Bernard Baruch

by James Grant

  1.That the mobilization of “dollars and things” by an industrial war chief would “take the profit out of war”; and

  2.That to take the profit out of war would probably prove one of the strongest influences for future peace.

  These suggestions are undoubtedly worthy of study and development from the standpoint of preventing war. The Page School is interested in all such measures. By taking the profit out of war we understand you to mean that you would limit profits through regulation so as to prevent profiteering. Certainly an absence of such profit would tend to repress that jingoism which encourages war, and, if war were to begin, to shorten, rather than to prolong it.

  It seems to the Page School Board that if the plan which you had in practical operation at the end of the war, and have several times since outlined in addresses to the War College, in newspaper articles, in hearings before Congressional committees, and in letters to men in public life, could be carefully studied in certain colleges in first-power countries, it would take its place definitely as one of the greatest deterrents to aggressive or causeless war that has yet been devised. For, if profit is eliminated from war everywhere, mercenary incentive to aggressive war will be definitely removed everywhere, and if the mobilization of things and dollars is carried along on the same basis with the mobilization of men in all countries verging on war, there will be less likelihood of joining battle.

  As Chairman of the Page School I invite you to center the American study of the problem there. Before coming to this decision the idea was submitted to General Pershing and you will note from his reply, a copy of which I enclose, that he agrees with all that I have said.

  Pershing and Young may have agreed but the board of trustees (which included, among other important people, Franklin D. Roosevelt) demurred. Their objection was that publication of the correspondence would leave the mistaken impression with the public that the school, instead of devoting itself to peace, had taken up the administration of war. This wounded Baruch and caused him to withdraw. Then the trustees reconsidered. A reconciliation was effected, and a statement for public release was beamed to Baruch across the Atlantic at the Ritz in Paris. The text included thanks for his “munificent” gift and the stipulation that the correspondence would be given to the newspapers immediately. News of the gift, complete with lengthy excerpts from the Baruch-Young letters, was published on the front page of The New York Times.

  The proposition that profits were a cause of war was, of course, a socialist evergreen, and it confirmed Baruch’s conservative critics in the notion that he was slightly soft in the head. (Whatever the theoretical merits or demerits of the profits from war idea, the Soviet Union, which abolished private property, marched on Finland and Poland in the next war, and Nazi Germany, which severely constricted property rights, marched on nearly everybody.) The fact was that Baruch was neither right nor left but eclectic. General Hugh Johnson described a portrait painter who despaired of capturing Baruch on canvas “because of the infinite variety and shades of expression constantly flitting across that aesthetic mobile face.” He was equally changeable in politics. In general he was loyal to men and party rather than to principles, but he was capable of magnificent disregard of personalities. When, for instance, Henry Ford proposed a plan in the early 1920s to develop the hydroelectric potential of Muscle Shoals and Senator George W. Norris of Nebraska countered with a rival scheme for government development, Baruch (who had had extensive wartime experience in the matter) considered the proposals on what he took to be their public merits. He chose Ford, his tormentor. He managed to support both the conservative Ritchie and the ultraliberal William G. McAdoo because he thought both of them were good men. While favoring fewer laws and more liberty, for many years he was also an ardent Prohibitionist.[39] Notwithstanding his aid to the soak-the-rich Nonpartisan League, he disapproved of the double taxation of corporate dividends and thought that a strict 33⅓ percent limit on income taxes would encourage enterprise.

  One of the strangest ideological encounters of his career occurred in the summer of 1925, following the Page School publicity. It happened at a discreet hotel in Versailles where the then commissar of foreign trade of the Soviet Union, Leonid Krassin, had arranged to meet him to make an extraordinary proposition. The Russian told the American that the achievements of the War Industries Board had made a deep impression on the Kremlin. “We have been counting on you, Mr. Baruch,” said Krassin, “to do for us in peace what you did for your own country in war.” He invited Baruch to become a kind of commissar consultant, and to name his price.

  Baruch (as he related the episode in his memoirs) agreed, although he said that he wouldn’t take any money. He did interpose one condition. It was that the needs of the Russian people in diet, transportation, and housing be given priority over heavy industry. This bourgeois sentimentality saddened even Krassin, who had an English wife and was known as a liberal, and the talks went no further. Shortly after this brush with Soviet Communism, Baruch lent some all-American counsel to Cordell Hull, chairman of the Democratic National Committee. “I do hope,” said Baruch, “that the Democrats will not ally themselves with these fellows who are either pink or red, or just be against a man because he is a little more successful than the others.”[40]

  Through the war years and into the mid-1920s the most important man in Baruch’s political life behind Wilson himself was the President’s son-in-law, William Gibbs McAdoo. McAdoo wanted to be President and also to be rich, but the latter ambition impeded the former. He was born in Marietta, Georgia, in 1863 and shared the universal poverty of that time and place. In 1877 he moved to Knoxville, Tennessee, with his six brothers and sisters because his father, an ex-Confederate officer, had been appointed adjunct professor of English and history at the University of Tennessee at the annual salary of $1,500. As a young man, McAdoo read the law in Chattanooga, accumulated $25,000 through real-estate speculation, but lost that and more in a failed attempt to electrify the Knoxville Street Railroad.

  Seeking a theater of operations in which to repay his debts, he moved to New York in 1892. He opened a Wall Street law office, found no clients, and tried to sell railroad bonds. To save a dime a day he walked from his home, a furnished fifth-floor walk-up on West 87th Street, to Wall Street and back again, a ten-mile round trip. In 1901, when Baruch, seven years his junior, was already a millionaire, McAdoo conceived a plan to build a railroad tunnel under the Hudson between Manhattan and New Jersey. By 1909, as president of the Hudson & Manhattan Railroad Company, he had built four tunnels (“the McAdoo Tunnels”) and coined the corporate slogan “The Public Be Pleased.”

  All this brought him prosperity and public esteem but, to his sharp disappointment, not wealth. On the Jersey side of the Hudson he met Governor Woodrow Wilson, joined his campaign in 1912, made himself invaluable, and entered the Administration as Treasury Secretary. In the war he kept the Treasury portfolio, shouldered the crushing duties of Director-General of Railroads and chairman of the Federal Reserve Board, headed up the Farm Loan Board, the War Finance Corporation, and the International High Commission, and somehow found time to sponsor Baruch within the Administration and to defend his flanks at the War Industries Board. This kindness Baruch never forgot.

  McAdoo quit the Treasury in 1918 to replenish his own finances. Probably he would have been the nominee for President in 1920 except that his father-in-law refused to rule out a third term for himself until late in the season. From a new base in Los Angeles, McAdoo busied himself in moneymaking and politics and was off to a fast start in the 1924 race. Baruch fell in with him, raised some $50,000 for him in the early going, and in 1923 described him as “head and shoulders above every man who has been talked about.”[41] Then, on January 24, 1924, Edward L. Doheny, a slight and mustachioed oil millionaire, confessed to a Senate investigating committee that he had sent $100,000 in bills in a “little black satchel” to Albert B. Fall, Secretary of the Interior under Harding, during negotiations for naval oil reserve
leases at Teapot Dome, Wyoming, and at Elk Hills, California. A few days later came another revelation: William G. McAdoo had been Doheny’s lawyer.

  Thus national politics were turned on their head and stood back up on their feet again. No sooner had the Harding Administration been exposed as corrupt than the leading Democratic presidential contender, McAdoo, was shown to have taken $50,000 in retainers from a presumed Republican malefactor.

  When the storm broke, Wilson lay dying. McAdoo and his wife, Wilson’s daughter Eleanor, had boarded a train in Los Angeles to be by his side, but he died before they could reach him. In Washington, McAdoo mourned distractedly. He fended off the Doheny insinuations, corralled delegates (which, in the circumstances, struck his mother-in-law as grievously bad form), and demanded the privilege of clearing his name before the Senate committee. This he did, wrote Frank Kent, in his history of the Democratic Party,

  right gallantly. . . . He made it clear that he not only had not rendered Mr. Doheny any legal services in connection with the Elk Hills oil lease but had known nothing about these leases. As soon as it had appeared that the breath of suspicion touched these leases he had severed the legal tie that bound him to Doheny and retired from the service. At no time had he ever had any relations with Mr. Doheny that were not clear and aboveboard, or which in any way reflected on him as a lawyer or as a man. It was a clear-cut, manly, convincing statement he made, but it did not in the least diminish the clamor nor lessen the vigor with which he was denounced as “Doheny’s attorney.”

  Baruch had long before advised McAdoo to steer clear of rich clients if he wanted to be President. Now his advice was to take a calculated risk. He urged McAdoo to offer to step down, a maneuver, he thought, that would win the public’s sympathy, disarm his enemies and ultimately salvage his candidacy. A resignation statement was drafted—Krock was called in from the World to write it—but McAdoo refused to sign. For a while Baruch suspended financial support. Still McAdoo carried on and indeed seemed to gain strength, and presently Baruch was aboard again. In April he told Senator Harrison:

  I am, of course, going to stay along with McAdoo as long as he wants me to and as long as he desires to run out his string. . . . Whenever a cloud hung over me, no matter how large or small it was, there was no questioning his faith or belief or willingness in every possible way.

  Either out of personal conviction or out of loyalty to his candidate, Baruch at the time was in one of his collectivist phases. He stood foursquare behind Prohibition and spoke in the progressive argot. To John W. Davis, the conservative corporate lawyer who was to figure unexpectedly in the final outcome of the convention, he offered in-town quarters and good will. “I should also like to see you very much and keep in touch with the elbows of my friends,” wrote Baruch, “so as to keep any wet or reactionary from getting the nomination. I think we will have the nucleus to prevent that in the McAdoo forces.”

  McAdoo himself was absolutely dry and in harmony with the ideology of William Jennings Byran. On the stump he was partial to words like “reaction,” “privilege,” and “sinister influences,” by which he meant Wall Street, corporate management, railroads, and such hostile eastern newspapers as the New York World. No doubt part of what McAdoo found sinister about Wall Street was how little money it had yielded to him (although, unlike Baruch, he had once managed to obtain venture capital from J. P. Morgan himself). He was tall and thin and had a long nose, lugubrious eyes, and a center-line part in his hair. He was as little given to self-deprecating humor as most intensely ambitious people are; to Baruch he once referred to “my restless and adventurous spirit.”

  McAdoo had been running hard for the Presidency since 1922, had built a far-flung campaign organization, and even after the Doheny admissions was pretty clearly seen as the Democratic front-runner. Through the unstinting efforts of Swope, his enemy, New York had been chosen as the site of the 1924 Democratic convention, and on June 19 McAdoo stepped off a train in Penn Station to the cheers of men in “Mc’ll Do” hatbands. Musicians struck up “Hail to the Chief,” a cavalcade formed and the candidate made his way by car to the Hotel Vanderbilt and to a suite that once had been Enrico Caruso’s.

  Conspicuous among the “reactionaries” who were bound to New York to oppose him was Senator Oscar W. Underwood of Alabama, formerly of the House, then leader of the Senate, an opponent both of Prohibition and of women’s suffrage and a friend of enterprise. In every predictable way and in one important surprising one, Underwood’s friends were McAdoo’s enemies and vice versa. Paradoxically, the Ku Klux Klan rejected the southern conservative, Underwood; it supported the California progressive, McAdoo.

  In those days the Klan was a weighty force in American politics. It naturally had little use for black people, but its agenda was chiefly anti-Catholic, anti-Jew, anti-foreign, and anti-beer. In a speech in Houston in the fall of 1923, Underwood had courageously attacked it and so brought down on himself the Klan designation of the “Jew, jug, and Jesuit” candidate. McAdoo, holding no brief for the Kluxers but alert to Underwood’s subsequent loss of strength in the South and Middle West, held fire. He trimmed on the issue of religious bigotry and refused to condemn the Klan, thereby inviting both the support of that organization and the opposition of its enemies. Baruch was caught in the middle. His friends on the World opposed McAdoo. He himself had advised against the tacit courting of Klan support. But when the advice went unheeded he became a silent partner in McAdoo’s silence. In May 1924 Swope invited Baruch to submit a brief statement on whether the Democratic and Republican parties should go on record against the Klan. On at least this one occasion, Baruch declined the opportunity to have his views published in the august pages of the World.

  The convention, which opened at Madison Square Garden on June 24, was the longest (sixteen days), most querulous, and most destructive in Democratic annals up to that time. It was the first in which the candidates abandoned the stance of dignified aloofness and generaled their forces on the floor, and it was the first to be broadcast. By radio sets in their parlors, Americans could hear the taunts of Catholics and Kluxers, the baiting chant of “Oil! Oil! Oil!” by McAdoo’s enemies and the belated attempts of the convention beadles to restore decorum (“Shut up, you big boob!”). The galleries belonged heart and soul to the governor of New York, Alfred E. Smith, a Catholic, a wet, and a product of the Tammany political machine. On all these counts, Smith was anathema to the McAdoo side; the Smith forces loathed McAdoo.

  On opening day, flags and bunting were draped festively over the ventilators and the still air bore the scent of some long decamped circus. The tone of the convention was set when Senator Harrison, in his keynote address, innocuously remarked that what America needed was a latter-day Paul Revere. Mistakenly thinking that they had heard the cry “cold beer,” the Tammany loyalists sent up a raucous cheer.

  After the preliminaries there was a fratricidal platform fight. A pro-League of Nations plank was voted down, and a proposal to denounce the Klan by name lost by one vote. Although nominally a victory for McAdoo, the Klan ballot backfired by steeling the wets and Catholics against him.

  On June 30, the first day of presidential balloting, it was clear that, barring a compromise, no candidate had the votes to win. McAdoo had 431½ out of a needed 732. Smith had 241 and Underwood had 42½. By the sixty-ninth ballot on July 4 (a day or two after the delegates were supposed to have amicably disbanded), McAdoo was up to 530 votes while Smith had 335. Hoping to break the deadlock, Baruch and Thomas L. Chadbourne, another moneyed McAdoo man, paid an Independence Day call on Al Smith to ask him to withdraw, but the New Yorker refused. At the eighty-seventh ballot, the oppressed and un-pressed Democrats put Smith in front. On July 8, after the hundredth ballot, McAdoo was forced to surrender, but then Smith’s support (which had been mainly stop-McAdoo) waned too. At last, on the one hundred and third ballot on July 9, John W. Davis went over the top.

  Hardly anyone had really wanted him. A former ambassador to the Cour
t of St. James’s and a distinguished advocate, Davis was, in William Jennings Bryan’s phrase, “Morgan’s lawyer,” but The Commoner dropped all objections when the delegates in an exhausted afterthought nominated his amiable younger brother, Charles W. Bryan, governor of Nebraska, as Vice President. Smith and the elder Bryan campaigned faithfully for the ticket. McAdoo issued a perfunctory statement and got on a boat for Europe.

  Baruch sailed for his annual vacation on July 9, praising McAdoo in defeat, also lauding Smith and next day sending a wireless message to Davis pledging support. (A news story of his sailing made the Op Ed page of the World, space usually reserved for scintillating commentary.) He held nothing against Davis—McAdoo, he thought, at least had fallen to a good man—but he was put off by the Democratic Party. In 1922, he had said that if he could shake his “desire not to be a leader” and if he weren’t a Jew, he might seek the party chairmanship himself in order to prepare for the 1924 season. In 1923 he privately called the then-reigning Democratic chiefs “bums.” On reflection at Fetteresso in the summer of 1924 he decided that the quality of leadership had somehow retrogressed. It came to him that the party had spurned him and his ideas and now wanted his money. He resolved to give less than he customarily did and never again to discuss an issue from the standpoint of party. To Krock he waxed uncharacteristically bitter:

  Jesse Jones asked me for money—I felt like referring him to all your friends, Mack, Roosevelt, Brennan, Marsh, and Cox . . . your friends who read me out of the party—not forgetting Joe Tumulty who does honor me with his friendship and all your other buddies—Not one cent yet. . . . [42]