Wall Street and FDR
Antony C. Sutton
New Rochelle, New York: Arlington House
Table of Contents
Part 1—Franklin Delano Roosevelt on Wall Street
Chapter 1—Roosevelts and Delanos
Chapter 2—Politics in the Bonding Business
Chapter 3—FDR: International Speculator
Chapter 4—FDR: Corporate Promoter
Part 2—The Genesis of Corporate Socialism
Chapter 5—Making Society Work for the Few
Chapter 6—Prelude to the New Deal
Chapter 7—Roosevelt, Hoover and the Trade Council
Chapter 8—Wall Street Buys The New Deal
Part 3—FDR and the Corporate Socialists
Chapter 9—The Swope Plan
Chapter 10—FDR; Man on the White Horse
Chapter 11—The Corporate Socialists at 120 Broadway, New York City
Chapter 12—FDR and the Corporate Socialists
Appendix A—The Swope Plan
Appendix B—Sponsors of Plans Presented for Economic Planning in the United States at April 1932.
In a previous book, Wall Street and the Bolshevik Revolution, (Arlington House 1974), the association of Wall Street international bankers and the 1917 Bolshevik Revolution was traced in some detail. Wall Street and FDR is a sequel to this earlier volume. Bankers were also associated with Franklin Delano Roosevelt between 1917 and 1934, as well as with the promotion of Roosevelt's New Deal and the rise of corporate socialism in the United States.
The evidence, based largely on FDR's own papers, suggests that there is nothing inevitable about the march of socialism. Socialism is the most inefficient, and certainly the most inequitable, way to run a society ever conceived by man. It has come to the United States only because it is very much in the interest of the Wall Street financial establishment to attain a socialist society. How this was brought about in the Roosevelt era is the story of this book.
Part 1—Franklin Delano Roosevelt on Wall Street
Chapter 1—Roosevelts and Delanos
"The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson and I am not wholly excepting the Administration of W. W. [Woodrow Wilson] The country is going through a repetition of Jackson's fight with the Bank of the United States—only on a far bigger and broader basis."
President Franklin Delano Roosevelt to Col. Edward Mandell House, November 21, 1933, F.D.R. His Personal Letters (New York: Duell, Sloan and Pearce 1950), p. 373.
This book [A previous volume, Antony C. Sutton, Wall Street and the Bolshevik Revolution, (New Rochelle, N.Y., Arlington House, 1974), hereafter cited as Sutton, Bolshevik Revolution, explored the links between Wall Street financiers and the Bolshevik Revolution. In great part, allowing for deaths and new faces, this book focuses on the same segment of the New York financial establishment.] portrays Franklin Delano Roosevelt as a Wall Street financier who, during his first term as President of the United States, reflected the objectives of financial elements concentrated in the New York business establishment. Given the long historical association—since the late 18th century—of the Roosevelt and Delano families with New York finance and FDR's own career from 1921 to 1928 as banker and speculator at 120 Broadway and 55 Liberty Street, such a theme should not come as a surprise to the reader. On the other hand, FDR biographers Schlesinger, Davis, Freidel, and otherwise accurate Roosevelt commentators appear to avoid penetrating very far into the recorded and documented links between New York bankers and FDR. We intend to present the facts of the relationship, as recorded in FDR's letter files. These are new facts only in the sense that they have not previously been published; they are readily available in the archives for research, and consideration of this information suggests a reassessment of FDR's role in the history of the 20th century.
Perhaps it always makes good politics to appear before the American electorate as a critic, if not an outright enemy, of the international banking fraternity. Without question Franklin D. Roosevelt, his supporters, and biographers portray FDR as a knight in shining armor wielding the sword of righteous vengeance against the robber barons in the skyscrapers of downtown Manhattan. For instance, the Roosevelt Presidential campaign of 1932 consistently attacked President Herbert Hoover for his alleged association with international bankers and for pandering to the demands of big business. Witness the following FDR blast in the depths of the Great Depression at Hoover's public support for business and individualism, uttered in the campaign address in Columbus, Ohio, August 20, 1932:
"Appraising the situation in the bitter dawn of a cold morning after, what do we find? We find two thirds of American industry concentrated in a few hundred corporations and actually managed by not more than five human individuals.
"We find more than half of the savings of the country invested in corporate stocks and bonds, and made the sport of the American stock market.
"We find fewer than three dozen private banking houses, and stock selling adjuncts of commercial banks, directing the flow of American capital."
In other words, we find concentrated economic power in a few hands, the precise opposite of the individualism of which the President speaks. (The Public Papers and Addresses of Franklin D. Roosevelt, Volume 1 (New York: Random House, 1938), p. 679.)
This statement makes Franklin Delano Roosevelt appear as another Andrew Jackson, contesting a bankers' monopoly and their strangle-hold on American industry. But was FDR also an unwilling (or possibly a willing) tool of the Wall Street bankers, as we could infer from his letter to Colonel Edward House, cited in the epigraph to this chapter? Clearly if, as Roosevelt wrote to House, a "financial element in the larger cities has owned the Government ever since the days of Andrew Jackson," then neither Hoover nor Roosevelt was being intellectually honest in his presentation of the issues to the American public. The gut issues presumably were the identity of this "financial element" and how and by what means it maintained its "ownership" of the U.S. Government.
Putting this intriguing question temporarily to one side, the pervasive historical image of FDR is one of a President fighting on behalf of the little guy, the man in the street, in the midst of unemployment and financial depression brought about by big business speculators allied with Wall Street. We shall find, on the contrary, that this image distorts the truth to the extent that it portrays FDR as an enemy of Wall Street; this is simply because most historians probing into Wall Street misdeeds have been reluctant to apply the same standards of probity to Franklin D. Roosevelt as to other political leaders. What is a sin for Herbert Hoover or even 1928 Democratic Presidential candidate Al Smith is presumed a virtue in the case of FDR. Take Ferdinand Lundberg in The Rich and the Super-Rich. [New York: Lyle Stuart, 1968.] Lundberg also looks at Presidents and Wall Street and makes the following assertion:
"In 1928 Al Smith had his chief backing, financial and emotional, from fellow-Catholic John J. Raskob, prime minister of the Du Ponts. If Smith had won he would have been far less a Catholic than a Du Pont President.... " [Ibid., p. 172.]
Now the Du Ponts were indeed heavy, very heavy, contributors to the 1928 Al Smith Democratic Presidential campaign. These contributions are examined in detail in this volume in Chapter 8, "Wall Street Buys the New Deal," and no quarrel can be made with this assertion. Lundberg then moves on to consider Smith's opponent Herbert Hoover and writes:
Hoover, the Republican, was a J. P. Morgan puppet; Smith his democratic opponent, was in the pocket of the Du Ponts, for whom J. P. Morgan & Company was the banker.
Lundberg omits the financial details, but the Du Ponts and Rockefellers are certainly on record in Congressional investigations as the largest contributors to the 1928 Hoover campaign. But Wall Street withdrew its support of Herbert Hoover in 1932 and switched to FDR. Lundberg omits to mention this critical and pivotal withdrawal. Why did Wall Street switch? Because, as we shall see later, Herbert Hoover would not adopt the Swope Plan created by Gerard Swope, long-time president of General Electric. By contrast, FDR accepted the plan, and it became FDR's National Industrial Recovery Act. So while Hoover was indebted to Wall Street, FDR was much more so.
Arthur M. Schlesinger Jr. in The Crisis of the Old Order: 1919-1933 comes closer to the point than any establishment historian, but like other Rooseveltophiles fails to carry the facts to their ultimate and logical conclusions. Schlesinger notes that after the 1928 election the Democratic Party had a debt of $1.6 million and "Two of the leading creditors, John J. Raskob and Bernard Baruch, were philanthropic Democratic millionaires, prepared to help carry the party along until 1932." [Boston Riverside Press, 1957, p.273.] John J. Raskob was vice president of Du Pont and also of General Motors, the largest corporation in the United States. Bernard Baruch was by his own admissions at the very heart of Wall Street speculation. Schlesinger adds that, in return for Wall Street's benevolence, "they naturally expected influence in shaping the party's organization and policy." [Ibid.] Unfortunately, Arthur Schlesinger, who (unlike most Rooseveltian biographers) has his finger on the very pulse of the problem, drops the question to continue with a discussion of the superficialities of politics—conventions, politicians, political give-and-take, and the occasional clashes that mask the underlying realities. Obviously, the hand on the purse ultimately decrees which policies are implemented, when, and by whom.
A similar protective attitude for FDR may be found in the four-volume biography by Frank Freidel, Franklin D. Roosevelt. [This series is Frank Freidel, Franklin D. Roosevelt: The Apprenticeship. (1952), hereafter cited as Freidel, The Apprenticeship; Freidel, Franklin D. Roosevelt: The Ordeal (1954), hereafter cited as Freidel, The Ordeal; Freidel, Franklin D. Roosevelt: The Triumph (1956), hereafter cited as Freidel, The Triumph; Freidel, Franklin D. Roosevelt, Launching the New Deal (1973). All four volumes published in Boston by Little, Brown.] Discussing the shattering failure of the Bank of the United States just before Christmas 1930, Freidel glosses over FDR's negligence while Governor of the State of New York. The Bank of the United States had 450,000 depositors, of which 400,000 accounts held less than $400. In other words, the Bank of the United States was a little man's bank. A report by Senator Robert Moses on the condition of an earlier banking failure—City Trust—had been ignored by Governor F. D. Roosevelt, who appointed another commission that produced milder recommendations for banking reform. Freidel poses the question:
Why had he [FDR] failed to fight through reform legislation which would have prevented the Bank of the United States debacle? These are sharp questions that critics of Roosevelt asked at the time and later. [Freidel, The Triumph, op. cit., p. 187.]
Freidel concludes that the answer lies in FDR's "personal confidence in the banking community." Why did FDR have this complete confidence? Because, writes Freidel,
"Herbert Lehman was one of the soundest as well as politically the most of Wall Street bankers; in banking matters Roosevelt seems to have followed Lehman's lead, and that was to cooperate as far as possible with the banking titans." [Ibid., p. 188.]
This is something like saying that, if your banker is a liberal and loses your money, that's OK, because after all he is a liberal and a supporter of FDR. On the other hand, however, if your banker loses your money and happens not to be a liberal or a supporter of FDR, then he is a crook and must pay the price of his sins.
The four-volume Freidel biography has but a single chapter on FDR as "Businessman," the most space given by any major FDR biographer. Even Freidel reduces important ventures to a mere paragraph. For example, while the American Investigation Corporation venture is not named, an associated venture, General Air Service, is mentioned, but dismissed with a paragraph:
"In 1923, together with Owen D. Young, Benedict Crowell (who had been Secretary of war under Wilson), and other notables, he organized the General Air Service to operate helium-filled dirigibles between New York and Chicago." [Freidel, The Ordeal, p. 149.]
We shall see that there was a lot more to General Air Service (and more importantly the unmentioned American Investigation Corporation) than this paragraph indicates. In particular, exploration of the Freidel phrase "and other notables" suggests that FDR had entree to and worked in cooperation with some prominent Wall Street elements.
Why do Schlesinger, Freidel, and other lesser FDR biographers avoid the issue and show reluctance to pursue the leads? Simply because, when you probe the facts, Roosevelt was a creation of Wall Street, an integral part of the New York banking fraternity, and had the pecuniary interests of the financial establishment very much at heart.
When the information is laid out in detail, it is absurd to think that Wall Street would hesitate for a second to accept Roosevelt as a welcome candidate for President: he was one of their own, whereas businessman Herbert Hoover had worked abroad for 20 years before being recalled by Woodrow Wilson to take over the Food Administration in World War I.
To be specific, Franklin D. Roosevelt was, at one time or another during the 1920s, a vice president of the Fidelity & Deposit Company (120 Broadway); the president of an industry trade association, the American Construction Council (28 West 44th Street); a partner in Roosevelt & O'Connor (120 Broadway); a partner in Marvin, Hooker & Roosevelt (52 Wall Street); the president of United European Investors, Ltd. (7 Pine Street); a director of International Germanic Trust, Inc. (in the Standard Oil Building at 26 Broadway); a director of Consolidated Automatic Merchandising Corporation, a paper organization; a trustee of Georgia Warm Springs Foundation (120 Broadway); a director of American Investigation Corporation (37-39 Pine Street); a director of Sanitary Postage Service Corporation (285 Madison Avenue); the chairman of the General Trust Company (15 Broad Street); a director of Photomaton (551 Fifth Avenue); a director of Mantacal Oil Corporation (Rock Springs, Wyoming); and an incorporator of the Federal International Investment Trust.
That's a pretty fair list of directorships. It surely earns FDR the title of Wall Streeter par excellence. Most who work on "the Street" never achieve, and probably never even dream about achieving, a record of 11 corporate directorships, two law partnerships, and the presidency of a major trade association.
In probing these directorships and their associated activities, we find that Roosevelt was a banker and a speculator, the two occupations he emphatically denounced in the 1932 Presidential election. Moreover, while banking and speculation have legitimate roles in a free society—indeed, they are essential for a sane monetary system—both can be abused. FDR's correspondence in the files deposited at the FDR Library in Hyde Park yields evidence—and evidence one reads with a heavy heart—that FDR was associated with the more unsavory elements of Wall Street banking and speculation, and one can arrive at no conclusion other than that FDR used the political arena, not the impartial market place, to make his profits." [This raises a legitimate question concerning the scope of this book and the nature of the relevant evidence. The author is interested only in estate, fishing the relationship between Wall Street and FDR and drawing conclusions from that relationship. Therefore, episodes that occurred in 1921, while FDR was on Wall Street, but not associated directly with his financial activities, are omitted. For example, in 1921 the Senate Naval Affairs Committee issued a report with 27 conclusions, almost all critical of FDR, and posing serious moral questions. The first conclusion in the Senate report reads:
"That immoral and lewd acts were practiced under instructions or suggestions, by a number of the enlisted personnel of the United States Navy, in and out of uniform, for the purpose of securing evidence against sexual perverts, and authorization for the use of these enlisted men as operators or detectives was given both orally and in writing to Lieut. Hudson by Assistant Secretary Franklin D. Roosevelt, with the knowledge and consent of Josephus Daniels, Secretary of the Navy.
"The 26 related conclusions and the minority report are contained in United States Senate, Committee on Naval Affairs, 67th Congress, 1st Session, Alleged Immoral Conditions at Newport (R. I.) Naval Training Station (Washington: Government Printing Office, 1921).
"However, while FDR's conduct in the U.S. Navy may have been inexcusable and may or may not reflect on his moral fiber, such conduct is not pertinent to this book, and these incidents are omitted.
"It should also be noted that, where FDR's correspondence is of critical import for the argument of this book, it is the practice to quote sections verbatim, without paraphrasing, to allow the reader to make his own interpretations."]
So we shall find it not surprising that the Wall Street groups that supported Al Smith and Herbert Hoover, both with strong ties to the financial community, also supported Franklin D. Roosevelt. In fact, at the political crossroads in 1932, when the choice was between Herbert Hoover and FDR, Wall Street chose Roosevelt and dropped Hoover.
Given this information, how do we explain FDR's career on Wall Street? And his service to Wall Street in creating, in partnership with Herbert Hoover, the trade associations of the 1920s so earnestly sought by the banking fraternity? Or FDR's friendship with key Wall Street operators John Raskob and Barney Baruch? To place this in perspective we must go back in history and examine the background of the Roosevelt and Delano families, which have been associated with New York banking since the 18th century.
THE DELANO FAMILY AND WALL STREET
The Delano family proudly traces its ancestors back to the Actii, a 600 B.C. Roman family. They are equally proud of Franklin Delano Roosevelt. Indeed, the Delanos claim that the Delano influence was the predominant factor in FDR's life work and accounts for his extraordinary achievements. Be that as it may, there is no question that the Delano side of the family links FDR to many other rulers and other politicians. According to the Delano family history, [Daniel W. Delano, Jr., Franklin Roosevelt and the Delano Influence (Pittsburgh, Pa.: Nudi Publications, 1946), p. 53.] "Franklin shared common ancestory with one third of his predecessors in the White House." The Presidents linked to FDR on the Delano side are John Adams, James Madison, John Quincy Adams, William Henry Harrison, Zachary Taylor, Andrew Johnson, Ulysses S. Grant, Benjamin Harrison, and William Howard Taft. On the Roosevelt side of the family, FDR was related to Theodore Roosevelt and Martin Van Buren, who married Mary Aspinwall Roosevelt. The wife of George Washington, Martha Dandridge, was among FDR's ancestors, and it is claimed by Daniel Delano that Winston Churchill and Franklin D. Roosevelt were "eighth cousins, once removed.'' [Ibid., p. 54.] This almost makes the United States a nation ruled by a royal family, a mini-monarchy.
The reader must make his own judgment on Delano's genealogical claims; this author lacks the ability to analyze the confused and complex family relationships involved. More to the point and without question, the Delanos were active in Wall Street in the 1920s and 1930s and long before. The Delanos were prominent in railroad development in the United States and abroad. Lyman Delano (1883-1944) was a prominent railroad executive and maternal grandfather of Franklin D. Roosevelt. Like FDR, Lyman began his career in the insurance business, with the Northwestern Life Insurance of Chicago, followed by two years with Stone & Webster. [See Sutton, Bolshevik Revolution, op. cit., pp. 128, 130-3, 136 on Stone & Webster.] For most of his business life Lyman Delano served on the board of the Atlantic Coast Line Railroad, as president in 1920 and as chairman of the board from 1931 to 1940. Other important affiliations of Lyman Delano were director (along with W. Averell Harriman) of the Aviation Corporation, Pan American Airways, P & O Steamship Lines, and half a dozen railroad companies.
Another Wall Street Delano was Moreau Delano, a partner in Brown Brothers & Co. (after 1933 it absorbed Harriman & Co. to become Brown Brothers, Harriman) and a director of Cuban Cane Products Co. and the American Bank Note Company.
The really notable Delano on Wall Street was FDR's "favorite uncle" (according to Elliott Roosevelt), Frederic Adrian Delano (1863-1953), who started his career with the Chicago, Burlington and Quincy Railroad and later assumed the presidency of the Wheeling & Lake Erie Railroad, the Wabash Railroad, and in 1913 the Chicago, Indianapolis and Louisville Railway. "Uncle Fred" was consulted in 1921 at a critical point in FDR's infantile paralysis attack, quickly found Dr. Samuel A. Levine for an urgently needed diagnosis, and arranged for the special private train to transport FDR from Maine to New York as he began the long and arduous road to recovery. [Elliott Roosevelt and James Brough, An Untold Story: The Roosevelts of Hyde Park (New York: Putnam's, 1973), pp. 142, 147-8.]
In 1914 Woodrow Wilson appointed Uncle Fred to be a member of the Federal Reserve Board. Intimate Delano connections with the international banking fraternity are exemplified by a confidential letter from central banker Benjamin Strong to Fred Delano requesting confidential FRB data: [United States Senate, Hearings before the Special Committee Investigating the Munitions Industry, 74th Congress, Second Session, Part 25, "World War Financing and United States Industrial Expansion 1914-1915, J. P. Morgan & Company" Washington: Government Printing Office, 1937, p. 10174, Exhibit No. 3896.]
My Dear Fred: Would it be possible for you to send me in strict confidence the figures obtained by the Comptroller as to holdings of foreign securities by national banks? I would be a good deal influenced in my opinion in regard the present situation if I could get hold of these figures which would be treated with such confidence as you suggest.
If the time ever comes when you are able to slip away for a week or so for a bit of a change and rest, why not take a look at Denver and incidentally pay me a visit? There are a thousand things I would like to talk over with you.
Hon. F. A. Delano
Federal Reserve Board, Washington, D.C.
Following World War I Frederic Delano devoted himself to what is euphemistically known as public service, while continuing his business operations. In 1925 Delano was chairman of the League of Nations International Committee on opium production; in 1927 he was chairman of the Commission on Regional Planning in New York; he then became active in sponsoring the National Park Commission. In 1934 FDR named Uncle Fred Delano as chairman of the National Resources Planning Board. The Industrial Committee of the National Resources Planning Board, which presumably Frederic Delano had some hand in choosing, was a happy little coterie of socialist planners, including Laughlin Currie, Leon Henderson, Isador Lublin (prominent in the transfer of industrial technology to the USSR in the pre-Korean War era), and Mordecai Ezekiel. The advisor to the Board was Beardsley Ruml.
Then from 1931 to 1936, while involved in socialist planning schemes, Delano was also chairman of the board of the Federal Reserve Bank of Richmond, Virginia. In brief, Frederic Delano was simultaneously both capitalist and planner.
Delano left a few writings from which we can glean some concept of his political ideas. There we find support for the thesis that the greatest proponents of government regulation are the businessmen who are to be regulated, although Delano does warn that government ownership of railroads can be carried too far:
"Government ownership of railroads is a bugaboo which, though often referred to, the public does not demand. If government ownership of railways comes, it will come because the owners of railways prefer it to government regulation, and it will be a sorry day for the republic when regulation is carried to such an extreme that the owners of the railways are unwilling to accept any longer the responsibilities of management." [Frederic A. Delano, Are Our Railroads Fairly Treated? Address before the Economic Club of New York, April 29,1913, p. 11.]
However, in another book, written about 20 years later, Delano is much more receptive to government planning:
"A big problem in planning is that of educating the people. If the public only realized that there can be social gains from directed effort, and that the time to accomplish most by planning comes before the need of making changes are manifested, the other problems of planning could be more easily solved." [Frederic A. Delano, What About the Year 2000?Joint Committee on Bases of Sound Land Policy, n.d., pp. 138-9.]
"The above brief classification of the problem involved in planning serves as a basis for indicating the need for both direct and indirect social control. Very few people really know the best use of land for their own advantage, to say nothing of planning its use for the common good. Institutions have done a great deal in educating farmers how to plan individual farms, and yet many of the farms in this country are poorly organized." [Ibid., p. 141.]
In brief, the Delano side of the family has undertaken capitalist enterprises and has Wall Street interests going well back into the 19th century. By the 1930s, however, Frederic Delano had abandoned capitalist initiative for socialist planning.
THE ROOSEVELT FAMILY AND WALL STREET
Franklin Delano Roosevelt was also descended on the Roosevelt side from one of the oldest banking families in the United States. FDR's great-grandfather James Roosevelt founded the Bank of New York in 1784 and was its president from 1786 to 1791. The investment banking firm of Roosevelt & Son of New York City was founded in 1797, and in the 1930s George E. Roosevelt, FDR's cousin, was the fifth member of the family in direct succession to head the firm. So the New York City banking roots of the Roosevelt family extend without interruption back into the late 18th century. In the industrial sphere James Roosevelt built the first American sugar refinery in New York City in the 1740s, and Roosevelts still had connections with Cuban sugar refining in the 1930s. FDR's father, also named James Roosevelt, was born at Hyde Park, New York in 1828 into this old and distinguished family. This James Roosevelt graduated from Harvard Law School in 1851, became a director of the Consolidated Coal Company of Maryland and, like the Delanos in subsequent years was associated with the development of transportation, first as general manager of the Cumberland & Pennsylvania Railroad, and then as president of the Louisville, New Albany & Chicago Railroad, the Susquehanna Railroad Co., Champlain Transportation Co., Lake George Steamboat Co., and New York & Canada Railroad Co. James Roosevelt was also vice president and manager of the Delaware & Hudson Canal Co. and chairman of the Maritime Canal Company of Nicaragua, but most significantly was an organizer of the Southern Railway Security Company, established in 1871 and one of the first of the security holding companies formed to buy up and consolidate railroads. The Southern Railway Security Company was a consolidation or cartelization scheme similar in its monopolistic principle to the trade associations formed by Franklin D. Roosevelt in the 1920s and to the National Recovery Act, another cartelization scheme, of the New Deal. James Roosevelt's second wife was Sara, daughter of Warren Delano, and their son was Franklin Delano Roosevelt, later President of the United States.
Franklin was educated at Groton and Harvard, then went on to Columbia Law School. According to his son Elliott, [Elliott Roosevelt, An Untold Story, p. 43.] FDR "never graduated or took a degree, but he was able to pass his New York State bar examination." [Ibid, p. 67.] FDR's first job was with the old established downtown law firm of Carter, Ledyard and Milburn, whose principal client was J. Pierpont Morgan, and in three years FDR worked his way up from minor legal research posts to the firm's municipal court and admiralty divisions. We should note in passing that, when FDR first went to Washington D.C. in 1916 to become Assistant Secretary of the Navy, it was Thomas W. Lamont—international banker and most influential of the Morgan partners—who leased the FDR home in New York. [See Sutton, Bolshevik Revolution, for numerous citations to Thomas Lamont's connection with the Bolshevik Revolution in 1917, while residing in FDR's leased house in New York.]
There were other Roosevelts on Wall Street. George Emlen Roosevelt (1887-1963) was a cousin of both Franklin and Theodore Roosevelt. In 1908, George Emlen became a member of the family banking firm Roosevelt & Son. In January 1934, after passage of FDR's Banking Act of 1933, the firm was split into three individual units: Roosevelt & Son, with which George Roosevelt remained as a senior partner, Dick & Merle-Smith, and Roosevelt & Weigold. George Emlen Roosevelt was a leading railroad financier, involved in no fewer than 14 railroad reorganizations, as well as directorships in several important companies, including the Morgan-controlled Guaranty Trust Company, [It is important to note as we develop the story of FDR in Wall Street that Guaranty Trust is prominent in the earlier Sutton, Bolshevik Revolution.] the Chemical Bank, and the Bank for Savings in New York. The full list of George Emlen's directorships at 1930 requires six inches of small print in Poor's Directory of Directors.
Another Morgan-associated Roosevelt was Theodore Roosevelt, 26th President of the United States and the grandson of Cornelius Roosevelt, one of the founders of the Chemical National Bank. Like Clinton Roosevelt, whom we shall discuss later, Theodore served as a New York State Assemblyman from 1882-1884; he was appointed a member of the U.S. Civil Service Commission in 1889, Police Commissioner of New York City in 1895, and Assistant Secretary of the Navy in 1897; and was elected Vice President in 1900 to become President of the United States upon the assassination of President McKinley in 1901. Theodore Roosevelt was reelected President in 1904, to become founder of the Progressive Party, backed by J. P. Morgan money and influence, and so launched the United States on the road to the welfare state. The longest section of the platform of the Progressive Party was that devoted to "Business" and reads in part:
"We therefore demand a strong national regulation of interstate corporations. The corporation is an essential part of modern business. The concentration of modern business, in some degree, is both inevitable and necessary for national and international business efficiency."
The only really significant difference between this statement backed by Morgan money and the Marxian analysis is that Karl Marx thought of concentration of big business as inevitable rather than "necessary." Yet Roosevelt's Progressive Party plugging for business regulation was financed by Wall Street, including the Morgan-controlled International Harvester Corporation and J. P. Morgan partners. In Kolko's words:
"The party's financial records for 1912 list C. K. McCormick, Mr. and Mrs. Medill McCormick, Mrs. Katherine McCormick, Mrs. A. A. McCormick Fred S. Oliver, and James H. Pierce. The largest donations for the Progressives, however, came from Munsey, Perkins, the Willard Straights of the Morgan Company, Douglas Robinson, W. E. Roosevelt, and Thomas Plant." [Gabriel Kolko, The Triumph of Conservatism (London Free Press, 1963), p. 202. Willard Straight was owner of The New Republic.]
There is, of course, a long Roosevelt political tradition, centered on the State of New York and the Federal government in Washington, that parallels this Wall Street tradition. Nicholas Roosevelt (1658-1742) was in 1700 a member of the New York State Assembly. Isaac Roosevelt (1726-1794) was a member of the New York Provincial Congress. James I. Roosevelt (1795-1875) was a member of the New York State Assembly in 1835 and 1840 and a member of the U.S. House of Representatives between 1841 and 1843. Clinton Roosevelt (1804-1898), the author of an 1841 economic program remarkably similar to Franklin Roosevelt's New Deal (see Chapter 6) was a member of the New York State Assembly in 1835. Robert Barnwell Roosevelt (1829-1906) was a member of the U.S. House of Representatives in 1871-73 and U.S. Minister to Holland 1888-1890. Then, of course, as we have noted, there was President Theodore Roosevelt. Franklin continued the Theodore Roosevelt political tradition as a New York State Senator (1910-1913), Assistant Secretary of the Navy (1913-1920), Governor of the State of New York (1928-1930), and then President (1933-1945).
While FDR was in office, other Roosevelts assumed minor offices. Theodore Roosevelt, Jr. (1887-1944) was a member of the New York State Assembly from 1919 to 1921 and then continued the virtual Roosevelt Navy monopoly as Assistant Secretary of the Navy from 1921 to 1924, Governor of Puerto Rico from 1922 to 1932, and Governor General of the Philippines from 1932 to 1933. Nicolas Roosevelt was Vice Governor of the Philippines in 1930. Other Roosevelts have continued this political tradition since the New Deal era.
An alliance of Wall Street and political office is implicit in this Roosevelt tradition. The policies implemented by the many Roosevelts have tended toward increased state intervention into business, desirable to some business elements, and therefore the Roosevelt search for political office can fairly be viewed as a self-seeking device. The euphemism of "public service" is a cover for utilizing the police power of the state for personal ends, a thesis we must investigate. If the Roosevelt tradition had been one of uncompromising laissez-faire, of getting the state out of business rather than encouraging intervention into economic activities, then our assessment would necessarily be quite different. However, from at least Clinton Roosevelt in 1841 to Franklin D. Roosevelt, the political power accumulated by the Roosevelt clan has been used on the side of regulating business in the interests of restricting competition, encouraging monopoly, and so bleeding the consumer in the interests of a financial elite. Further, we must consider the observation conveyed by Franklin D. Roosevelt to Edward House and cited in the epigraph to this chapter, that "a financial element in the large centers has owned the government ever since the days of Andrew Jackson." Consequently, it is pertinent to conclude this introductory chapter with the 1943 observations of William Allen White, an honest editor if ever there was one, who made one of the best literary critiques on this financial establishment in the context of World War II; this, it should be noted, was after ten years of FDR and at the peak of Roosevelt's political power:
"One cannot move about Washington without bumping into the fact that we are running two wars—a foreign war and a domestic one.
"The domestic war is in the various war boards. Every great commodity industry in this country is organized nationally and many of them, perhaps most of them are parts of great national organizations, cartels, agreements, which function on both sides of the battle front.
"Here in Washington every industry is interested in saving its own self. It wants to come out of the war with a whole hide and with its organization unimpaired, legally or illegally.
"One is surprised to find men representing great commodity trusts or agreements or syndicates planted in the various war boards. It is silly to say New Dealers run this show. It's run largely by absentee owners of amalgamated industrial wealth, men who either directly or through their employers control small minority blocks, closely organized, that manipulate the physical plants of these trusts.
"For the most part these managerial magnates are decent, patriotic Americans. They have great talents. If you touch them in nine relations of life out of ten they are kindly, courteous, Christian gentlemen.
"But in the tenth relation, where it touches their own organization, they are stark mad, ruthless, unchecked by God or man, paranoics, in fact, as evil in their design as Hitler.
"They are determined to come out of this war victorious for their own stockholders—which is not surprising. It is understandable also for Hitler to desire to come out of this war at any cost victorious for the German people.
"But this attitude of the men who control the great commodity industries, and who propose to run them according to their own judgment and their own morals, do not make a pretty picture for the welfare of the common man.
"These international combinations of industrial capital are fierce troglodyte animals with tremendous power and no social brains. They hover like an old silurian reptile about our decent more or less Christian civilization—like great dragons in this modern day when dragons are supposed to he dead." [Quoted from George Seldes, One Thousand Americans, New York: Boni & Gaer, 1947, put 149-150.]
Chapter 2—Politics in the Bonding Business
"I am going to take advantage of our old friendship and ask you if you can help me out any [sic] in an effort to get fidelity and contract bonds from the powers that be in Brooklyn."
Franklin D. Roosevelt to Congressman J. A. Maher, March 2, 1922.
[This chapter is based on the FDR papers at Hyde Park, New York: specifically Croup 14, file entitled "Fidelity & Deposit Co. of Maryland, Correspondence of FDR as Vice President, 1921-1928."]
In early 1921 Franklin D. Roosevelt became vice president of the Fidelity & Deposit Company of Maryland and resident director of the company's New York office at 120 Broadway. Fidelity & Deposit of Maryland was an established insurance company specializing in the bonding and surety policies required on government and corporate contracts and a range of individual employments ranging from secretary of a trade union to employees of stock brokerage houses. In fact, a potential for bonding business exists wherever a contractor or employee can violate a fiduciary trust or fail to complete a contract, as in construction projects. In brief, bonding is a specialized field of insurance covering the risk of noncompliance. In 1921 Fidelity & Deposit was the fourth largest such bonding house in the United States, but not to be confused with the Fidelity and Casualty Company of New York, another insurance company, which incidentally had W. Emlen Roosevelt, FDR's cousin, on its board of directors.
Why did Van-Lear Black, owner of The Baltimore Sun and board chairman of Fidelity & Deposit, hire insurance novice Franklin D. Roosevelt as vice president of the important New York office? Almost certainly he hired FDR because the bonding business is unusually dependent upon political influence. Reading through FDR's Fidelity & Deposit letter files from 1921 to 1928, we find that only rarely do price or service appear as competitive elements in bonding. The main competitive weapons are "Whom do you know?" and "What are your politics?" In other words, politics is a substitute for the market place. Politics was FDR's forte and Van-Lear Black knew his bonding world when he acquired FDR. It is important to note the political nature of the bonding business because FDR's biographers have, in some cases, suggested that FDR, a business novice, was relatively useless to Van-Lear Black. For example, Frank Freidel writes:
"Whether Van-Lear Black hired him because it was a smart business move or merely to collect a celebrity is impossible to determine. The worst Wall Streeters unfriendly to Roosevelt were able to charge was that the company wasted the twenty-five thousand dollars per year it paid him in salary." [Freidel, The Ordeal, op. cit., p. 138. Freidel is unfair to Roosevelt. No evidence is given of Wall street criticism of the appointment. criticism is unlikely—given the political nature of the business, that politics was FDR's strength, and the long Roosevelt tradition on the street.]
What then were the roles of politics and politicians in the bonding business in New York State in the 1920s?
POLITICIANS AS BOND WRITERS
The pervasive political nature of the bonding business is reflected in a contemporary, but anonymous, news clipping found in the FDR letter files and carefully marked by FDR himself. The clip refers to New York State government officials negotiating state contracts while at the same time acting as members of private bond-issuing firms selling security bonds to state contractors. The newspaper aptly headed the column "All Under One Roof" and reported that Daniel P. O'Connell, a member of the Albany bonding firm O'Connell Brothers & Corning and simultaneously in charge of the public affairs of the city and county of Albany, was endeavoring to exert a statewide influence over the issue of his bonds, to the dismay of competing bond writers:
"Whereas, formerly Daniel P. has been somewhat busy going on the bonds of various and sundry constituents, hereafter he will do his utmost, it is said, to wish his bonds on other persons, especially contractors doing business with the city and county.
"His advent into the bond-writing world has been about as welcome as a snowstorm would be to a blushing bride on a bright and sunny June morning. Local insurance men, Democrats as well as Republicans, it is said, who have been engaged in writing contractors' bonds for many years, resent Daniel P's coming into their field, while perhaps admiring his ambition and display of courage and all that sort of thing; and in state political circles it is said that Royal K. Fuller, state commissioner of the bureau of canals and waterways, is fearful that if Daniel P. succeeds in the local field [it will be] to his (Mr. Fuller's) detriment, or rather to the detriment of the bond-writing firm with which he is connected and for whose benefit, it is said, he uses the influence of his position."
Bond writer cum office holder O'Connell then wrote soliciting letters to all Albany city and county contractors to the effect that he was in the bonding business at the City Savings Bank Building, owned incidentally by Albany Mayor Hackett and which also happened to be the headquarters of the Albany county Democratic organization. O'Connell's letter to State contractors concluded with the appeal:
"I would appreciate it if you will allow this office the opportunity of serving you. A telephone call or letter addressed to me at this office will receive prompt attention."
It is important to note this prevailing and apparently acceptable use of political office and influence to feather one's own nest. In the light of the evidence below, it suggests that FDR was merely following the contemporary mores of his environment. The use of politics to obtain bond business is reflected in the FDR letter files and essentially is the only way he obtained bonding business while vice president of Fidelity & Deposit Company. Of course, his letters soliciting business to the other Wall Street Roosevelts are entirely legitimate. We find for example, a letter to "Dear Cousin Emlen" (W. Emlen Roosevelt of Roosevelt & Son, 30 Pine Street) dated March 10, 1922 to inquire about obtaining the scheduled bond for the Buffalo, Rochester and Pittsburgh Railway Company, a bond then written by the competing National Surety Company. Emlen replied promptly on March 16 that he "was able to speak to the President about the matter." This must have stirred FDR's imagination because on March 16, 1922 he wrote to "Dear George" (George E. Roosevelt), also at Roosevelt & Son, inquiring about the blanket bond taken out by the firm itself for its own protection.
Trade unions were a special FDR target for business; as each union local secretary and treasurer is required to have a bond, this was a lucrative field. On December 13, 1921 general secretary treasurer E. C. Davison of the International Association of Machinists wrote FDR:
"We are now carrying the bulk of our bonding business with your company, which we were influenced to do in a great measure by the fact of your connection with this concern."
Then on January 26, 1922 Joseph F. Valentine, president of the International Molder's Union of North America, wrote to FDR that he was most appreciative of all FDR's efforts for the union while acting as Assistant Secretary of the Navy and
"I have a desire to give the Fidelity and Deposit Company of Maryland as much of our business as possible . . . as soon as our existing bonds have lapsed, it will be a personal pleasure to have your Company handle our business in the future."
Union officials in Washington and elsewhere were prompt to request their locals to divert business to their old friend FDR and away from other bonding companies. In turn, local union officials were prompt to report on their diverting actions, information in turn promptly conveyed to FDR. For example, the president of the International Association of Boilermakers wrote to Secretary Berres of the Metal Trades Department, A. F. of L., in Washington, D.C.:
". . . You may rest assured that anything that I can do to be of service to Mr. Roosevelt in his new position will be a pleasure on my part, and I am today writing Mr. Roosevelt."
Naturally FDR exploited his old political friends to the utmost and with a commendable attention to detail. In a sales pitch dated March 2, 1922 addressed to Congressman J. A. Maher, FDR wrote two letters, not one. The first letter read in part:
"Howe [Louis Howe, FDR's right-hand man] told me of his conversation over the telephone with you and I am inclosing a more formal letter for exhibition purposes. This is a little friendly note lest you think I have suddenly grown formal since I have adopted Wall Street as my business address.
"Do come over and see me. I know it will do your soul good to hear the language which Brother Berres and various others connected with the Labor Bureau, are using in regard to the present administration in general and Congressmen in particular. If the Missus happens to be out of hearing when you arrive I will repeat some of the more quotable extracts."
FDR enclosed for Congressman Maher a more formal letter obviously to be shown around to Maher's friends stating precisely what it was he wanted: "fidelity and contracts bonds from the powers that be in Brooklyn:"
"I am going to take advantage of our old friendship and ask you if you can help me out any in an effort to get fidelity and contract bonds from the powers that be in Brooklyn. There are a large number of bonds needed in connection with the city government work, besides the personal bonds which every city official has to give, and I am in hopes that some of my old friends will be willing to remember me. Unfortunately, I cannot take this matter up with them myself at the present time, but as all my friends are your friends I feel that if you have the time and inclination, you can be of real help to me. I assure you the favor will not soon be forgotten.
Later we shall see how successful this approach was for F & D.
POLITICAL INFLUENCE AND CONTRACT AWARDS
FDR's political contacts and influences were of course well known within Fidelity & Deposit, and he was repeatedly called upon by other members of the firm to use his political expertise and personal credit to generate bond business, even outside New York. This may be exemplified by a letter dated August 23, 1928 from F & D director F. A. Price, in charge of the Chicago office, about business from local Chicago politicians. Price wrote "Dear Franklin" with a message that, since the death of Chicago political leader George Brennan, several names had been proposed as leaders of the local Democratic Party machine. Brennan before his death requested that M. L. Igoe be his successor, Price writes FDR:
"You undoubtedly got in touch with him while at Houston and in the event you have a personal acquaintance with him, I would like to have you give me as strong a letter of introduction to him as possible."
Price noted that recently when in Baltimore he had discussions with F & D company president Charles Miller about "the thought of making some deal with the new democratic leader in Illinois. It is with this view in mind that I wish the letter of introduction." As machine politics in Chicago has been notorious for its low ethical standards, it requires little imagination to visualize the kind of deal Price was suggesting and which FDR used his name and influence to further.
That personal friendship alone was insufficient to get bonding business and that some variety of sweetener was used is brought out in a letter on the New York political situation dated September 23, 1925 from John Griffin, in charge of the New York office contract division, to "My Dear Mr. Roosevelt." It discusses the complex interconnections between New York political offices and the bond brokerage business. In part the letter reads:
"The big victory of Walker over Hylan will, of course, make a new set-up in the bond broker situation. Sinnott & Canty, from whom we were able to get some bonds in the early part of the Hylan Administration and in the latter part were not so much favored, will no doubt be out of it and either Charles F. Murphy, Jr., Hyman & McCall, Jim Hoey, or a man named McLaughlin, a brother of the Banking Superintendent, will be the favored one. As I see it, our strongest connection will be through Al Smith into Charlie Murphy or McCall or McLaughlin as Hoey has his own Company—the Columbia Casualty Company. Perhaps Murphy receives from the National Surety Company, or the Company to whom he gives business now, a larger commission than we might be willing to give for his direct business, but a word into his ear through you and, of course, through the Governor and possibly Jimmie Walker, would at least put us under the most favored nation clause or [for] any division of these bonds as you know all of them must be divided between two or more companies.
"I know all of these people pretty well and favorably, but mere personal friendship will not be sufficient."
A meticulous reading of this internal company letter suggests that kickbacks were the usual way to get bond business from New York government agencies; note the paragraph, "Perhaps Murphy receives from the National Surety Company, or the Company to whom he gives business now, a larger commission than we might be willing to give for his direct business." The concluding sentence, ". . . mere personal friendship will not be sufficient" has an ominous ring.
Politicization of the surety business, so obvious in Chicago and New York, extended also to the Federal government contract arena in Washington D.C. On May 5, 1926 F & D second vice president F. A. Bach in Baltimore wrote FDR about a $1 1/4 million Veterans Bureau building projected for construction that spring:
"Among other projects of the Veterans Bureau this spring is one involving approximately a million and a quarter dollars at Bedford, Mass., and I am secretly hoping that through influence such as knowing Mrs. Rogers, Representative of Massachusetts, that we might have some chance of getting a piece of that business although, of course, the biggest project will be at North Port, Long Island."
Similarly, to a contact in a "firm holding Navy contracts" FDR wrote:
"A casual reference in a letter from one of my old friends in the Navy Department to the award of some 8-inch gun forgings to your company, brought to my mind the very pleasant relations we held during my term as Assistant Secretary of the Navy, and I wondered if you would feel like letting my company write some of the contract bonds that you are obliged to give the government from time to time. I would like very much to have one of our representatives call."
Louis Howe, FDR's right-hand man, also worked at F & D offices, also actively solicited bonds, and was not at all backward about canvassing business. Howe's letter to Homer Ferguson of the Newport News Shipbuilding Company in December 1921 noted that the company had entered bids on construction of the vessel Leviathan and thanked Ferguson for the bond:
"If by any chance the fact that this was Mr. Roosevelt's company influenced you in making this award it would cheer Mr. Roosevelt tremendously if you could write him a little line to that effect."