Memoirs

by David Rockefeller

  After dinner Alger excused himself so that the board could discuss its agenda for the following day, including the matter of his continuing employment. We were polled one by one, and the vote was unanimously in favor of firing Hiss immediately, until it was my turn to vote. I disagreed, saying that while the accusations were heinous, they were still only accusations. Until Hiss was found guilty, it was incumbent upon us to treat him as an innocent man. I suggested that it would be appropriate to ask him to take a leave of absence, since he couldn’t function effectively at the endowment under the circumstances. Tom Watson and others supported my position, and in the end the board compromised by offering Alger a paid leave of absence, which he accepted.

  The Hiss-Chambers case dragged on into 1949, when Hiss was convicted not of espionage, but of perjury in denying before Congress that he knew Whittaker Chambers. Hiss denied until the day of his death in 1996 that he was a Soviet spy, and his supporters continue to maintain his innocence. Once the evidence was all in, it appeared to me that he was a Soviet agent.

  On the other hand it was also evident that opportunistic politicians were using the Hiss case to attack the New Deal and to oppose a stronger international role for the United States by claiming that Communists had infiltrated the federal government as part of a massive “international conspiracy.” The emotions stirred up by the Hiss case marked the emergence of a dangerous tendency in our political life. Since then, both the left and the right have routinely demonized individuals and carelessly attacked our governmental institutions in an effort to impose their own rigid and intemperate ideological views on the rest of us. In time I would emerge as a favorite target of both extremes.

  RECRUITING A PERSONAL STAFF

  It was not long before I realized I needed help in dealing with my many outside involvements. For a few years after the war the Family Office, financed almost completely by Father, handled these relationships. In addition to legal, accounting, and investment services, a staff of twenty people managed a vast array of civic and not-for-profit involvements for me and my siblings. Arthur Packard, Father’s philanthropic advisor, and his young assistant, Dana Creel, helped with my not-for-profit activities, but they were not an adequate substitute for a personal staff.

  In 1947 I hired Eleanor Wilkerson as my personal secretary. She was an expert stenographer and skillful in arranging social functions and dealing with all manner of complex situations. Eleanor was a pillar of strength for the next three decades and worked closely with Edna Bruderle, my bank secretary, to keep my schedule under control. These two remarkable women were well organized and efficient, and handled people with sensitivity and tact.

  In 1951 I decided to add a personal assistant to manage my growing philanthropic interests. After a brief search I turned to a colleague from my Army days in Paris, Warren Lindquist. After the war Lindy had worked at the Chase for five years before taking a job as an assistant to J. Peter Grace, chairman of W. R. Grace and Company.

  Lindy helped me with Rockefeller University, the Carnegie Endowment, International House, and a host of other involvements. He took charge of my correspondence and scheduling, and strategized with me on my role in various organizations. Lindy later played a central role in guiding my substantial personal real estate investments. As Lindy became more fully occupied with real estate matters and the scale of my personal involvements and responsibilities increased, I hired additional staff. Richard Dana and DeVaux Smith were longtime friends, and I had also served with them during the war in Europe. John (Jack) Blum, a young Milbank, Tweed lawyer assigned to the Family Office, assisted Lindy in his work.

  I gave my associates considerable independence, although we consulted on a regular basis. All of them and their successors—Richard E. Salomon, John B. Davies, Jr., Alice Victor, Patricia Smalley, Christopher Kennan, Peter J. Johnson, and Marnie S. Pillsbury—handled their responsibilities with great tenacity and intelligence. They extended my reach and influence dramatically. Without them I could never have balanced my work at Chase with my “parallel career.”

  CHAPTER 12

  BUILDING THE CHASE MANHATTAN BANK

  On January 19, 1953, John J. McCloy succeeded Winthrop Aldrich as chairman of the Chase National Bank. In many ways Jack was an unusual choice to head one of the country’s largest commercial banks. Like Winthrop, Jack had been trained as a lawyer, not a banker. He had been a partner at Cravath, Henderson and de Gersdorff, Wall Street’s most powerful firm, for more than a decade before World War II and had worked closely with a number of investment banks and large corporations. Right after the war he became a name partner in another of the Street’s prestigious firms, Milbank, Tweed, Hope, Hadley & McCloy, which numbered among its clients both the Chase National Bank and my family. However, during his many years as a practicing lawyer Jack had no direct experience with the highly specialized world of commercial banking.

  Obviously, in making their choice the Chase board had looked beyond Jack’s limited banking background to his distinguished public service career. He had entered government service in 1940 as a special assistant to Secretary of War Henry L. Stimson and became an assistant secretary the following year. He served in that capacity for the remainder of the war and emerged as a key member of President Roosevelt’s circle of advisors.

  In late February 1947, Jack assumed the presidency of the World Bank, a post he held for more than two years, until his appointment as the U.S. High Commissioner for Occupied Germany. Working closely with Chancellor Konrad Adenauer, Jack presided over the creation of the West German state, its rearming, and its inclusion in the Western Alliance. His tenure proved to be a great success, and he returned to the United States in July 1952 a well-known and deeply respected figure.

  Although Jack had never made a loan or analyzed a balance sheet, he had enormous prestige and was a great natural leader—qualities that suggested he would understand how to manage a large organization like the Chase. His appointment as chairman gave encouragement to those of us who had been working toward an expanded international program for the bank.

  A CURIOUS RELATIONSHIP

  Given the similarity in our interests, I was disappointed that Jack and I never developed a close personal relationship. That may have been the result of the great differences in our early lives and a peculiar episode in Jack’s that seems to have scarred him for life.

  Jack was born, as he often recalled, on “the wrong side of the tracks” in Philadelphia. His father died when he was quite young, and it was only by dint of hard work and exceptional ability that he made his way through Amherst College and Harvard Law School, and on to a distinguished career.

  Despite his own great achievements, Jack seemed wary, perhaps even resentful, of what I appeared to represent in financial and social terms. Frequently at gatherings I attended, Jack related the story of his first contact with my family. He had worked his way through college and law school in part by tutoring during the summer and had traveled to Maine in the summer of 1912, three years before I was born, hoping to get a job on Mount Desert Island. One of the families he decided to contact was mine. Jack always imparted the story at great length—walking the quarter mile from the main road up to the Eyrie, knocking on the massive door, and explaining to the butler why he was there, only to be turned away with the explanation that a tutor had already been hired for the Rockefeller children that summer. And that ended the story. I confess that I never understood the significance he attributed to it. Making an unannounced call didn’t seem to be the best way to go about securing a summer job, and Father, in fact, always arranged for tutors and other summer companions months before we moved to Seal Harbor.

  Jack must have told the story in my presence a hundred times, the last time in 1985 when I succeeded him as chairman of the Council on Foreign Relations. The story always made me feel uncomfortable.

  Jack’s inability to resist retelling this anecdote demonstrated ambivalence toward me and my family, maybe even latent hostility. His feeling wa
s probably deepened by a comment Nelson was said to have made to him at the time he became chairman of Chase. Nelson reportedly told him the “family had used its influence” to make him chairman and that one of his jobs was to ensure that “David would succeed him when he retired.” It seems quite possible that Nelson made the comment or one quite similar to it. He could be quite high-handed and no doubt thought he was doing me a favor. But if Nelson did make a statement of this kind, it certainly was not the result of a family decision or a request from me. It would have been highly inappropriate for anyone in the family to make such a demand. Unfortunately, if the story was true, it may have permanently altered Jack’s attitude toward me.

  In any event, Jack’s ambivalence may have been a factor in his refusal to play a more decisive role with the directors of the bank in selecting his successor in 1959. His indecisiveness, whatever its cause, would have profound consequences for me personally and for the bank. Quite possibly Jack could never look at me without remembering the long, dusty walk up the hill in Seal Harbor and the big wooden door being closed quietly but firmly in his face.

  MODERNIZING BANK MANAGEMENT

  The longer I worked at Chase, the more uncomfortable I became with its antiquated management structure. While our basic lending business was well handled, there were severe shortcomings in most other areas: decentralized management with many autonomous fiefdoms, inadequate personnel administration, and no budget and/or business plan. Any management consultant would have been appalled, but we refused to let any of them in the door.

  In the summer of 1952, just before I took over as head of the New York City District, Kenneth C. Bell, a vice president with similar views, and I began to assemble information on this issue. Although assessing the bank’s organization had nothing to do with our jobs—or anyone else, as far as we could tell—we wanted to see whether we could suggest a more efficient and rational structure. Our research turned up some startling and even alarming facts. For example, the directors of the nine geographical “districts,” which handled corporate business around the country as well as all the heads of our twenty-nine domestic branches, reported directly to the president of the bank. Few apparently ever received instructions or oversight from him. They operated as they pleased. On paper, Chase had a highly centralized structure; in reality, clear-cut responsibility and accountability did not exist.

  Taking these astounding facts into account, my colleague and I designed a simplified structure that reorganized the bank along functional lines. We kept our conclusions private, preferring to wait for a favorable moment to bring our organizational proposals forward.

  COLLISION COURSE

  I had been moving up quite rapidly in the bank, as had George Champion. George was eleven years my senior and had graduated from Dartmouth in 1926 where he had been an all-star football player. He joined the Equitable Trust Company right after college and came to Chase through the merger. Over the course of the 1930s and 1940s, George had become one of the bank’s most outstanding lending officers. Corporate customers and bankers across the country respected his skills and business acumen, and were glad to do business with him. He was an ardent golfer and enjoyed a hearty good time at the nineteenth hole as well! George was named head of the Commercial Banking Department, the bank’s most important unit, in 1949.

  It became increasingly apparent to many that George and I were on a collision course, both seeing ourselves headed for the chairmanship of the bank.

  The moment of truth for our reorganization plan came in September 1952 when President Percy Ebbott called me into his office to tell me that he was promoting me to senior vice president. He talked in vague terms about my responsibilities, which would be related to the branch system in New York. Percy’s description was so obscure and nebulous that I frankly had no idea what I was expected to do or how I would relate to the other parts of the bank. I thought the time was right to bring up the reorganization plan that we had been working on for the past few months.

  The next morning I brought in our organizational chart and laid it all out for Percy. We proposed to combine all the bank’s corporate business under George Champion in a new “United States” Department. A department called Special Industries would be created and would include the Public Utilities group and the Petroleum and Aviation departments. I would take charge of a third new one, the Metropolitan Department, with responsibility for all the retail branches in the city as well as relations with our many large corporate customers headquartered there. Certain key staff functions, such as public relations and economic research, would be included in my new domain. I told Percy that both activities deserved more emphasis than they had previously been given.

  Our suggested reorganization plan also called for the retention of three existing departments: Trust, Bond, and my old area, Foreign. A senior vice president would head each of the six major departments, and they and they alone would report directly to the president. Most important, each of these senior officers would be given well-defined responsibility for a specific area of the bank’s operation.

  Percy seemed quite pleased with our ideas and particularly intrigued by the “novel concept” of an organizational chart. He took the proposal to Winthrop, who gave it his endorsement. As I had anticipated, George Champion was enthusiastic about the new arrangement since it gave him responsibility for the area of the bank he considered most important. It also gave me authority over an aspect of the bank’s business that I believed would be increasingly important in the coming years. The board authorized the reorganization, and it went into effect on the first day of January 1953, just as Jack McCloy took over. Chase now had—at least on paper—a modern and potentially more effective corporate structure.

  MERGER MANIA

  When he retired from Chase, Winthrop Aldrich told Jack McCloy that there were three things he had failed to accomplish during his nineteen years as chairman: first, finding a merger partner to expand the bank’s branch system and strengthen the retail side of its operations; second, building a new headquarters to house the bank’s widely dispersed workforce in lower Manhattan; and third, making Chase a truly international bank. Jack took these words to heart and began immediately to seek a merger partner.

  By the early 1950s all the major New York banks, as well as those in Chicago and California, began to search for new sources of lendable funds to meet the increasing credit requirements of their corporate customers. Some commercial banks, such as the Bank of Manhattan, had followed a retail strategy designed to broaden and strengthen their deposit base. Their deposit base had grown appreciably, while the great wholesale banks, such as Chase, City Bank, and Guaranty Trust, had seen their corporate deposits decline. Chase had about $6 billion in deposits at the end of 1943, but only $4 billion by the end of 1954. In contrast, the Bank of Manhattan’s deposits had increased—by almost $300 million—over the same period, and so had the number of small depositors. It became apparent that the acquisition of retail-generated deposits would have to play a role in the activities of even the largest commercial “wholesale” banks.

  Thus, in the mid-1950s there was a veritable mating ritual of mergers—almost all of them linking larger commercial banks having substantial corporate business with smaller retail banks, which had large and growing consumer business. All of these mergers were driven by the need for wholesale commercial banks to acquire branches so that they could gain access to new deposits.

  “JONAH SWALLOWS THE WHALE”

  The Bank of the Manhattan Company, chartered by the New York State Legislature in 1799, was the second oldest bank in the state. Aaron Burr had been one of its original incorporators. The Manhattan Company had been chartered as a water company to provide freshwater to New York City, but Burr and his associates shrewdly slipped a phrase into the charter that allowed the company to use its excess capital “in the purchase of public or other stocks, or in any money transactions or operations not inconsistent with the laws and constitutions of the State of New York.”
Thus, the Bank of the Manhattan Company came into existence.

  Burr’s subterfuge outraged Alexander Hamilton and his associates, who up until then enjoyed a banking monopoly through their Bank of New York. This undoubtedly played a role in the bad blood between Burr and Hamilton, which led to their famous duel on the heights of Weehawken in 1804, in which Burr killed the former Secretary of the Treasury. (Chase still owns and displays the dueling pistols used by the two.) The Bank of Manhattan prospered over the years and continued to function under its original 1799 charter. By the early 1950s its most important asset had become its network of fifty-eight retail branches in New York City, double that of Chase. Measured by total assets of $1.7 billion, however, the Bank of Manhattan was only one-quarter Chase’s size.

  Winthrop Aldrich had tried to combine the two banks in 1951 and the merger had actually been announced in the press, but the attempt proved unsuccessful, due primarily to a powerful personality clash between Winthrop and the Bank of Manhattan’s chairman, J. Stewart Baker.

  Jack McCloy was a more artful negotiator, and he skillfully overcame Baker’s personal reluctance and a number of nettlesome legal obstacles by agreeing to merge the much larger Chase into the state-chartered Bank of Manhattan. This strategy flattered Baker’s ego and achieved Chase’s objective to expand its retail banking. And so, on March 31, 1955, the smaller Bank of the Manhattan Company technically absorbed the much larger Chase National Bank, leading one newspaper to run the headline “Jonah Swallows the Whale.”