Bernard Baruch

by James Grant

  An attempt in 1935 to prove that Baruch had illicitly profited as chairman of the War Industries Board boomeranged on the accuser and brought the accused his most thumping vindication of the period. The forum was a special Senate committee that Gerald P. Nye had convened in 1934 to investigate the munitions industry. Assisted by an upwardly mobile government lawyer named Alger Hiss, Nye’s plan was to expose the scope of corporate profits in the last war, to lay bare the lines of influence between the “merchants of death” and the government and to prevent any such recurrence in a future war. Since (as the reasoning implicitly went) capitalism was a cause of aggression, a promising avenue to peace was the suppression of wartime profits. One of the many witnesses called by the committee was Baruch.

  He was a potentially friendly witness. For years he had advocated “taking the profit out of war,” and in December 1934, President Roosevelt had appointed him chairman of a high-level federal panel to draft legislation to do just that. Later on, he commended the idea of government-owned munitions plants to Eleanor Roosevelt. Besides furthering national preparedness, he said, the armories and related manufacturing facilities would yield “great social values.”

  It was clear from the start, however, that the committee had unfriendly intentions. Although Baruch wasn’t called as a witness until March, Senator James F. Byrnes had begun collecting ammunition for use in his defense as early as January. The invitation to testify, when it did arrive, contained the transparently hostile request that Baruch furnish copies of his tax returns for 1916–1919 as well as a list of the securities he owned in that period. Presently word leaked out that the original tax returns had vanished from the Treasury archives (which, in the course of a routine weeding, they had), as if the witness himself had had them spirited away to destroy incriminating evidence.

  Nye and Hiss underestimated their man. Not only was Baruch innocent of the wrongdoing they suspected, but he was also well equipped to prove it. In advance of his appearance he sent the committee copies of his tax returns for 1916 and 1917, facsimile reports for 1918 and 1919, and lists of securities held (chiefly Liberty Bonds) and of dividends donated in the war to such interdenominational causes as the Knights of Columbus, YMCA, YMHA, and the Salvation Army. He coldly promised to furnish further personal details, and also “to further the work of the committee, which I had understood to be an investigation of the munitions industry.”

  Late in March, Baruch and his party—his valet, Lacey; a secretary, Miss Adele Busch, bearing more documents; and Swope—moved into rooms at the Carlton Hotel in Washington. For two days and two nights Swope and Baruch rehearsed, assembled evidence, and planned tactics. Swope reminded him that his Senate friends would be waiting to shake his hand at the committee-room door. He was to draw out this moment of greeting as long as possible. (Swope also advised him to show up a few minutes late, but tardiness, for Swope, was a lifelong policy.) The more time he took with his prepared statement, Swope counseled, the fewer questions would be asked of him and the greater the likelihood that the headlines next day would highlight him, not the committee. On the first day all went according to plan. On the second day, there was no statement to read, but the determined inquisitor, Hiss, had to contend with the stage whispers of Carter Glass in response to his questions—“Never heard such dad bum fool questions in all my bo’n days”—as well as Baruch’s forthright answers. Finally Senator Byrnes rose to testify to the generosity and patriotism of Baruch in the war, recounting, among other stories, his distribution of free Pullman tickets to the homebound women of the WIB. “Have you got that down?” Swope whispered loudly to the committee stenographer. The stenographer said yes. Swope then turned to Baruch and said, “Now we got the sons of bitches! From here we just coast in!” They did.

  52. In 1927, in a letter to Frank Kent, Baruch delivered himself of the line “If Christ had been mortal, he would have been a Democrat—certainly not a Republican.” He intended no humor.

  53. His personal financial interests were mixed. As a holder of bullion he would lose by the order to surrender one’s gold at the submarket price of $20.67 an ounce. As a holder of gold-mining stock, he stood to gain by the looming formal devaluation. And in the event, Alaska Juneau began to receive $35 an ounce for its gold in 1934.

  Fourteen

  “His Métier Was Peril”

  Annie Griffen Baruch came down with pneumonia on Tuesday, January 11, 1938, and died the following Sunday afternoon at home in New York. A private funeral was held the next Tuesday. The obituaries described a quiet and motherly woman who had patronized the arts, supported the opera, collected antique silver and furniture, and avoided her husband’s spotlight. She was sixty-five years old.

  “I don’t know why he wants me to go to the funeral,” Eleanor Roosevelt told a friend when Baruch invited her to attend. “He never paid any attention to her when she was alive.” Perhaps he mourned from guilt and old love as much as from anguish, for their marriage had become a formality. His taste ran to young and pretty women, and she was stout and looked her years. She took little interest in power brokerage, stock picking, quail shooting, and his other pursuits. Long’s and Coughlin’s attacks on him horrified her, and the fact that she had no grandchildren saddened her. In the fall of 1936, when a grandson was born to the Swopes, she had wired congratulations wistfully: YOU HAVE A GRANDSON, I HAVE NOT EVEN A WHIFFENPOOF.

  A month after Annie’s death, Cary Grayon, the former White House physician, died. Baruch was genuinely bereaved. Once in the Harding years there had been a spiteful Republican attempt to have the doctor, a Navy man who owed an out-of-line promotion to President Wilson, shipped off to the Philippines. Hearing of the plot, Baruch intervened. Grayson and he were partners in racing, and a thirteen-thousand-mile separation would have been out of the question. “Through many difficult and also many happy adventures,” he once reflected of Grayson, “our friendship has ripened into one of those beautiful relationships that make life worth living.” He could have almost said the same thing about Joe Robinson, and he had died, under the burden of Senate work, in July 1937.

  The death of a close friend or spouse often serves as a reminder of the inevitability of one’s own death, but in Baruch’s case the signs were premature. He would carry on to impart advice to President John F. Kennedy, to worry over a world war, two lesser conflicts, and the atomic bomb, and to exceed by almost a quarter century his Biblically allotted life span of threescore and ten years. One health-giving force in his life was hypochondria. It never occurred to him, as a rich and egocentric doctor’s son, not to take care of himself or to deny himself (or, for that matter, his close friends and relatives) expert medical care. He watched his diet, soaked himself in mineral baths, and waved small dumbbells in the air for exercise. After Annie’s death he hired a live-in nurse and companion.

  Sick or well, he was a model patient. He followed medical instructions to the letter, unquestioningly paid his doctors’ bills, and took pills, including vitamins, by the handful. One physician in the Baruch stable billed his famous patient at a premium rate simply because he was expected to make himself available to Baruch at the drop of a hat. “If a doctor said ‘go to the moon,’ ” said the doctor, “he’d go.”

  Despite conscientious preventive maintenance, however, Baruch’s body developed the usual knocks and rattles of old age. The gout, which tortured him in 1932, recurred later in the decade. In 1935 it had him on crutches. In 1936, a year in which he felled an opponent with a single blow during an altercation on East 57th Street (to a policeman who happened on the scene after the fight and asked whether he could be of assistance, Baruch answered, “Yeah! Pick the son of a bitch up so I can hit him again”), he suffered from arthritis. In 1939 he had prostate trouble, a renal attack, and a mastoid operation. The hearing in his left ear was gone, but in August 1939 he pronounced himself fitter than he’d been in a decade—his doctors, he said, had discovered a heretofore-undiagnosed “low-grade infection.”

  By that
time it was clear that another war was coming, and Baruch wanted to be up and around for it, and to have others believe that he was fit enough to participate, too. He had been predicting war and trying to rouse his countrymen to prepare for it ever since the mid 1930s. As he himself pointed out, he was the living authority on economic mobilization, and he had been lecturing, writing, and cajoling on that subject almost since the first Armistice Day.

  Baruch, said a perceptive associate of his, loved to be needed when the chips were down—“his métier was peril.” Apart from this urge to serve in an hour of crisis, he was a patriot who was willing to put country above everything else, even his own pride. (In the main guest bedroom at Hobcaw there was a picture of Happy Argo, Baruch’s champion colt, winning the Parole Handicap at Belmont Park in 1927. The jockey was dressed in the silks of Kershaw Stable, Baruch’s nom de course. Its colors were red, white, and blue.) With the onset of war, he became an unpaid, full-time public servant.

  Baruch proceeded in martial affairs in the same ideologically eclectic way as he had operated in political and economic ones. As early as 1935, he had condemned Hitler as the “greatest menace to world safety,” and in 1938 he contributed $11,060 to the Abraham Lincoln Battalion, which fought in Spain against Franco, and with the Communists.[54] Both positions were certifiably progressive. Then, in 1939, he said that Hitler and Stalin were “blood brothers”—a view from the right. In 1941 he pressed for controls on wages, prices, and profits, thus siding with the New Deal theorists who were happy to aggrandize the government’s power in peace or war. (In 1936 Baruch had gone the New Deal one better by proposing a global minimum wage, and in 1937 he wrote, “I feel that if the businessmen who have to carry into effect the social and economic reforms would place themselves and their lawyers at the disposal of the government instead of against it, we could move much faster and more surely along the paths along which we have already started.”) But in quarrels between the civilians and the Army, he usually sided with the Army.

  The consistency in Baruch’s method was his pushing for more and better defenses. He called for raw-materials stockpiling, expanded armaments production, especially of aircraft, and the revival of something like the old War Industries Board. President Roosevelt, listening sympathetically to this plea in 1938, on the eve of Baruch’s annual summer vacation, agreed that some such conspicuous mobilization planning might worry Hitler, and he agreed to make Baruch the chairman of something they would call the Defense Coordination Board. The Board would meet in September, when Baruch got back, and would make its report in December. In the meantime, Baruch was commissioned to study the European military situation, and he sailed in high spirits. In Great Britain and France he was so appalled by the state of unpreparedness that he placed a transatlantic call to the White House on August 19, his birthday, to suggest that he return at once to get the American program under way. Roosevelt, who had elections to win as well as a country to defend, may or may not have been inclined to agree that such haste was desirable. What he could not abide was the impolitic suggestion, which Baruch had floated in an earlier communiqué, that the new Board include Hugh Johnson and George Peek, two War Industries Board alumni who had had noisy fallings-out with the New Deal. The new Board never met.

  Baruch, however, boarded the Queen Mary under the impression that he might be taking up where he had left off in 1918. Winston Churchill, then a private citizen with every apparent prospect of remaining one, shared the same impression. He told Baruch as they said goodbye: “Well, the big show is going to be on pretty soon. You’ll be in the forefront of it over there, and I’ll be on the sidelines here.” (Possibly they also talked about stocks. They had gone into Brooklyn Manhattan Transit Company together a few years before, and in October 1937 Baruch had flashed him a general buy signal: “THINK AMERICA ON BARGAIN COUNTER.” As he did with his other friends, Baruch was also prone to advise the future Prime Minister not to get in over his head.)

  Baruch, said Roosevelt to Jimmy Byrnes in 1938, “was nuts on Army preparation.” Certainly he was single-minded. When Louis Johnson, the Assistant Secretary of War, mentioned that for want of a $3 million appropriation, the War Department would be unable to obtain some vital gunpowder facilities, Baruch offered to advance the money himself. Johnson declined. (Early in 1941, however, General George C. Marshall accepted with thanks Baruch’s gift of a pair of Zeiss binoculars.) Baruch took a keen, almost proprietary, interest in all phases of military operation, and in officers of all grades. He was a regular lecturer at the Army War College and the Army Industrial College. Once he started an inquiry into the case of a Jewish cadet at West Point who had run afoul of the Academy superintendent just prior to his graduation. Baruch suspected anti-Semitism. He contacted Stephen Early, the President’s press secretary, who called the War Department. The superintendent was overruled, and the cadet was duly commissioned a second lieutenant.[55] The Navy’s reassignment of the skipper of the USS Panay to the command of an oil tanker in 1940 prompted a Baruch suggestion to General Edwin “Pa” Watson, the President’s secretary, that a more suitable billet for the heroic survivor of a Japanese strafing attack would be a new cruiser or battleship. (Baruch had as much or more faith in battleships than the Navy did. “Has any warship ever been destroyed by an airplane?” he asked Swope rhetorically in 1940. “Has any been put out of commission by an airplane?”)

  Baruch’s stock was usually higher with the military than it was with the President. According to the historian Jordan Schwarz, Roosevelt, concerning Baruch and preparedness policy, had two rules of thumb. First, never share power with him or with a so-called Baruch man; as Moley said, he was too luminous a figure. Second, “never allow even the emergency of war mobilization to become the occasion for erecting power bases that might rival the White House.” In other words, deny what Baruch took to be the most obvious and important lesson of the First World War, namely, the necessity of one-man responsibility for the home front.

  In August 1939 a War Resources Board was formed to report on the very mobilization question to which Baruch had addressed himself for twenty years; his name was not among the committeemen. Nor was he brought into the Administration’s successor war-planning agencies, the Advisory Commission on National Defense and the Office of Production Management (OPM) in 1940 and the Office of Price Administration and Civilian Supply (OPACS) and the Supply, Priorities and Allocation Board (SPAB) in 1941.

  Historians of the period have written that Baruch was more influential in these mobilization alphabet agencies than he appeared to be. Thus, for instance, John Hancock, a longtime confederate of his, was named to the War Resources Board, and one of the first items on the WRB’s agenda was to consult with the “Chairman of the old War Industries Board. . . .” Similarly, the industrialist Samuel R. Fuller Jr., a consultant to OPM, was a friend of Baruch’s. Once Fuller had gone to Germany on a mission for the President, had been given an audience with Hitler, and had mentioned Baruch’s name. Much to Baruch’s delight Fuller reported that the Fuehrer had gone off like a rocket. Furthermore (as the historians have also written) Baruch was friendly with Leon Henderson and some of the young New Deal economists with OPACS. In a concession to the value of Baruch’s advice, the President, in February 1941, began to eat lunch with him regularly.

  What Baruch had to say to the President or to anybody else on the subject was more or less predictable. He advocated all-out federal controls. In the first place, he said, the government ought to be able to direct industrial traffic according to the needs of national defense. Airplanes, for instance, would receive a high government priority and eggbeaters a low one, so that scarce steel would be routed toward vital uses and away from nonessential ones. In the spring of 1941 a salesman had gotten Baruch’s patriotic dander up by offering him a new Lockheed Lodestar passenger plane. Under the Baruch priority system he wouldn’t have been able to buy a plane even if he’d wanted one; the Army and Navy would have gotten them all. It followed logically that price contr
ols were also essential, he went on, because if prices were free to go up, rich buyers could divert raw materials from defense production merely by paying more for them. He insisted, moreover, that price controls must be all encompassing, not “piecemeal.” (For a man with so much of it, money figured surprisingly little in Baruch’s discussion of inflation and of anti-inflationary policies. In a piece in the Harvard Business Review in March 1941 he did mention the need to control the supply of money, but the weight of his analysis was on nonmonetary forces. As late as the fall of 1940, the then president of the Brookings Institution, Harold G. Moulton, could find no reference to the banking or monetary side of inflation in any of his published writing or testimony on price controls, which was extensive.) To check excessive consumer spending and to finance as much of the war as possible in the years in which it was fought, Baruch also advocated putting up taxes “as high as a cat’s back.” The nation that came through with the lowest cost and price structure would be the one to win the peace.