by David Nasaw
The Chief had no compunctions about spending millions of dollars because he considered every bit of it earned income. He subscribed to the labor theory of value—with an ironic twist. Because wise business executives contributed considerably more “value” than common laborers, they deserved more in the form of recompense. “It is certainly a fact that ‘the laborer is worthy of his hire,’” he wrote in a 1918 editorial, “but it is equally a fact that the manager, the inventor, the promoter, the developer, the director, the executor, or whatever word you call the creating head of an enterprise, is worthy of HIS hire.” The example he gave to prove his point came directly out of the Hearst family saga: “The men who dig in the ground for gold are worthy of their share of the gold found; but the man who tells them where to dig in order to get the gold is of determining importance and is worthy of liberal compensation. Wars are won by GENERALS; not merely by armies.”21
Wherever he was, recalled Jimmy Swinnerton, his friend and cartoonist in San Francisco and New York, Hearst “worked harder than any of his men.” As he traveled often, living virtually a bicoastal existence through the early 1920s, he carried his “office” with him. When in New York, he held most of his business meetings at the Clarendon. Short, round George Thompson, who had waited on him twenty years before at the Hoffman House, had graduated from valet/butler to gatekeeper. It was his task—one he seemed to enjoy—to keep Hearst’s visitors waiting until he, “George Tom,” concluded the Chief was ready to see them.22
While Thompson presided at the Clarendon, Joe Willicombe was required to travel with Hearst wherever he went, often at literally a moment’s notice. “No indication yet of when or where we are going,” Willicombe wrote Lawrence O’Reilly, his friend and predecessor as Hearst’s secretary, in June of 1921. “Get all kinds of hints. Saturday it looked like Chicago direct and then to the Coast. That was the first indication. Yesterday Chief said he would be in town only ‘a few days more.’ This, of course, for your personal information, if you can make anything out of it.” Willicombe was on duty twenty-four hours a day, with pad and pencil at the ready. He had made himself indispensable to the Chief because he knew shorthand, needed very little sleep, was willing to be on call every hour of the day or night, was intensely loyal and thoroughly discreet. Although few of Hearst’s friends, Marion especially, had anything good to say about Willicombe, the Chief trusted him more than anyone else in his family or employment. Whenever Hearst had a message for his editors, publishers, film executives, art dealers, or family members, he dictated it to Willicombe, who knew the current whereabouts of everyone in Hearst’s universe and how to get a phone call or cable to them. The workload was inhuman, but Willicombe never complained. In February of 1921, he apologized to O’Reilly for having sent him so long a letter with so many instructions: “Mr. Hearst shot a number of messages for you at me in between a flock of letters that he unloaded on me as soon as I got in to-day. I’ll give them all to you in this one letter, if you don’t mind.”23
The division of labor in the Hearst organization was clear. It was Hearst’s job to spend whatever he wanted. It was treasurer Joseph Moore’s job to find the money to pay the bills. It was his publishers’ and editors’ job to make the money that Moore would transfer to Hearst’s personal accounts to pay his bills and his and Millicent’s generous allowances. That Phoebe had left her son several million dollars did not make matters easier. Her bequests to friends and family and $1 million in estate tax liabilities had quickly depleted the estate of liquid assets.
To meet the Chief’s mounting obligations—construction costs at San Simeon were consuming some $25,000–$30,000 a month (equivalent to $230,000-$280,000 a month in 1990s currency)—Moore had borrowed from the New York banks until, in May of 1920, the banks had refused to extend him any more credit. He got additional credit to pay off the still outstanding $250,000 deficit by using as collateral Hearst’s shares of stock in Cerro de Pasco, a Peruvian copper mining company that he had inherited from his mother.
Having, with this transaction, exhausted all available sources of credit, Moore suggested that Hearst try to reduce his deficits by cutting back production at his movie studio. Hearst scornfully rejected his treasurer’s recommendations. “Production,” he lectured Moore, “is necessary for profit.” If Cosmopolitan Productions made fewer moving pictures, it would earn fewer dollars. “We must make twelve pictures per year under the Zukor contract and we should make at least six more to sell.”24
Still, he agreed with Moore that something was amiss. He was making good moving pictures. If they failed to make money, it had to have been because his control over his pictures ceased at the moment the finished negatives were delivered to Adolph Zukor and Paramount. His inability to control every aspect of the picture business—from production to distribution and exhibition—and his dissatisfaction with the way Zukor was distributing Marion’s films never ceased to trouble the Chief. His moods veered abruptly from heady optimism to resignation and defeat. On October 7, 1920, after receiving a congratulatory letter from Zukor on his most recent film, The World and His Wife, which was, like Humoresque, doing well at the box office, Hearst boasted to Moore that he was “glad to learn from Zukor that public agrees with my views. Am pretty good judge of public taste in Journalism and policies, may be in pictures too.” A day later, his mood had darkened considerably. He had, he wrote Moore, decided to “close the film company in a month or two. I don’t think it can ever make any money and I am tired of it.”25
Hearst was convinced that Marion’s films were not making money because Zukor was not getting them to the audiences they were intended for. Instead of selling them to theater owners, one at a time, Zukor grouped them into “blocks” with other Paramount pictures and distributed them sight unseen. This meant that theater owners who wanted to exhibit Hearst’s superior, high-class Cosmopolitan Productions starring Marion Davies could not do so unless they also bought the cheap, inferior pictures that were block booked with them.
When, in the summer of 1921, it came time for Hearst to renew his distribution agreement with Paramount, the Chief directed Moore to inform Zukor that he would only re-sign the agreement if he was permitted to “make other arrangements with other companies” to release Miss Davies’ pictures as “special presentations.” “You understand without my stating it,” he telegrammed Moore, “my reasons for being interested in these pictures and why they are peculiarly important to me.”26
Hearst was not used to entering a negotiation in the role of supplicant. As the negotiations for a new distribution agreement dragged on through the summer and into the fall, Hearst became increasingly frantic, almost paranoiac about Zukor, who he feared might be cheating him in some way. The most courteous of men under usual circumstances, Hearst, when crossed, turned into a brutal bully. Never one to do his dirty work for himself, he delegated his subordinates to make and carry out his threats. In a flurry of 4 and 5 A.M. telegrams from San Simeon to New York, Hearst directed Joseph Moore in New York to warn Zukor and Paramount that negotiations had to be completed at once “in friendly or unfriendly way as they see fit....The unfriendly way will give them the biggest exposé they have ever had with civil suits and possible criminal prosecutions with the assistance of the government. I prefer the friendly way if it can be had right.”27
While negotiating with Zukor, Hearst directed Moore to open discussions on a possible distribution deal with United Artists, the company that Douglas Fairbanks and Mary Pickford had established in partnership with Charles Chaplin and D. W. Griffith. In September 1921, Moore wrote Hearst that it looked “as though we are going to be able to close with United Artists on the four star pictures you mentioned....[Marion was always referred to as “star.”] This looks good. The best news however is Zukor now wants to do everything you ask.”
Zukor had taken Hearst’s threats to heart. Already under investigation by the Federal Trade Commission for his block-booking practices, Zukor could not afford to have Hearst as an en
emy, fight off a public lawsuit, and defend himself from the campaign against him the Chief implied he was ready to launch in New York, Los Angeles, Washington, D.C., and everywhere else he owned a newspaper. In the end, Zukor gave Hearst what he wanted. All he asked in return was that the Chief use his influence with “his friend in Washington,” President Warren Harding, to solve Paramount’s antitrust problems.28
The new agreement gave Hearst a higher percentage of the box-office take and Zukor’s promise to release Marion’s films as “super-specials.” Hearst, for his part, agreed to give up the $30,000 monthly “advance” Paramount had been paying him, though Moore pointed out that without these funds coming in, he would have to divert funds from other sources to finance film production. In giving up Zukor’s $30,000 monthly advance, the Chief had effectively ransomed his film company in return for special treatment for Marion’s pictures.
19. A Return to Normalcy
THE POSTWAR RECESSION that had rocked Hearst’s business empire —and made life so difficult for Joseph Moore, who had to pay the bills—was as short-lived as it had been severe. By 1922, the American economy had embarked upon an extraordinary seven-year growth cycle. The business boom was stimulated by the beneficent tax policy that President Warren Harding’s secretary of the treasury, the Pittsburgh industrialist Andrew Mellon, shepherded through a Republican-dominated Congress. Maximum tax rates for individuals were reduced from a wartime high of 77 percent to 24 percent, excess profits taxes were abolished, and lower rates were set for capital gains. Hearst benefited additionally when Secretary Mellon’s appointees at the Income Tax Bureau reduced his tax liabilities for the war years by some $1,737,097.1
Taking full advantage of the economic boom and Republican tax policies, Hearst went on a buying spree. In 1921, he purchased two evening papers—the Times, in Detroit, and the Record, in Boston—and a morning paper, the Post-Intelligencer, in Seattle. In 1922, he added an evening paper, the Herald, in Los Angeles to complement his morning paper there, and a morning paper, the Herald, in Washington, D.C., to complement his evening paper. And he started up three new dailies, the Oakland Post-Enquirer, the Syracuse Telegram, and the Rochester Journal.
Hearst, who never paid cash for anything, borrowed recklessly to make each of these purchases. By the end of 1922, he had exhausted his working capital to pay off existing debt obligations and was still a half million dollars short of meeting them all. “We are absolutely at the end of our string in manipulating finances,” Moore telegrammed the Chief on December 29, 1922.2
Hearst responded by blaming Moore for allowing him to borrow more than he could repay. “You should be more cautious and conservative,” he telegrammed his treasurer. “If I am disposed to embark in a new enterprise, you should have the figures to show me whether or not we can afford to undertake it....I am of a promoting temperament. My disposition is to expand....What I want is to have somebody advise me not to expand before things become disturbing, and to keep expenses down on the various papers and not merely get agitated about them after they have gone up.”3
Moore was hardly to blame. Time and again, he had tried to rein the Chief in, to stop him from buying a paper mill, to plead with him to cut back film production, to demand that he fire Alma Rubens, who was getting too high a salary for too little work. In the long run, Hearst’s decision to buy new dailies would pay off handsomely, but in the short run it had pushed the corporation to the brink of bankruptcy.
While Moore was left to hunt for funds to meet payrolls and to plead with lenders for patience, Hearst continued to buy newspapers. In early 1923, he took out more than $5 million in additional loans and mortgages to buy the Baltimore American and the Baltimore News from Frank Munsey. When Joseph Moore suggested a year later that he reduce that debt by selling his morning paper to the owners of the Baltimore Sun, the Chief, apparently forgetting his previous advice to Moore to rein him in, responded again with anger: “What you propose is last ditch remedy disastrous to our prestige and stimulating to our opposition everywhere. It might do much more harm than good. Any dub can confess failure and throwing up sponge is not generally considered evidence of courage as much as of incompetence.”4
By the summer of 1923, the Chief was so overdrawn on his New York accounts that he was asked to take his business elsewhere. “Yesterday the president of the Chase National Bank sent for me,” Joseph Moore telegrammed Hearst in San Simeon in July, “and after going over the situation as regards our accounts there, which showed the American account overdrawn, the Journal account overdrawn, the Cosmopolitan Finance Corporation account with an extremely small balance, the Star Company account with a balance of $2500 and a total loan of $800,000, he asked if we would not kindly take the account into some other bank. He tried to be extremely courteous but said they could not go on with an account which was continuously in such bad shape.”5
Five days later, Hearst received another telegram with even worse news. Moore warned him that they were going to have to come up with $1 million in the next sixty days to pay off outstanding loans in New York and an additional $700,000 for obligations in Chicago. And this without any help from Chase National Bank, formerly their chief source of credit. In a panic, Moore wrote John Francis Neylan, the publisher of Hearst’s San Francisco Call, to ask him to look into the possibilities of borrowing money from San Francisco banks. Neylan, an Irish-American attorney from San Francisco with strong ties to progressive Republicans in California, had moved steadily up in the Hearst ranks to become a sort of editor in chief for his West Coast papers. As canny in financial dealings as in political, he would soon replace Moore as Hearst’s chief financial adviser.6
Neylan did his best to secure new sources of credit for the Chief. Unfortunately, Hearst was so overleveraged that no banker in his right mind would have extended him further credit except as a personal favor. This, as Neylan recognized at once, was bound to have an effect on his newspapers’ editorial independence, especially since Hearst’s chief source of funds on the West Coast had been Herbert Fleishhacker, president of the London and Paris National Bank in San Francisco, whom Neylan had been attacking for months in the pages of the San Francisco Call.
Because San Francisco’s future growth and prosperity depended on its securing additional water, the city’s business and political leaders had been coveting Hetch Hetchy, a valley in northwest Yosemite through which the Tuolumne River flowed. If the valley were dammed and an aqueduct built, it would supply the city with abundant water and hydroelectric power for decades to come. San Francisco’s progressives, Neylan among them, were determined to secure full municipal ownership and control of Hetch Hetchy water and power. They were opposed by the business and banking communities, led by Fleishhacker, a board member of several of the transit and power trusts, who hoped to be able to privatize at least some of the Hetch Hetchy resources.7
When Neylan suggested that there might be a conflict of interest if Hearst borrowed money from a man his newspapers were in the process of attacking, Hearst reassured him that there was no need to worry. “Regarding Mr. Fleishhacker,” he wrote Neylan in October of 1923, “do not be at all alarmed....We owe him some money. If we do not want to owe it to him, we could owe it to somebody else—if we need to owe it at all....I do not always agree with him in his policies—he does not always agree with me in my policies. But I think we agree a good deal and have a sufficient respect for each other’s opinions....There are occasions like in the Hetch Hetchy matter where we have to take a stand which is opposed quite generally by the ultra-conservative, by big financial interests in the community. But if we are fundamentally right in these occasional important crusades, we preserve the respect even of these people—all the more so if we give an exhibition of the paper’s power.”
Hearst was signaling to Neylan that he would support crusades, but only if they were occasional and pursued with moderation. “It is easy,” Hearst continued, “to lose the respect of all the judicious elements of the community by too captio
us criticism and too much quarreling. We are not the only good citizens in the community. Our way of doing things is not the only way of benefitting the community. Undoubtedly the great enterprises which these big financial interests create, and you may say constitute, are in themselves benefits to the community. We want to realize those facts and not disturb things more than is necessary to secure an honest conduct of these enterprises.”
It had to have been painfully obvious to Neylan that, with this memorandum, Hearst was signaling a significant shift in editorial policy. No longer would the Hearst papers take an unequivocal stand for municipal ownership. No longer would they employ the language and images that had been their stock in trade. Hearst closed his memo with what sounded at first like an apology but was instantly transformed into a defense of his actions: “I suppose you think I am a poor progressive; but I am not. I want to see progressive achievement more than mere progressive display. I want our powerful newspapers to cooperate with other powers whenever that cooperation means most for the benefit of the community.”8
Through 1924, as the fight over the privatization of the Hetch Hetchy project continued in San Francisco, with Neylan leading the forces advocating municipal control, Hearst warned him not to go too far in criticizing Fleishhacker. “It is not right to ... make reflections upon him or his enterprises. Please try to conduct our fight with a little more consideration. Mr. Fleishhacker is entitled to consideration not merely because he is our friend —although he certainly is that—and that should make us treat him with fairness at least—but also because he is an important citizen in the community, deeply interested in the welfare of the State and City, and entitled to his views on this question even if they differ from ours ... In any event let us maintain the pleasant relations we have always maintained, without any reflection upon Mr. Fleishhacker or his enterprises.”