Bernard Baruch

by James Grant

  This Roosevelt declined to do. Instead, aboard the USS Indianapolis, in the advisory company of Louis M. Howe and Henry Morgenthau Jr., he drafted a repudiating statement ever afterward known as the “bombshell.” Economically the goal of the New Deal was to raise domestic prices. The AAA and NRA were designed to lift them by law or persuasion, the gold acts through monetary inflation. Talking it over with Morgenthau and Howe, Roosevelt bridled at the idea of relinquishing any domestic freedom of action to an international agreement. To Hull he wrote explosively that

  the sound internal economic situation of a nation is a greater factor in its well-being than the price of its currency in changing terms of the currencies of other nations. . . . So, too, old fetishes of so-called international bankers are being replaced by efforts to plan national currencies with the objective of giving those currencies a continuing purchasing power which does not vary greatly in terms of the commodities and needs of modern civilization.

  Nothing more was heard of the conference. For the American delegation the political repercussions of the President’s turnabout were far-reaching. Moley, who had sponsored the rejected declaration, was out, while Hull, whom Moley had briefly upstaged, was in. The gold-standard advisers were out; and Warburg, for one, promptly resigned, saying, “We are entering upon waters for which I have no charts and in which I therefore feel myself an utterly incompetent pilot.”

  Being older, wiser, and navigationally more agile than Warburg, Baruch made no protest. “I am going along with the new adventures as much as I can,” he wrote Josephus Daniels in mid-July, a week before sailing for Europe, where he was to meet Annie and Belle, “but some of it, between old friends, is pretty strong medicine for me to take.” He said he was off to Vichy, for the waters, “to take all of the wickedness out of my system, and I hope out of my heart.” Swope wired him with a bon voyage wish that his love life should continue to be kept “on an inflated basis.” Later the same summer, in Czechoslovakia, Baruch fell in with Carter Glass and Frank Kent, both intransigent old-line Democrats. A Czech count put them up, and they hunted boar and celebrated Baruch’s sixty-third birthday. (Krock had been invited too, but couldn’t come. In his absence, he observed, Kent would be the “undisputed representative of the Guild of Sourpuss Political Columnists in Europe.”) Probably Baruch’s good right ear was filled with anti-New Deal ideas, but he returned to New York in a state of political ambivalence.

  What to do? He had given unstintingly of money in the campaign—$200,000, he told Moley—and of advice both then and later. A month before the inauguration he had served warning against inflation—a systematic debasement of the currency—before the Senate Finance Committee. Subsequently The Saturday Evening Post had invited him to have the testimony boiled down into an article. He said yes. The piece was written, submitted, and scheduled to run at the end of November.

  Its approaching publication put its author on edge. Although careful to praise Roosevelt’s “great labors,” Baruch had written that fear of tampering with the dollar was impeding recovery. Some weeks earlier, Fortune magazine, in its October issue, had asked the question, “Is this a Baruch Administration?,” had answered it in the negative, and had quoted Baruch at his most pungently conservative, e.g., “By going off the gold standard we have become a nation of dishonest people in our relations with the bondholders,” and “We’re raising prices for the benefit of a small proportion—20 percent—of the population, the unemployed, debtor classes—incompetent, unwise people,” and, finally, “You don’t distribute wealth. You distribute poverty.”

  Party loyalty and the fear of ostracism worked strongly in Baruch and on November 6, 1933, he set out to explain himself. “About last March,” he wrote the President, “I wrote a document against inflation which at the request of many of my friends who read it I finally gave to The Saturday Evening Post. . . . Had I been aware that you were going to take the position that you have, I would have not given it for publication because although I disagree with many of the things you are doing, I would not want to be in a position of being publicly opposed to them.” Baruch thought better of it. He inserted the qualifying “might” between “I” and “disagree” and changed “many of the things you are doing” to “some.” At last he decided to send no letter at all.

  The 1930s were filled with issues over which reasonable people argued and drew swords. On the financial scene one of the most acrimonious was the question of how to dispose of contracts in which payment was specified in gold or in the current dollar price of gold. Ever since the inflationist scare of the 1890s it had been common practice for creditors to stipulate payment in dollars of the same gold weight as they had lent. The Treasury’s own bonds, as late as May 1933, had been sold with this guarantee. All told, an estimated $100 billion worth of gold-clause bonds and obligations, public and private, were outstanding.

  Early on in the New Deal, gold clauses had all been canceled by a Joint Resolution of Congress. Then, on January 31, 1934, the contingency against which clauses had been written occurred: the dollar was devalued. At once the debtor’s burden was lightened, but so too the creditor’s asset was diminished. Aggrieved bondholders trooped to court, claiming that the cancellation of the gold clauses was unconstitutional and tantamount to theft. One such litigant, a man named Norman, had bought a $1,000 bond of the Baltimore & Ohio Railroad. The railroad had promised to pay 4½ percent a year in semiannual installments in “gold coin of the United States of America of or equal to the standard weight and fineness existing on February 1, 1930.” The stated dollar value of the coupon payable on February 1, 1934, was $22.50. However, since the gold value of the dollar had been reduced, the paper-dollar value of the interest payment would go up, as the gold clause provided. Instead of $22.50, Norman wanted the new, devalued dollar rate, $38.10. Invoking the government’s abrogation of gold clauses, the B&O refused.

  Through 1934 the gold-clause issue was joined. Did the government, in the interest of relieving debtors and raising prices in time of crisis, have the right to cancel contracts? Baruch, of course, had been a director of the B&O—implicitly he had joined in the company’s promise to pay Norman in constant gold dollars, come what may—and he therefore had at least a sentimental interest in saving the railroad the extra burden of debt that its creditors demanded. Furthermore, he was a Democrat, and the party necessarily stood behind the Administration and its policies. There was something else. Politics, to Baruch, began with the mass, not the individual, and he was thus disposed to bow to even summary federal laws for the sake of what he took to be the national interest. (The government’s lawyers, arguing in terrorem, warned that economic calamity would follow restoration of the clauses; the burden of debt would be ruinous.) To Fortune in 1933 he had bemoaned the injustice of going off gold—“. . . we have become a nation of dishonest people in our relations with the bondholders.” In late 1934, as Norman v. B&O Railroad Co. and other gold-clause cases wound their way to the Supreme Court, he wrote an unsolicited letter of advice to the then Treasury Secretary, Henry Morgenthau Jr. (Woodin had left office in ill health). In case the government lost and the gold clauses were upheld, Baruch suggested the Treasury should levy a tax on the devaluation premium that Norman and the others were demanding. For a rate of tax he proposed 100 percent, a strange kind of justice for bondholders. In the event the idea was unnecessary. On Monday, February 18, 1935, the Supreme Court, by a vote of 5–4, upheld the government’s contention that its sovereign power to define and redefine the value of money counted for more than contracts between individuals. Justice James C. McReynolds, his face flushed with anger and his southern voice pitched high, passionately dissented: “The Constitution as many of us have understood it, the instrument that has meant so much to us, is gone. The guarantees heretofore supposed to protect against arbitrary action have been swept away.” The stock market, hailing cheap money and the lightened burden of debt, went up. Baruch wired his congratulations to the President via his secretary, Marguerite
LeHand: “PLEASE TELL HIM THIS DELIGHTS ME MORE THAN I CAN EXPRESS.”

  But there was no predicting just where Baruch would turn up next on the ideological compass, and he continued to espouse a return to a gold-convertible dollar. In 1937 he ventured the prediction to Churchill that all the “managed currency nonsense” would soon disappear and said that for six thousand years the only real money had been based on gold and perhaps silver. A lady who saw a lot of Baruch remembered an evening in London in which Churchill and he were animatedly discussing gold. “All of us were sitting on a divan in front of the fireplace,” she said. “Churchill would jump up to make a point, then Baruch would jump up to counter it. Baruch would tower over Churchill. I remember there was a big gilt mirror above the fire, and how often each of the men would lean an elbow on the fireplace and steal a look at himself in the mirror while he was talking.”

  Herbert Swope, who for years served as a kind of concertmaster in the symphony orchestra of Baruch, once mused of his friend and client: “He has a passion for service and who is to say no to that, even though the service is attended by a fanfare of trumpets. I sometimes wonder whether this reputation is wholly deserved or if he, like most of us, is occasionally synthetic.”

  It was no easy matter to live up to a reputation that (thanks in no small part to Swope) bordered on the mythical. The Baruch of public mind was rich, wise, avuncular, judicious, and powerful. Arthur Krock, who should have known better, startled Baruch by writing in 1932 that he was one of the richest men in the country (he wasn’t, even before the Crash), and Roosevelt once supposedly remarked to Rexford G. Tugwell that Baruch “owned” no fewer than sixty congressmen and senators. There was a glimpse of the wise Baruch in a New Yorker piece by Heywood Broun about the perfect doctor. “To sum the whole thing up,” Broun had written, “the doctor nobody knows is a combination of Baruch, Beecher, Don Juan, Houdini, Mencken, and Ed Wynn.” (Baruch recalled strolling down the boardwalk in Atlantic City some time before the Crash in the company of Broun, Krock, and Alexander Woollcott. He said that when talk turned to the market his advice was to buy bonds.) There was another Baruch of popular imagining, the unredeemed Wall Street Jew conjured by Henry Ford, Senator Huey Long, and sundry critics of the Wilson war effort. There was a trace of him in a Broadway version of the Sinclair Lewis novel Dodsworth, which played in New York in 1934. In the second act, an “international banker,” by name Arnold Israel, is put in his place by Dodsworth, the Midwest automobile man, with the line, “This Israel may be all he says he is internationally and financially, but he certainly is no Barney Baruch.”

  To Baruch, of course, the preferred image was that of the wise and judicious American statesman, and he was at pains to have it projected in newspapers and magazines. He worked at maintaining cordial relations with newsmen, and he often made an impression with simple human kindness. Once the ship-news columnist for the New York American, Harry Acton, wrote appreciatively that Baruch had been generous enough to take the time to scan a passenger list to alert him to possible new leads, that he had obliged him in that way before and that he would be welcome in his column any time. It was Baruch’s office policy that no friendly editorial should go unanswered by a warm personal letter to the editorialist. To cope with heavy bouts of friendly publicity, he retained a former New York World reporter, Charles S. Hand, to write thank-you notes for him.

  As a master of the symbolic occurrence later known as the “media event,” Baruch in 1928 made news by moving his office downtown. In the summer of 1934, when Wall Street was no longer a fashionable address, he announced a move back uptown. He explained to newsmen that he had given up finance (later in the year he discovered that he would earn a bigger income than ever before but would pay 83 percent of it in taxes) and planned to write three books—The Autobiography of an American Boy, The Way That Lies Ahead for the Youth of America, and Man’s Conquest of Nature. Although he had already retained Marquis James, Pulitzer Prize-winning biographer of Andrew Jackson, to write a draft of his autobiography, he said there would be no ghostwriter—an astonishing whopper. “Wall Street will see him less and the public will hear him more,” reported Time in a story on this ostensible watershed in his career.

  His money not only dazzled the press but was also occasionally a source of succor to needy newsmen. Carter Field, a writer on the staff of Business Week who went on to publish a flattering biography of Baruch, was in his debt in the Depression, as were David Lawrence, the syndicated columnist George Sokolsky, and, of course, Swope. There is no known record of Krock either borrowing money or of entrusting what he did have to Baruch’s management. Frank Kent, on the other hand, availed himself freely of Baruch’s investment advice. In 1937, for instance, Baruch advised him that Warren Pipe & Foundry was a good thing but that he shouldn’t buy too much of it. One thing led to another, and in 1949, weakened by arthritis, Kent asked if Baruch couldn’t put him up at his apartment and give him the use of his car when he was next in town for a meeting of the Warren board of directors of which he (Kent) was by then a member. Baruch and the Baltimore columnist traveled together and needled each other in the way of boon companions. One of the Depression waifs to which Baruch had loaned money was Oglethorpe University in Atlanta. In gratitude the university presented the honorary doctor of laws degree to some candidates of his choosing, including Kent and Kennedy. After his investiture Kent received a backhanded letter of congratulation from his sponsor. “I nearly laughed myself sick at the idea of you looking dignified at the time the degree was conferred upon you,” Baruch wrote. “Your poor wife! Your poor wife!”

  Although Kent was in Baruch’s debt for countless favors, the two friends went their own ways in public life, and it can no more be said that Baruch “owned” Kent than the other way around. On most issues they did see eye to eye. Each could deplore the New Deal and each revered the memory of Woodrow Wilson. However, on two matters Baruch was a never-ending source of disappointment to the columnist. Where Kent was forthright and unswerving in his opposition to Roosevelt, Baruch was guarded and wavering. “I suppose,” Kent challenged in July 1936, “you are about to play your favorite role of Democratic sap—contributing to a cause in which you do not believe and for the benefit of a man you do not trust or like. What a china egg you are—and Herbert—and all of us. It’s a humbug world.” The second point of contention was Mrs. Roosevelt.

  To Kent the President’s wife was the sentimental, meddling, feminine image of the President. Baruch happened to like her, and she liked him. He was a source of cash for her good works and a fatherly counselor; she was a gentle lady, a White House spy, and a liaison between him and the President. Once in January 1934 she addressed him as “Barney,” but the familiarity rang false. (Baruch in any case preferred “Bernie”) and she resumed the formality of “Mr. Baruch.” Yet each of them was capable of spontaneous, heartfelt tributes to the other, and Baruch supported her work enthusiastically. In 1934, he gave $25,000 for the Reedsville homestead project; in 1935, $10,000 for the Arthurdale project and $43,500 more for Reedsville. (When, in the same year, Al Smith dunned him for $1,250 on behalf of the Brooklyn Zoo, which needed a pair of black leopards, Baruch pleaded poverty and the press of the New Deal. “If you can show me where I can get the $1,250 which as you know would have to be increased some in order to have this amount when the government finishes with us, I will go and get it and give it to you.”) For Reedsville and Arthurdale together in 1936, he gave more than $57,000. He furnished $200 anonymously to a Florida woman who, sick, pregnant, and unable to pay her hospital bills, had had a dream that the First Lady would help her; and in 1937, when Mrs. Roosevelt took an interest in developing a school in New York City, Baruch and his brother Herman promised to buy it for her.

  Some of his help was intellectual. He kept a steady stream of ideas on public issues flowing her way with the hope that some would find their way to the Oval Office. Sometimes, in return (she spoke of “our partnership”), she reported what was on the President�
��s mind, or tried to allay Baruch’s anxiety over some new policy thrust. In the summer of 1936, as the Administration and its critics were heading for a showdown over the Supreme Court, she wrote him reassuringly, “Franklin feels as keenly as you do about the Constitution.”

  Even with the coaching or columnar support of Swope, Kent, Krock, or Hugh Johnson (who turned to writing after he left the NRA), Baruch was not wholly the master of his own public image. The Depression was a harvest time of envy and anti-Semitism, and he was vulnerable to attack on either score. Moreover, since he had declared himself openly neither for nor against the New Deal, he was fair game for critics on either side of the political spectrum and for cranks at home and abroad. In the Senate he was regularly assailed by Huey Long as the secret power behind the Administration. As a matter of fact, according to Long, Baruch had run Hoover too—“We thought we were swapping Hoover for Roosevelt, but we were swapping Baruch for Baruch.” The Detroit radio priest Father Charles E. Coughlin arraigned him as “Acting President of the United States, the Uncrowned Prince of Wall Street” and insisted that his middle name wasn’t Mannes at all but Manasseh, for the wicked king of Judah who dealt in graven images, enchantments, witchcraft, and murder. Hate mail arrived uptown, including a handwritten note in 1935 that commanded him, after some vicious anti-Semitic name-calling, to “seek a lonely spot and shoot yourself and do the US a favor.”

  An attack on Baruch often yielded a publicity dividend to the assailant since one or more of Baruch’s many prominent friends could be expected to rise to his defense. In a riposte at Long in 1935, for instance, Krock observed that Baruch, far from being the omnipotent being caricatured by the Kingfish, had in fact been frustrated both in Wall Street (he was never permitted to realize his dream of owning a railroad) and more recently in Washington, where his advice went unheeded. Answering a Paris newspaper that had painted his mentor as “President Roosevelt’s great financial adviser and semiofficial chief of Jewish policy in America,” Johnson wrote that Baruch in fact deplored the Administration’s fiscal policy. Sometimes the best retort was silence, and Swope, for one, insisted in 1936 that nothing be said to provoke Coughlin. (He followed up this shrewd counsel with a prescient report of a small company that made sunglasses but not yet instant cameras and film, Polaroid Corporation. “It looks good,” he wrote. “In fact it looks so good I am startled.”) Following an allegation by Senator Schall of Minnesota in 1934 that Baruch had unpatriotically channeled investment funds abroad, the accused got in touch with Joe Robinson to frame a reply. So close were he and the senator from Arkansas and so faithfully had the latter taken his side against slander in the past that Baruch couched the proposed rebuttal in an interesting way. Here are the facts, he wrote Robinson, in case “we” should care to answer him.