Memoirs

by David Rockefeller

  Fortunately, not all our efforts were quite that inept. We prepared a steady stream of reports on the critical economic situation and the increasingly unstable political scene. De Gaulle was running into serious trouble by the late spring of 1945. His arrogance, inflexibility, and single-mindedness, qualities that had been so essential to his political triumph over Giraud in Algiers, created serious problems as the French went about the task of forming a permanent government and drafting a new constitution. Within a year he would fall from power.

  While we developed most of our information through our own network of informants, a good part of it came as a result of the dinners that we hosted for high-ranking French officials at General Smith’s residence. A well-stocked wine cellar and a fine table proved to be a wonderful inducement to revealing conversation.

  THE AFTERMATH OF WAR

  On May 7 the Germans surrendered and Paris celebrated VE day. It was a beautiful spring day that turned into an evening of wild celebration. The embassy closed, and we all went out into the streets for a party that lasted all night. That night and for a brief time afterward one had the unique experience of having Parisians be friendly to you precisely because you were an American!

  Paris, physically untouched by the war, was the most beautiful I had ever seen it. The scarcities caused by the war actually burnished the city’s many charms. Gasoline was strictly rationed, so the streets were virtually empty of cars. I walked across the Seine to the embassy every morning and saw only an occasional automobile. Instead, the streets were filled with women on bicycles riding home from the markets with long loaves of bread under their arms, sitting carefully on their long skirts that would catch the wind and billow out behind them as they rode.

  I was eager to return home but had not yet earned enough “points” to be demobilized. In the interim, General Smith sent me on several interesting missions. One, only ten days after the surrender, took me to Frankfurt and Munich. Allied bombing had almost destroyed both cities, and it was shocking to see the extent of the devastation. I saw my old Harvard friend Ernst Teves in Frankfurt for the first time since 1938. Ernst had volunteered to work for the U.S. Occupation as soon as the war ended. Our meeting was difficult, and Ernst’s account of his war years was distressing for a friend to hear. He had never become a Nazi, but the compromises he had made in order to keep his family’s business operating eroded his principles and coarsened his values.

  In Munich I returned to the Kaulbachstrasse, where I had lived with the Defregger family in 1933. The street was covered with rubble, and most of the houses had been destroyed. Somehow the Defreggers’ house had escaped serious damage, and the family greeted me at the door. They were amazed and overjoyed to see me, and crowded around, shaking my hand and asking questions. I was glad to see them and relieved that they had survived the war, but it gave me a strange feeling to see them again after so many years. The war and its terrible passions now stood between us: the deaths of Dick Gilder, Walter Rosen, and Bill Waters; the destruction I had seen across France and Germany; the wasted years away from my family. The Defreggers had not started the war—indeed, they had suffered from it—but the horrible tragedy had begun in that city, and I had watched its “evil genius” walk through Munich’s streets only a few years before.

  The next day I visited Dachau, the infamous concentration camp nestled incongruously amid the gentle hills north of Munich. The camp’s inmates had been evacuated, but one could still see the barracks in which they had been housed and the grotesque crematoria where their emaciated bodies had been burned. Scraps of striped cloth still hung in the rusting barbed wire beneath the guard towers. It gave me an understanding I had not had before of the horrors of the Nazi regime, the full extent of which we would only discover with the passage of time.

  COMING HOME

  In August, Uncle Winthrop came through Paris, and we talked about my plans for the future. He said that a career at the Chase National Bank, of which he was chairman, was the logical path for me to follow. I didn’t give him a firm answer but said I would think seriously about it.

  Orders recalling me to Washington came through in early October. I wrote Peggy that I had no way of knowing the day of my departure, nor would I be able to notify her when I did find out. Peggy was so impatient that she went to Washington to stay with Nelson at his home on Foxhall Road. Each day for a week she drove to the airport and anxiously scanned the crowds of arriving servicemen. Each day she returned home disappointed. When I finally squeezed aboard a plane, it landed in New York. I called her immediately, but it was another day before I could join her in Washington.

  Peggy and I were overjoyed to be together again, and it is difficult to find the words to describe my emotions when I saw my three children, David, Abby, and Neva, although to them I was a stranger. It was some time before they accepted the fact that I was their father and not just a competitor for their mother’s time and attention.

  The war years had taken a toll. While I had been traveling and getting to know interesting people, Peggy had a different experience. She had endured the restrictions of rationing and the constant fear that I would not return. It was a lonely and difficult time for her. What I had not known was that Peggy was in the midst of a perplexing struggle with her mother, who treated her as if she were still a child, telling her how to dress, how to furnish our home, and how to bring up the children. Peggy resented this but felt powerless to resist it and never told me about it until years later. She was under enormous psychological pressure, which contributed to her recurring periods of depression.

  Peggy battled depression for more than two decades. The key moment came when she broke free from her mother and sought psychological counseling. In the end she overcame her problems, and the last twenty years of her life were her happiest.

  Men of my generation often refer to their military service as good or bad. I had a good war. I had been confused and apprehensive at first but soon learned to adapt and then how to use my newly acquired skills effectively for the benefit of my country. I look back at the war years as an invaluable training ground and testing place for much that I would do later in my life. Among other things, I discovered the value of building contacts with well-placed individuals as a means of achieving concrete objectives. This would be the beginning of a networking process that I would follow throughout my life.

  *More than four decades later I discovered my reports had been preserved, and I was able to get copies of them from the National Archives in Washington.

  CHAPTER 10

  EMBARKING ON A CAREER AT CHASE

  Soon after returning home I accepted my uncle Winthrop Aldrich’s offer to join the Chase. It was not an easy decision because I still had a strong interest in working for government or in the not-for-profit sector. I discussed my alternatives with a number of people, including Anna Rosenberg, who thought the Chase would be useful training for a year or two but that I “would not find it challenging enough to stay with as a career.” Anna was wrong. Indeed, for the next thirty-five years I devoted myself to the fascinating and personally rewarding life of a commercial banker. During those years I had a number of opportunities to serve as a cabinet officer or in ambassadorial posts. I did not accept any of those attractive offers, but I have no regrets since my career at Chase provided me with a strong challenge and different, though equally satisfying, ways to participate in civic and government affairs.

  THE CHASE NATIONAL BANK

  The bank I joined in April 1946 was an impressive organization with a distinguished history. The Chase National Bank had been formed in the 1870s, grown through a series of mergers early in the twentieth century, and emerged from the war years as the country’s largest commercial bank. At the end of 1945, Chase had total assets of $6.1 billion, deposits of $5.7 billion, and seven thousand employees, many of them, like me, recently discharged from the armed forces. Chase took special pride in being the biggest and best “wholesale” bank in the country, handling the credit needs of
major U.S. corporations, serving as a “bankers’ bank” for thousands of domestic and foreign correspondents, and financing a substantial portion of the nation’s foreign trade. On the other hand, Chase had little interest in the “retail” side of banking or in expanding its international operations, two areas that I would take special interest in and would push aggressively for the following thirty years.

  ROCKEFELLER “FAMILY” BANK

  Chase has often been called the Rockefeller “family bank,” suggesting that we owned or at least controlled the bank. Neither has ever been the case, although my family has had a number of strong ties with Chase over many years. Early in the century Grandfather acquired shares in a number of New York banks, including the Equitable Trust Company, one of Chase’s predecessors. In 1921 he gave his stock interest in the Equitable, amounting to about 10 percent of its outstanding shares, to Father, making him the bank’s largest shareholder.

  However, no one in my family had any direct role in the management of the bank until late 1929, and even then it was the result of an unusual series of events. Equitable’s law firm, Murray & Prentice, had handled corporate and trust work for my family over the years. My uncle Winthrop Aldrich, Mother’s youngest brother, joined this firm in 1918 and rose rapidly to become a senior partner, handling the Equitable Trust, among other clients.

  In the wake of the 1929 stock market crash, Father and other stockholders became concerned about the Equitable’s stability. A short time later, when the president of the Equitable died suddenly, Father suggested that Winthrop step in on a temporary basis. Winthrop accepted the position reluctantly, insisting that he would take it only for a year.

  After Winthrop became president, he sought a banking partner to provide domestic strength and support. He found that partner in Chase, one of the strongest domestic banks in the country. In early 1930 he negotiated the merger with Chase, creating what was at the time the largest bank in the world. Father strongly backed the merger and was allowed two representatives on the new bank’s board, out of a total of twenty-five. Although his stock ownership was reduced by the merger to about 4 percent, Father remained the largest shareholder in the combined bank. After the merger, Albert Wiggin, the prominent and very successful chairman of Chase, became the chairman of the combined bank, and Winthrop assumed the presidency.*

  WINTHROP ALDRICH

  Winthrop Aldrich was a handsome man with pale blue eyes and the rather distinctive Aldrich nose that I also inherited. He was enormously charming and very prominent in the social life of New York, but became more than a bit pompous as his prestige and position increased.

  From what he later told me, Uncle Winthrop had every intention of returning to his law firm shortly after the merger. But the situation changed dramatically in late 1933 when Albert Wiggin admitted at congressional hearings that he had lent large amounts of the bank’s money to himself and his associates on favorable terms and that they had made $10 million selling Chase stock short during the 1929 crash! With strong pressure from Father, who was appalled by the revelations, Wiggin and two other senior officials resigned in disgrace. The Chase board decided that Winthrop, long a staunch advocate of ethical business practices and of banking reform, was the most qualified person to lead the bank through the crisis and persuaded him to remain as chairman.

  Winthrop insisted that such misbehavior had been made easier because commercial banks were allowed to own investment banking subsidiaries, which facilitated the self-dealing practiced by Wiggin and others. He testified before Congress in 1933, strongly supporting the two major structural reforms enacted that year: the Glass-Steagall Act, which separated commercial from investment banking, and the Securities Act, which created the Securities and Exchange Commission and compelled corporations to register their stock and make regular and substantial financial disclosures.

  Wall Street and the American banking community respected Winthrop, and the Chase prospered during the twenty years of his stewardship. Winthrop, however, had not been trained as a banker and rarely became involved in the day-to-day operations of the bank. He preferred the role of business statesman and emerged as a prominent spokesman for the American banking industry. The downside of Winthrop’s detachment at Chase meant that a cadre of senior officers with more limited views about banking dominated operations and hindered the development of an effective management structure and organization.

  THE CHASE CULTURE

  It did not take me long to discover that Chase had both enormous strengths and some significant weaknesses. As I saw it, the most serious of the latter were our inadequacies in the field of management and our limited international presence. Although the bank was powerful and influential, in many ways it was still the creature of a much simpler era. We had no budget, no comprehensive business plan, no formal organizational chart—in short we had few of the tools considered essential for the effective management of a large and complicated financial enterprise. I remember going in to see Winthrop and arguing that, given the problems that Chase faced—slow growth and an alarming decline in deposits—a budget was essential because it would help us plan for the future and deploy our assets and personnel more intelligently. Winthrop’s response was that the bank had never had a budget, and there was no reason to adopt one now.

  The narrow attitudes and predispositions of the Chase officer corps was another problem. Only a few had college degrees. The majority had risen through the ranks, starting as tellers or cashiers. As a group, with some notable exceptions, they lacked a breadth of vision or an awareness of political and economic factors that might affect the bank or their profession. Most Chase officers subscribed to the idea that the “science” of banking—finance, accounting, and arbitrage—could be taught, but the “art” of banking, its real essence, could only be learned through a lengthy apprenticeship that had its origins, as far as I knew, in the time of the Medici. This system had been highly successful in its time; rigorous standards of accounting and credit analysis had always been demanded of our loan officers. However, Chase officers tended to dismiss the newer management disciplines—human resources, planning, marketing, and public relations—as unworthy of the time and attention of credit officers. In the minds of the old guard, who would dominate the bank well into the 1960s, the model officer was a man who made good, profitable loans; everything else was left to those of lesser talent.

  $3,500-A-YEAR SUBWAY “STRAPHANGER”

  During my first twelve years at Chase, until I became a vice chairman in 1957, I rode to work on the Lexington Avenue subway. Like many of my fellow commuters I became expert at folding the newspaper lengthwise, reading standing up, one arm grasping the strap, while clutching my briefcase between my legs.

  In an atmosphere where neither higher education nor management skills were considered important, having a Ph.D. in economics was not something I advertised. It would have seemed effete. However, I did suggest to Winthrop Aldrich that having a Ph.D. in economics meant, at the very least, that I should not be required to take the bank’s excellent credit training program, and, unfortunately, he agreed. I was thirty years old and anxious to get going with my career; my head was full of bigger visions than analyzing balance sheets and income statements. It was a decision I regret and certainly paid for later on when I was trying to change the bank’s culture. It meant I never spoke the same language as those I was trying to convince. It only increased the conviction of many that I was never a real banker anyway.

  Graduates of the new credit courses started as clerks and became officers after a year or so—if they performed well. I began as an assistant manager, the lowest officer rank, in the Foreign Department at an annual salary of $3,500. I was assigned to one of twenty or thirty wooden desks in a room that ran the length of the tenth floor of 18 Pine Street. Each desk had two chairs, one on each side, for customers and/or a secretary from the pool. It was here that I spent my first three years at Chase.

  Jerome (Packy) Weis, the department’s personnel director, gu
ided me through a rotation of the thirty-three geographical and functional units in the Foreign Department. This was my first exposure to the bank’s inner workings, and I emerged from it somewhat mystified. I wanted to make sure I understood each unit’s role, so I made notes after completing each one. Although I had never had formal training in organization management, I could not understand the wisdom of a structure where thirty-three units reported directly to one person. I proposed as an alternative the clustering of units so that only six or seven managers would report directly to Charles Cain, the department head. Charlie’s reaction was polite (I fear my name caused him to be more so than he might have been otherwise), but no changes were made in the department’s structure.

  EUROPE: LITTLE MARKETING IMAGINATION

  The Foreign Department’s main function was maintaining relations with our global network of more than one thousand correspondent banks, all closely linked to our principal business of financing international trade in a number of commodities, such as coffee, sugar, and metals. Chase required these correspondent banks to maintain substantial “compensating balances” with us. These were enormously profitable interest-free deposits that constituted the bulk of our deposit base. Domestic credit officers viewed them as the only valuable aspect of our international business. We did no underwriting of business transactions or financing of mergers and acquisitions.