There is always tear gas to take care of that.”
He used his influence to
vigorously oppose any proposals for government public works spending to ease
unemployment, which he contemptuously termed, “job inflation.” A front page
headline in the November 12, 1931 New York Times proclaimed
this baseless optimism: “Baruch Sees Nation Rising From Slump.” Alongside it
ran an article reporting 67,000 unemployed lining up in New York City to
register for emergency jobs. Baruch called for raising income taxes to keep the
government's budget “balanced and sound” in the crisis, insisting that any
vigorous public spending would inflate the dollar. His eye was on the price of
gold, not the public welfare.
Through
his influence over Congressional Democrats, Baruch succeeded in winning them to
the same destructive fiscal deflation as Hoover's Republicans, thus
successfully paralyzing any prospect for significant policy initiative as the
nation sank deeper into the economic morass. Bernard Baruch was unremitting in
his advocacy of continued deflation as national policy during the years of the
onset of depression.
The core of Baruch's
strategy was to prevent any Congressional attempts to modify the Federal
Reserve System and to demand, at all costs, rigid US adherence to the Gold
Standard, even after Britain and 24 other nations had abandoned it in late
1931. As Baruch wrote to his close friend, Senator Jimmy Byrnes, “This country
cannot go off the gold basis.” [17]
Coincidentally, during
the entire period when Baruch was urging Congress and the Hoover Administration
not to abandon the gold standard, Baruch was also the private business partner
of Hoover's Undersecretary of the Treasury Ogden Mills Jr. in an Alaska gold
mine. A third partner was Baruch's old crony, Eugene Meyer, Jr., who had just
been named by President Hoover to the Federal Reserve Board. [18]
By
February 1932, in the midst of the presidential election year, US gold reserves
had fallen to alarming lows. More than $1 billion of monetary gold had gone,
owing to foreign drains and to private hoarding of gold as the domestic
American banking crisis escalated. The Federal Reserve was mandated by law to
find another $1.5 billion of gold reserves. The amount of Federal Reserve ‘free
gold’ at that point was down to $433 million, and it was disappearing at the
rate of $150 million per week. Baruch redoubled his public and private call to
maintain adherence to the gold standard at all costs.
Hoover
adamantly affirmed he would do nothing further to “tamper” with the automatic
workings of the Gold Standard. Gold continued to leave the vaults of the
Federal Reserve, and bank failures mounted ever higher.
An editorial in the Philadelphia
Record in May 1932 expressed the growing alarm in the nation:
Within three months the
United States must suspend gold payment. If the Government waits until its hand
is forced, it courts disaster. If the Government acts now, it can arrest
deflation, end depression, win back prosperity...At the rate gold is going out
of the Federal Reserve System, Federal Reserve banks will have to stop their
open market transactions within six weeks. They will be pulled up short by
dwindling gold reserve--the golden chain which has circumscribed any adequate
action to cure the depression...
Why can't we fight this
depression as we fought the war, when we declared an embargo on gold in 1917,
and no one thought anything of it?... President Hoover declared a moratorium on
allied debts, but allows the subjects of these debtor nations [i.e. France and
Britain-w.e.] to drain our gold and drive us toward destruction. Are we
in the grip of some strange obsession, which makes us act irrationally whenever
the precious metal is mentioned?
When
it became clear that Democrat Franklin Roosevelt would win the November 1932
presidential elections, Baruch shrewdly shifted his allegiance to Roosevelt, a
man he had earlier opposed for the nomination.
At
the same time, Baruch began privately hoarding gold bars in a New York bank
vault, buying from European suppliers as well as from his own Alaska Juneau
Gold Mining Company. Baruch's gold fortune reached an impressive sixty-six gold
bars by February 1933, the month before Roosevelt's inauguration, when Baruch
abruptly ceased buying gold. It turned out that some members of President-elect
Roosevelt’s ‘Brain Trust’ had privately informed Baruch of Roosevelt's gold
policy plans.
On
April 5 1933, Franklin Delano Roosevelt issued a proclamation calling for the
return to the US Treasury of all privately held gold. At the time, Baruch was
reportedly “the greatest single individual holder of gold bricks.” Later that
year, the Roosevelt government announced it was buying all newly mined gold at
a price above the market price, a misguided effort to revive commodity prices.
Needless to say, Baruch was a major beneficiary. Baruch kept his friend Winston
Churchill closely informed of all these developments.
In
any event, dollar convertibility with gold was to hold until the new President,
Franklin Delano Roosevelt, in one of his first official acts of office,
declared on April 19, 1933 that the United States had suspended convertibility
of the dollar under the Gold Standard.
Roosevelt
resumed the Gold Standard under the Gold Reserve Act, passed by Congress in
January 1934. The act of 1934 represented the first official dollar devaluation
against gold since 1900, when President McKinley had signed the Gold Standard
Act, fixing the dollar to a value of 25.8 grains of gold.
The
Gold Reserve Act of 1934 ended domestic redemption of dollars for gold. The new
law nationalized all gold by ordering the Federal Reserve banks to turn over
their supply to the US Treasury. In return the banks received gold
‘certificates’ to be used as reserves against deposits and Federal Reserve
notes. The act also authorized the President to devalue the gold dollar so that
it would have no more than 60 percent of its existing weight, a huge
devaluation and a staggering loss for foreign creditors.
Roosevelt
used his powers under the Gold Reserve Act to declare an immediate 59%
devaluation of the dollar to a new fixed parity price of $35 per ounce of gold.
The dollar was to remain at $35 per fine ounce gold until the fateful dollar
crises of the early 1970's. By sharply devaluing the dollar against foreign
currencies the Government hoped to give export trade a big boost and with it
lift the economy out of depression.
Rockefellers emerge triumphant
The
fateful consequence of the decline of the House of Morgan within the banking
establishment was that the Rockefeller family and its interests rose to a
position of dominance in US economic and political policy never before seen in
America.
The Rockefeller group had
been more or less in the background during the 1920s in terms of the Morgan
group’s efforts to build their global dollar power. Rockefeller, meanwhile, had
concentrated on building the power of Standard Oil in the Middle East, Latin
America, in Europe and elsewhere, and on building an international chemicals
and military industry, the predecessor to America’s Cold War era military
industry complex.[19]
By
the late 1930s the powerful Rockefeller dynasty was managed by four brothers,
the sons of John D. Rockefeller Jr.—David, Nelson, John D. III and Laurance
Rockefeller. A fifth brother, Winthrop, played a relatively minor role in the
political activities of the family empire. The four brothers organized the
emerging power of their faction within the highest ranks of the US power
establishment around two banks: 1) New York’s First National Bank, the bank of
the Standard oil empire, headed by James Stillman, and whose Board of Directors
included William Rockefeller, brother of John, Jr; and 2) the Chase Bank, the
house bank of Standard Oil and by 1933 the largest bank in the world, now under
Rockefeller control after the merger with the Rockefellers’ Equitable Trust.
While most of Wall Street
initially treated Roosevelt’s New Deal as anathema and a major step in the
direction of economic Bolshevism for the United States, the Rockefeller
brothers realized they could use the depression crisis and the emerging role of
the state to huge advantage in building their global empire.
They had little reason to
fear any policies out of Roosevelt’s Cabinet. Their own establishment people
dominated the President’s famous ‘Brain Trust,’ five men who guided the
President’s policy decisions, but who had no official positions or titles. They
included, in addition to Baruch, A. A. Berle; James Warburg, Wall Street banker
(and son of the architect of the Federal Reserve, Paul Warburg); Professor
Rexford Guy Tugwell; and Raymond Moley.
The
Rockefellers had one of their top men, a former Rockefeller employee, at
President Roosevelt’s side – FDR confidante Harry Hopkins. He would make
certain Roosevelt did what was useful for the vast Rockefeller interests.
Hopkins had been financed by the Rockefeller Foundation for more than a decade,
when he ran its Organized Social Service. Hopkins soon became Franklin D.
Roosevelt's alter ego, even to the point of living in the White House. He
became the second most powerful man in America during the war years, dubbed by
the press, ‘Deputy President.’
In addition, the
Rockefellers had close ties to another influential member of FDR’s Brain Trust,
Columbia University Professor A. A. Berle, Jr. Berle had been on close terms
with the Rockefeller family since the early 1920s as a prominent New York
lawyer. Berle would later work for the Rockefeller interests after the war as
family adviser on Latin America, and co-author of Nelson Rockefeller’s
‘autobiography.’ [20]
Shortly
after his reelection to a second term in 1937, Roosevelt, notorious for lack of
understanding of economics, accepted the opinion of his Treasury Secretary
Henry Morgenthau that the depression was ending, and that the greatest danger
was potential inflation from too much government spending.
As a consequence, FDR
slashed Federal spending and dramatically reduced the budgets of New Deal
agencies such as the Works Progress Administration. The Federal Reserve duly
tightened the money supply, slamming the brakes on consumer spending. The stock
market underwent its most severe drop in US history as two million Americans
were thrown out of work. The press called it “Roosevelt’s Depression.” Shortly
after the second fall of the economy into depression, FDR turned anew to people
like A.A. Berle and to the Rockefeller interests for a strategy to bring
America out of the second depression. The Rockefellers were more than ready to
help.[21]
In that climate of the
depressed stock market the Rockefellers were able to greatly extend their vast
web of interlocked industrial and financial holdings as they pulled key
corporate assets into their vast industrial empire. In contrast to its impact
on most small and mid-sized industries, the New Deal dealt most kindly with the
Rockefeller interests and most Fortune 500 corporations close to them,
including Rockefeller Standard Oil companies as well as the group of chemical
companies linked to them.[22]
Investigative
journalist Walter Winchell reported at the time that Harry Hopkins acknowledged
his debt to the Rockefellers when he was appointed Secretary of Commerce, by
offering the post of Assistant Secretary of Commerce to Nelson Rockefeller, son
of John D. Rockefeller, Jr.
According to an account
in the Los Angeles Herald Examiner of September 7, 1975,
Hopkins had brought Nelson Rockefeller into the inner circles of the New Deal
in the 1930s. Soon after his appointment, Rockefeller, then in his 30’s, became
a Roosevelt intimate, spending his holidays with the President at Shangri-la,
now Camp David. [23]
A.
A. Berle Jr. became Assistant Secretary of State for Latin America in 1938, a
position from which he could immensely benefit Rockefeller oil and other
business interests from Venezuela to Brazil and beyond.
Baruch, Rockefeller, Big Business and
Mussolini
Bernard Baruch, a financier and speculator known in his day as “the lone
wolf of Wall Street,” was one of the first so-called “dollar-a-year men”
appointed by President Woodrow Wilson. The US presidential habit of tapping
extremely wealthy men for high posts is well established. Baruch himself,
although he never allowed it to be mentioned, was reputed to be the first
trillionaire.
Rockefeller's Wall Street
interests, Bernard Baruch (left), and a powerful circle of big
business leaders at the time were determined to reorganize the US economy along
the centralized corporatist model of Mussolini’s fascist Italy. Of course they
were politically astute enough not to say so too loudly.
Baruch and his close
friend, Bernard Swope, a director of General Electric and of National City
Bank, had initially urged President Hoover in 1931 to “stabilize industry” with
what they characterized as an emergency program. The aim was to free big
business from the restraints of the Sherman Anti-Trust Act, thus opening the
door to major consolidation of corporate power during the depression when cheap
stock prices made takeovers easy and cheap for those such as the Rockefeller
group who were flush with cash. [24]
Hoover, who was
ideologically opposed to state intervention, rejected the Swope Plan and
Baruch’s ideas. When it became clear that Democrat Franklin Delano Roosevelt
(FDR) would oppose Hoover in 1932, Baruch and his Wall Street friends quickly
ingratiated themselves into the inner circle of FDR, greasing their entry with
ample bundles of cash. [25]
Contrary to carefully
planted propaganda in the media portraying FDR as the “hero of the little man”
who was ready to “chase the money lenders from the temple,” Roosevelt was the
scion of a wealthy East Coast family, a distant relative of Teddy Roosevelt,
and every bit The Man of Wall Street—especially of Baruch, Rockefeller and their
group. [26] According
to Roosevelt’s Secretary of Labor, Frances Perkins,
At the first Cabinet
meeting following the inauguration of the President in 1933, the financier and
Roosevelt adviser Bernard Baruch and Baruch’s friend, General Hugh S. Johnson,
later to head the National Recovery Administration, came. They handed out
copies of a book by Gentile, the theoretician of Italian fascism, to every
Cabinet member and we all read it with great concern.[27]
The
same industrial reorganization under state control that Baruch and Swope had
unsuccessfully tried to get Hoover to embrace in 1931 was now embraced by FDR.
In
May 1933, during his first weeks in office, FDR proposed to Congress the
creation of a National Recovery Administration (NRA). It passed with a minimum
of debate amid the depression crisis. Its first head was Hugh S. Johnson,
associate of and advisor to Bernard Baruch.
The concept of the NRA
was largely drawn from the national military emergency mobilization of industry
that Baruch and Johnson had administered during the First World War. Ever since
then, Big Business and Wall Street had been salivating over the possibility of
getting such power over the economy into their hands once again. The Great
Depression would be their chance. Johnson would be their man. Within
Roosevelt’s Administration, Johnson was open about the fact that he saw
Mussolini’s Italian Fascist corporatism—the merger of government and corporate
power to the one-sided gain of business—as a model for America.[28]
Johnson’s
NRA organized thousands of businesses under codes drawn up by trade
associations and industries, with NRA-approved companies being given the right
to display the NRA symbol, the “Blue Eagle.”
Guiding policies at NRA
was a troika of three extremely powerful industry magnates—Walter C. Teagle,
President of Rockefeller’s Standard Oil of New Jersey; Gerard Swope, author of
the earlier Swope Plan and also President of General Electric; and Louis
Kirstein, vice president of Filene & Sons department stores of Boston.[29]
The Rockefeller group,
working through Teagle, was able to use its influence over Johnson’s NRA to
re-centralize the 33 independent companies that had made up the earlier
Standard Oil Trust, the combine that the Supreme Court had broken up under the
Sherman Anti-Trust Act in 1911.[30] It was
only one of a series of moves by the Rockefeller faction as it consolidated its
decisive role in United States domestic and foreign policy during the course of
the depression and the Roosevelt Presidency.
In 1930 as most banks
were struggling to survive, Rockefeller’s Chase National Bank was thriving. The
bank’s head during that time was Winthrop Aldrich, son of Senator Nelson
Aldrich of the Jekyll Island secret Federal Reserve meeting of 1910, and
brother-in-law of John D. Rockefeller Jr. Chase Bank’s most significant
acquisition during the first months of the financial crisis in 1930 was the Equitable
Trust Company of New York, the largest stockholder of which was John D.
Rockefeller Jr. This made the Chase Bank the largest bank in America and indeed
the world.[31]
As
a result of their dominant position following the decline of the House of
Morgan during the depression, the Rockefeller group, in addition to controlling
Chase Bank and First City Bank of New York, controlled the largest US oil
companies -- Standard Oil of NY (Mobil), Standard oil of New Jersey
(ESSO/Exxon), Standard of California (Chevron) and Texaco (The Texas Company).
The Rockefeller group
also consolidated a commanding control over the major chemical and
defense-related industries, including Allied Chemical, Anaconda Copper, DuPont,
Monsanto Chemicals, Olin Industries (Winchester Arms), Shell, Gulf Oil, Union
Oil, Dow Chemicals, Celanese, Pittsburgh Plate Glass, Cities Service, Stauffer
Chemical, Continental Oil, Union Carbide, American Cyanamid, American Motors,
Bendix Electric, and Chrysler. [32] The
Rockefellers also bought up large blocks of stock in General Motors, General
Electric and IBM, then a new company.
By
the end of the 1930s the Rockefeller group’s industrial holdings and banks were
uniquely poised to reap handsome gains from any future war. They did not have
to wait long.
Endnotes:
[1] Paul Studenski and H. E.
Krooss, Financial History of the United States (New York:
McGraw-Hill Book Co., 1963), p. 353.
[2] Morris H. Hansen, Statistical
Abstract of the United States (Washington, D.C.: US Department of
Commerce, US Government Printing Office, 1946), p. 355.
[3] Kathleen Burk, Finance,
Foreign Policy and the Anglo-American Bank: The House of Morgan, 1900-31,
Historical Research, Vol. LXI, no.145, June 1988, pp. 208-210.
[5] Peter Collier and David
Horowitz, The Rockefellers: An American Dynasty (New York:
Holt, Rinehart and Winston, 1976, pp. 160-161.
[8] United States Department of the
Treasury, History of the Treasury: Chronology of Events 1900 through
2003, accessed in www.ustreas.gov/education/history/events/1900-present.shtml.
[12] Bernard M. Baruch, My
Own Story (New York: Henry Holt and Co., 1957), pp. 138-39. Baruch
related that, "our firm did a large business for Mr. Harriman....”
[13] Jordan A. Schwarz, The
Speculator: Bernard M. Baruch in Washington, 1917-1965 (Chapel Hill:
University of North Carolina Press, 1981), passim.
[19] F. William Engdahl, A
Century of War: Anglo-American Oil Politics and the New World Order, op.
cit., see especially Chapter 5.
[20] Gerard Colby and Charlotte
Dennett, Thy Will Be Done: The Conquest of the Amazon—Nelson
Rockefeller and Evangelism in the Age of Oil (New York: HarperCollins,
1995), p. 89.
[22] Anthony C. Sutton, Roosevelt
und die internationale Hochfinanz (Tuebingen: Grabert-Verlag, 1990),
pp. 149-150.
[27] Frances Perkins, The
Roosevelt I Knew (New York,: Viking Press, 1946 ), p. 206., cited in
Anthony C. Sutton, op. cit., p.199.
[28] Stanley G. Payne, A
History of Fascism, 1914-1945 (Madison: University of Wisconsin Press,
1995), p. 230, footnote 65.
[32] Gary Allen, The
Rockefeller File, Chapter Three, accessed in http://www.mega.nu:8080/ampp/gary_allen_rocker/ch1-4.html#ch3.
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