The Untold History of the United States

by Oliver Stone

  Others also voiced skepticism about Roosevelt’s motives. Washington Post columnist Raymond Clapper listed several explanations that were circulating around Washington. One was that the president wanted to steal the spotlight from Nye and Vandenberg, the Republican senators who were making headlines with their investigations. Another was that the “munitions interests have got to the Administration and that it is trying to take them off of the spot.”82

  Nye thought Roosevelt was up to no good. “The departments of our government are really codefendents with the munitions industry and the profiteers,” he exclaimed, having only recently become sensitive to the degree of government complicity in international arms sales.83

  Refusing to let the administration steal its thunder, the Nye Committee came out with more headline-grabbing exposés. The du Ponts remained in Nye’s crosshairs. Alger Hiss revealed more evidence of untrammeled greed. The Washington Post headlined one December 1934 front-page article “800% War Profit Told at Inquiry; Du Pont Deal Up.” Hiss released a list of companies involved in various aspects of war production and the gaudy returns on their investments. He also released names of the 181 individuals who reported incomes exceeding $1 million in 1917 and noted that 41 of them had appeared for the first time. The list included six du Ponts, four Dodges, three Rockefellers, three Harknesses, two Morgans, two Vanderbilts, two Whitneys, and only one Mellon.84

  The more blood Nye drew, the shriller the attacks on the committee became. The Chicago Tribune condemned the committee’s method of damning witnesses as “unjust, dishonorable, and disgusting.”85 But support for the investigation remained strong. Nye met with Roosevelt in late December. The committee had received over 150,000 friendly letters by that point. Afterward, Nye assured reporters that he had mistaken Roosevelt’s motives. The president was entirely behind the investigations, he said, and no new legislation would be forthcoming until the investigation had run its course.86

  Members of the committee tried to warn the public about what they feared was an impending European war. Pope thought it “paradoxical” that governments around the world were aiding munitions manufacturers. Countries, he regretted, “seem to be in the grip of some monster that is driving them to destruction. Preparations for the next war are feverishly under way. That it is inevitable is widely assumed.”87

  In early February 1935, Representative John McSwain of South Carolina introduced legislation that would freeze prices at the level they were at on the day war was declared. Baruch and Johnson both testified on behalf of the legislation and both opposed Nye’s more sweeping nationalization proposals.

  Meanwhile, at the hearings, Eugene Grace, president of Bethlehem Steel Corporation and the Bethlehem Shipbuilding Corporation, admitted that his company’s profits jumped from $6 million before the war to $48 million once the war started and that he had received personal bonuses of $1,575,000 and $1,386,000. Senator Bone aggressively questioned him about Treasury Department charges that “Bethlehem profits . . . were unconscionable and unjust,” the subject of an $11 million suit that had been tied up in the courts for years.88

  In February, the committee weighed a request to open up a new line of inquiry. The annual convention of the Department of Superintendence of the National Education Association (NEA) heard a powerful indictment of the “insidious influences” of press magnate William Randolph Hearst by former president of the American Historical Association Charles Beard. Beard claimed that Hearst “has pandered to depraved tastes and has been an enemy of everything that is noblest and best in our American tradition.” According to the Times, when Beard finished, the thousand educators in attendance “rose to their feet and applauded for several minutes.” The association passed a resolution declaring that NEA members had been “shocked and outraged by the iniquitous greed for profits on the part of American munitions manufacturers [as] has been revealed in all the grossness of their corruption by the Nye Committee.” The resolution called upon the committee to also investigate “the propaganda in newspapers, schools, motion pictures and radio carried forward to increase the fear of war and promote the sale of munitions,” specifically including the Hearst newspapers. Nye responded that such an investigation did fall within the purview of his committee and requested more information. But, after further consideration, he decided against the inquiry.89

  In late March, a Senate bill to ban war profits started to take shape. The New York Times described it as “a plan that is admittedly the most radical in the history of the government.” The Washington Post concurred, describing it as “a plan so drastic in its confiscatory features that six months ago it would have been scoffed at. . . . It went beyond anything that Senator Gerald P. Nye, dapper chairman and most radical member of the committee, ever thought of recommending.” Staff researcher John Flynn laid it out for committee members, who met with the president to discuss it. Roosevelt surprised them by responding positively. Secretary of State Cordell Hull, however, advised Roosevelt against supporting any specific legislation eliminating war profits.

  But, given the president’s backing, committee members decided to put their proposals into legislative form. The tentative provisions included a tax of 100 percent on all incomes over $10,000 and hefty taxes on lower incomes, a 50 percent tax on the first 6 percent of corporate profits and 100 percent on profits over 6 percent, drafting corporate officials into the army, shuttering all stock exchanges for the duration of the war, prohibiting all commodity speculation, and commandeering of all essential industries and services. Flynn told the committee, “The profits in war, the spiraling of prices, the uncivilized scrambling for the shameful fruits of national disaster, can be prevented in only one way, and that is to prevent inflation at the beginning. In 1917 and 1918 we had our war and we sent the bill to our children and grandchildren. In the next war we must resolve, as intelligent as well as civilized beings, that while one part of the population—the army—fights in the field, the other part, that stays at home, will pay the bills.”90

  The slightly amended Flynn proposal was introduced as the Emergency Wartime Act in early April. The bill would mandate government seizure of all profits above 3 percent and all individual earnings above $10,000. Nye commented, “The bill is drastic because war is a drastic thing. The tax collector who comes for one man’s money is not nearly so solemn and forbidding as the draft officer who knocks at another man’s door and calls for his young son.”91

  When the House was ready to vote on the more moderate McSwain bill, pandemonium broke out. Opposition rang down from all sides. The New York Times reported, “Antiwar sentiment so swept the House that the original McSwain proposal was amended beyond recognition.” Amendments included an excess war profits tax of 100 percent, government control of the financial and material resources of the country, and conscripting officials in industry, commerce, transportation, and communications.92 The bill passed the House with provisions to draft all men between the ages of twenty-one and forty-five but with conscription of management officials stripped out. The bill was framed so that it would be easy to add provisions from the more radical Nye bill in the final version.

  Arthur Krock inveighed against both bills in the New York Times. “The McSwain bill,” he charged, “is colored with pacifism, the Nye bill with syndicalism, socialism or communism . . . the two measures seek to discourage war by providing the certainty that the well-to-do would be ruined when war was declared. Only labor and passive objectors have been treated with consideration. All the provisions of the bills are designed to prevent limiting the wage or strikes of the one and the conscription of the other.”93 Baruch also weighed in against features of the Nye bill, claiming it would increase inflation, paralyze war production, and leave the country defenseless against a major attack. Nye accused Baruch of being business’s mouthpiece and not really wanting to eliminate war profits.94

  Nye introduced his bill in the Senate in early May as an amendment to the McSwain War Profits Bill. He promised that this would be only th
e first of several bills to come out of his committee, explaining, “We believe the opinion of the American people is behind this bill. We think that now, when the whole world is troubled by rumors of wars, is the time to serve notice on our own people and on the world that America does not intend to use another war as an instrument to make a foolish and futile effort to make a few people rich.”95

  The committee presented three resolutions to the Senate. One prohibited making loans to warring nations or their citizens. A second denied passports to citizens entering war zones. And a third embargoed arms shipments to warring nations if such shipments might involve the United States in conflicts. The Senate Foreign Relations Committee approved the first two measures and was debating the third when Hull convinced committee members to keep U.S. options open in dealing with other nations. With the developing Ethiopia crisis on their minds, they decided to reconsider all three measures before finalizing their actions.

  When Congress adjourned in September, the differences between the House and Senate versions of the war profits bill had not yet been resolved. That was a relief to the Chicago Tribune, which called it a “communistic defense act” that in the event of war would allow the president to “communize the American nation as completely as Lenin communized Russia.”96

  At that point, with pressure building for dramatic action, Wilson’s former Secretary of War Newton Baker threw a monkey wrench into the proceedings. He responded to a letter to the New York Times by William Floyd, the head of Peace Patriots, by denying that there had been any discussion of protecting private U.S. commercial or financial interests in the run-up to the United States’ entry into the World War and averred that “America’s safety from future wars cannot be secured by muzzling bankers or disabling munitions makers.”97 Four days later, banker Thomas Lamont wrote, challenging Floyd’s evidence and blaming German aggression, not U.S. commercial interests, for U.S. entry.98

  These very issues formed the crux of renewed committee investigations in early 1936. Was it true that the House of Morgan and other Wall Street firms had pushed the United States to war in order to recoup the enormous sums they had lent to the Allies? Both sides readied for the battle. The much-anticipated showdown occurred on January 7, when J. P. Morgan appeared before the committee along with his partners Lamont and George Whitney, as well as Frank Vanderlip, a former president of National City Bank. John W. Davis came along as Morgan’s counsel. The committee moved the hearings to the Caucus Room of the Senate Office Building in order to accommodate the record number of requests for seats. Nye Committee researchers had been poring over the books and files of the banking behemoth for almost a year, examining more than 2 million letters, telegrams, and other documents. The night before the hearings, the firm invited reporters to its forty-room suite at the Shoreham Hotel for an off-the-record background briefing by Lamont and Whitney. Nye took to the radio to lay out his position to a national audience. “After we had started stretching our American neutrality policy to accommodate commercial interests to the extent of permitting loans,” he reasoned, “the Allied powers were never in doubt as to what America would ultimately do. They knew what we didn’t seem to realize, namely that where our pocketbook was, there would we and our hearts ultimately be.”

  Morgan released a nine-page statement denying such allegations. It read, “We call particular attention to the secured nature of these loans, because there has been an impression fostered in certain quarters to the effect that the Allied loans were worthless unless America entered the war; that the holders of these loans urged our Government into the war ‘to make the loans good.’ There was nothing in the facts remotely justifying this fantastic theory. The loans were always good. No one feared for their safety.” The statement argued that U.S. business was already thriving from supplying the Allies and there was no material advantage to having the United States enter the war.99

  Losing the debate could have enormous consequences. Nye and Clark recognized that the evidence presented about U.S. entry into the past war could determine the fate of the important neutrality bill they were introducing that week.

  At that first hearing, the committee released documents showing that President Wilson had sided with Secretary of War Robert Lansing over Secretary of State William Jennings Bryan’s sharp opposition and decided to allow bankers to float loans to belligerents in 1914, long before the policy change was publicly announced. Before adjourning, Senator Clark asked one last question of Vanderlip: “Do you think Great Britain would have paid her debts if she had lost the war?” Vanderlip replied, “Yes, even had she lost the war she would have paid.” 100

  In subsequent hearings, Nye and other committee members endeavored to show that the United States had never been neutral in the war and that German submarine warfare was just the pretext Wilson seized upon as an excuse to intervene. Nye dropped one last bombshell: he alleged that Wilson learned about the Allies’ secret treaties before the United States entered the war and then “falsified” the record by telling members of the Senate Foreign Relations Committee that he had found this out only later, at Versailles.

  The Nye Committee investigations showed that Wilson had, in effect, lied the country into war. He had undermined neutrality by allowing loans and other support to the Allies, deliberately exaggerated claims of German atrocities, and covered up the fact of his knowledge of the secret treaties. Far from being a war to further democracy, it had been a war to redivide the spoils of empire.

  Aspersions on the integrity of Woodrow Wilson proved to be the final straw for many Senate Democrats, who rose in fevered denunciations of the committee chairman in what the Washington Post described as “a tornado of protest and resentment.” Senator Tom Connally of Texas led the charge, declaring, “I do not care how the charges were made; they are infamous. Some checker-playing, beer-drinking back room of some low house is the only place fit for the kind of language the Senator from North Dakota, the chairman of the committee—this man who is going to lead us out toward peace—puts into the record about a dead man—a great man, a good man, and a man who, when alive, had the courage to meet his enemies face to face and eye to eye.” Connally accused Nye and the committee of an “almost scandalous effort to besmear and besmut the records of America in the World War.” The controversy split the committee itself. Two of the members, Senators Pope and George, left the hearing in protest. Pope returned and read a statement in which he and Gregory expressed resentment at “any effort to impugn the motives of Woodrow Wilson and to discredit his great character.” They regretted that the purpose of the investigation was being lost sight of and feared that the chance of securing “remedial legislation” was slipping away. They questioned the integrity of the committee’s investigation: “Such efforts to disparage Wilson and Lansing . . . disclose the bias and prejudice with which the investigation is being carried on.” They made it clear that they were not resigning from the committee and would return for a vote on the final report. Another committee member, Senator Vandenberg, added that he, too, admired Wilson but that economic motives had provided “an inevitable and irresistible impulse” for getting the United States into the war. He wanted to make sure that never happened again and said he took pride in what the committee had accomplished: “History has been rewritten in the last 48 hours. It is important that history should be revealed in all its nakedness, no matter what it shows.” Nye assured Pope and George that he had no malice toward Wilson and had even voted for him in 1916, promising to persevere “as long as there is a possibility of lessening the chances of our being drawn into war.”101

  The bloodletting continued the next day in the Senate. Seventy-eight-year-old Carter Glass of Virginia, who had served as Wilson’s secretary of the Treasury in the last months of his administration, accused Nye of an “infamous libel,” an “unspeakable accusation against a dead President, dirt-daubing the sepulchre [sic] of Woodrow Wilson.” Pounding his hand on the desk so hard that blood spurted all over his papers, Carter cried out, �
��Oh, the miserable demagogy, the miserable and mendacious suggestion, that the House of Morgan altered the neutrality course of Woodrow Wilson!” Nye finally got his chance to respond on the floor of the Senate. He said that what surprised him was that there had not been “an earlier concerted effort” to stop his committee’s work and that the hostility only became apparent with the appearance of Morgan and his partners. He offered no apologies, instead reading letters and documents that, he reiterated, showed that “the United States entered the war knowing the spoils had been agreed upon. Yet we were told news of secret treaties came as a bombshell at the peace conference.”102

  Two days later, Nye informed Morgan and his partners that they need not appear as scheduled the following week for further examination. The committee had hit a roadblock, and the prospects of Senate appropriation of the $9,000 needed to continue its work looked bleak. He accused his detractors of using the Wilson issue as a “smoke screen.” Their real intention, he insisted, was to “seize upon any weapon and resort to any subterfuge to kill legislation which threatens the bloody profits to be made from war.”103

  To everyone’s surprise and Nye’s delight, the hearings were not aborted. On January 30, the Senate unanimously approved $7,369 to finish the probe. Even Connally reversed his previous position and voted for the added funding, but he urged the committee to stick to living people and not invade the “cemeteries and catacombs” of the dead.104 The New York Times explained the Senate’s change of heart: “When Wilsonians resentful of slurs against their World War chieftain threatened to interrupt the inquiry by stripping it of funds, mail sacks on Capitol Hill bulged with letters urging that the full story of 1914–18 be told. That demonstration of an antiwar mood explains why an inquiry which had provoked more bitterness than any similar affair in many years was allowed to survive.” The Times credited the committee with having already achieved “notable reforms.” “It helped to place on the books a statute requiring munitions makers to obtain licenses and report all shipments to the State Department. It resulted in the framing of bills to remove exorbitant profits from the arms and shipbuilding industries, and it is expected that these proposals will eventually become law in one form or another. But its major accomplishment is the churning of public opinion on the subject of war, peace and profits.”105