by Kai Bird
There were more than a dozen associates and thirty-four nonlegal staff, making the company one of Manhattan’s earliest law factories. In 1921, the firm collected $734,278 worth of fees, 31 percent of which was used to cover expenses. That left a hefty pretax profit of $506,652 to be divided among the eight partners.4 Cadwalader was doing well, and the potential rewards if McCloy made partnership were considerable.
But from the beginning he found the pace at Cadwalader “slow” and the firm’s atmosphere “very traditional.”5 McCloy gravitated toward the corporate and securities work supervised by William Lloyd Kitchel. Because many of Kitchel’s clients were troubled railroads, McCloy found himself specializing in this field.
His annual salary of $1,000—plus bonus—was good money in 1921. Real income in 1920 had risen less than 5 percent above the rates for 1899. The subway fare was a nickel, first-class postage was 2 cents, and a seven-course meal could be had at a number of Italian restaurants in Greenwich Village for $1.10.6
Because he wanted to be as close as possible to the West Side Tennis Club, McCloy rented a bachelor’s room from a family in Forest Hills. Next door lived a professional tennis coach who befriended McCloy and used him to warm up the women pros.7 He once won a set in an informal match from another native Philadelphian, William Tilden, Jr., the reigning Wimbledon champion, who was turning tennis into a big-money spectator sport. McCloy talked up his little victory and won the reputation on Wall Street as the lawyer who had beaten “Big Bill” Tilden.
On some evenings, McCloy visited Manhattan’s flourishing speakeasies in the company of a pint-sized, somewhat impish little man named Benjamin Buttenwieser. “Benny” was five years younger, born, in his own words, “Not with a silver spoon in my mouth, but platinum.”8 He had graduated from Columbia University in 1917, at the age of seventeen, and though he had wanted to become a poetry professor, his family persuaded him to work as a clerk-runner for Kuhn, Loeb & Co., the investment-banking house that rivaled the House of Morgan. McCloy met Buttenwieser in the course of working for Cadwalader on a Kuhn, Loeb railroad receivership.
With his dark, bushy eyebrows and wide, easy grin, Buttenwieser made up in zest and energy what he lacked in physical stature. His bristling self-assurance and easy nonchalance charmed McCloy. They began to double-date around town, taking their women to the theater and then to a nightclub for some dancing. By his late twenties, McCloy had lost almost all the hair from the top of his head. He had a stocky frame, but his weight was all muscle and he was quick on his feet. He did not exactly cut a debonair figure, though he was nevertheless handsome in a pleasant sort of way. His self-assurance, his easy smile, and the brightness in his eyes suggested to women that this was a man who knew his way about town.
The early twenties were exciting years to be a young lawyer in New York. Beginning in 1919 with the formation of the General Motors Acceptance Corporation, Americans were learning how to buy on credit everything from cars to furniture. After the 1920–21 recession, the economy boomed, and lawyers could not help benefiting. The Cadwalader firm’s revenues jumped more than $200,000 in 1922, to $942,879.9
McCloy was also witnessing an intellectual renaissance in the city. A half-dozen new book-publishing firms were established, The New Yorker was founded, and in 1921 the Council on Foreign Relations was created by a group of New York lawyers and investment bankers. The Council eventually became a second home to McCloy, but at the time he was still too young to join its ranks. He was, however, well aware of its activities; his boss, George W. Wickersham, was chairman of the board. Other, more senior Cadwalader men were active members of the Council and such private clubs as the Metropolitan. For the moment, McCloy confined himself to a membership in the New York City Bar Association, which maintained a plush parlor and library in midtown.
Much of McCloy’s work at Cadwalader involved railroad receiverships or working to protect Cadwalader’s corporate clients from antitrust or regulatory actions by the federal government. Typically, this meant burying the government lawyers in mountains of paper. In one case, involving Bethlehem Steel’s acquisition of a rival steel company, McCloy inundated the Federal Trade Commission with fourteen thousand pages of testimony. The Supreme Court eventually upheld the merger, which helped accelerate a trend toward large corporate mergers. The Bethlehem Steel case also gave McCloy the opportunity to work with several senior lawyers from Cravath, Henderson & de Gersdorff. He liked what he saw of the Cravath men: Carl de Gersdorff and Hoyt Moore were extremely hardworking and demanded as much from their associates. McCloy’s Harvard Law classmate Donald Swatland, a Cravath man who had assisted him on the reorganization of the bankrupt Denver & Rio Grande Railroad, began to encourage McCloy to switch firms.
McCloy was tempted, in part because his speakeasy companion Benny Buttenwieser had been introducing him to the select world of Kuhn, Loeb, which was invariably represented by Cravath and had its offices in the same building.
By 1920, when the patriarch of the firm, Jacob Schiff, died, Kuhn, Loeb was second only to the House of Morgan; over the years, it had syndicated some $10 billion worth of loans for various corporations and governments all over the world. When Buttenwieser showed McCloy around the office in the early 1920s, there were only five resident partners: Otto H. Kahn; Mortimer L. Schiff, Jacob’s son; Jerome J. Hanauer; Paul M. Warburg, who had married a Loeb daughter; and Felix M. Warburg, who had married Jacob Schiff’s only daughter, Frieda. None of these names were unknown to McCloy; indeed, he had met Felix and Frieda Warburg and their four sons and one daughter during a summer at Bar Harbor. His mother had occasionally done Frieda’s hair those summers.
Buttenwieser and his peers at Kuhn, Loeb referred to themselves as part of “Our Crowd,” or the “One Hundred,” to differentiate themselves from the “Four Hundred” families of New York’s gentile social elite. The Loebs, Kuhns, Warburgs, Buttenwiesers, Altschuls, Lewisohns, Lehmans, and other “Our Crowd” families traced their origins to Germany and were in one way or another part of New York’s clannish Jewish banking community.
Though not members of “Our Crowd,” two younger Kuhn, Loeb men that McCloy met were remarkable personalities in their own right. Both Lewis L. Strauss and Sir William Wiseman were to become lifelong friends. Strauss had served as Herbert Hoover’s secretary during the war and came to Kuhn, Loeb in 1919. As for Wiseman, McCloy was intrigued to learn that this British gentleman had been the head of London’s intelligence operations in North America during the war. Wiseman had set up an elaborate network of British agents, largely to counter the effort of German saboteurs to slow the shipment of war supplies to Britain. After the war, he decided to remain in New York, and in 1921 joined Kuhn, Loeb.
Young men like Wiseman and Strauss had lunch with people like Robert Cecil, the English lord and Tory politician, and William Randolph Hearst, and made deals every day worth hundreds of thousands of dollars.10 McCloy was strongly attracted by the idea of working with such wealthy and influential Cravath clients. He also wanted work that involved traveling abroad. Much of Kuhn, Loeb’s business was syndicating war reconstruction loans for Europe, and Cravath handled all these transactions. So, after three years with Cadwalader, on December 1, 1924, McCloy moved just around the corner into Cravath’s offices at 52 William Street. He was now part of the exacting “Cravath system.”
Temperamentally, McCloy already fit the Cravath mold. Neither brilliant nor easily distracted by his imagination, he instinctively exercised the qualities that Paul Cravath had spent a lifetime inculcating into a generation of young lawyers: a relaxed common sense and an intuitive grasp of the proportion of any problem thrown his way.
Until Cravath came along, law partnerships had been an informal, fluid collection of lawyers who came and left on whim. Instead of seeking new partners by enticing lawyers with established reputations, Cravath intended to create an institution capable of perpetuating itself by training its future partners from within its own ranks. He planned to hire each year a
few of the best law-school graduates from Harvard, Yale, and Columbia. To qualify, these men usually had to be Phi Beta Kappa and law-review editors.
Cravath abolished the practice, still common at the time, of having unpaid clerks in the office study the law in preparation for passing the bar. Cravath actually paid his law clerks a regular salary, starting at $50 a month in 1908.
These clerks were molded and trained under the close supervision of a Cravath partner. Robert Swaine, a partner since 1917, described the discipline in the firm’s privately printed history: “Under the ‘Cravath system’ a young man watches his senior break a large problem down into its component parts, is given one of the small parts and does thoroughly and exhaustively the part assigned to him. . . .”11
After a few years, it was either up or out. If an associate failed to make partnership after a period of five or six years, he was let go to make room for others. Unlike Cadwalader, Cravath hired no associates, let alone partners, because of their familial connection to members of the firm. No Cravath men were to have any financial connection to the firm’s clients, since that might impede their objectivity. The firm was not to traffic in anything so petty as “political influence.”
All of this appealed to McCloy, who had found quite different assumptions about the law prevailing at Cadwalader. He liked the idea of practicing “pure law” inside Cravath’s meritocracy. Even so, it was unusual for Cravath to recruit a lawyer from a rival firm. Perhaps Cravath decided to make one of his exceptions to the “system” because McCloy had been sponsored by Don Swatland, who was just a year away from becoming a partner himself. Another factor was that Cravath’s partners were swamped with work generated by the economic boom of the 1920s; they desperately needed some experienced men. As at Cadwalader, McCloy’s clients were investment bankers, corporations such as Westinghouse, the Radio Corporation of America, Bethlehem Steel Co., and a variety of railroads. In his first year with Cravath, McCloy earned about $3,500, surpassing what his father had been making at his death in 1901.
A year before McCloy joined in 1924, the firm had only five experienced partners: Paul Cravath, Carl de Gersdorff, Hoyt Moore, Robert Swaine, and Douglas M. Moffat. In the following year, three more partners were named, and in the next five years, the firm expanded from thirty-three associates serving eight partners to forty-six associates serving thirteen partners. The nonlegal staff grew from seventy to 104. An office manager was appointed, and the antiquated practice of copying all outgoing letters into letterpress books was abandoned. In 1927, a Paris office was opened to handle the firm’s increasing business in foreign securities. Cravath was clearly not a stagnant place for an ambitious young lawyer.
Paul Cravath, sixty-four in 1925, ruled the firm much as he had since 1906, as, in the words of Francis T. Plimpton, an “absolute Czar.”12 Six feet four inches tall, and weighing 240 pounds, Cravath intimidated anyone who came within his view. His piercing eyes were set behind a pair of gold-rimmed pince-nez, and his massive head was topped by a shock of iron-gray hair. He made no pretense of simplicity, but dressed expensively, almost like a dandy. His temper was fearsome, and he never hesitated to display contempt for his inferiors. J. D. Robb, a young associate at the time, recalled, “There were two very formidable figures who used to be seen on Wall Street: J. P. Morgan and Paul D. Cravath, and their derby hats, unlike ours which were nicely rounded, were flat-topped. Their very presence emanated power and instilled awe.”13
Early in his career, Cravath had established a reputation as a lawyer with the mind of a businessman. He cultivated business leaders like George Westinghouse and Jacob Schiff, and soon both Westinghouse Electric and Kuhn, Loeb were his clients. In the years of Teddy Roosevelt’s “trust-busters,” Cravath became nationally known as a defender of the robber barons. The Hearst newspapers called him a public malefactor. The New Yorker wrote, in mock sympathy, “Those were bitter days for Cravath.. . . He became, for the public, a symbol of rapacious Capital.”14 John W. Davis, later a Democratic presidential candidate, decided in 1917 against becoming a Cravath partner in part because he thought the firm “distinctly the counsel for the predatory rich.”15
By the time McCloy arrived at the firm, Cravath had somewhat mellowed in both temperament and reputation. Swaine wrote, “The Cravath who returned from World War I was a much more human person than the prewar Cravath. His role during the war was that of an advisor, constantly seeking to reconcile the differing points of view of strong men of vigorous personalities. He acquired tolerance. He learned that few men are unfailing in their judgements and he became less sure of his own and less insistent that everything be done his way.”16
He also began to develop some interests outside the law, interests becoming a man who was now taking statesmanlike positions in the public debate over the League of Nations, the World Court, and the settlement of European war debts. Like Henry Stimson, Cravath thought “men of wealth and power had special obligations to the community. . . .” In Cravath’s case, he began to think of himself as a steward of the country’s foreign policy. When the Council on Foreign Relations was organized in 1921, Cravath became a director and vice-president. He contributed funds to the Council’s new publication, Foreign Affairs, edited by Hamilton Fish Armstrong. Cravath argued in the pages of Foreign Affairs that the United States should recognize the communist regime in the Soviet Union and encourage East-West trade. He thought the Treaty of Versailles was a “millstone around the neck of economic Europe,” and that Germany would never be able to pay “anything approaching the indemnity imposed on her. . . .”17—views that McCloy would soon begin to echo.
Cravath was not the only strong personality in the firm. Hoyt Moore was notorious for wearing out the young associates with his marathon binges of work late into the night, night after night. Moore, Harvard Law ‘04, was known as a “slavedriver.”18 Moore, recalled McCloy, “wasn’t happy unless he was working. . . . If he didn’t have something to do, he’d go around and ask to work on a brief.”19 Moore’s obsession with petty detail suited Paul Cravath’s purposes; he wanted men with patience to break a problem down into all its possible legal components and laboriously solve it.
McCloy worked long hours, but he also managed to bring himself into the social circles of Cravath’s most valued clients. With the death of Paul Cravath’s friend Jacob Schiff in 1920, a younger generation had begun taking control of Kuhn, Loeb. Sometime in 1925–26, McCloy became good friends with Frederick Warburg, twenty-eight, the eldest grandson of Schiff. “Freddie,” as he was known to everyone, had just joined Kuhn, Loeb after serving a stint with his uncle Max’s merchant banking firm, M. M. Warburg, in Hamburg, Germany. Because Freddie was Felix Warburg’s son, it was ordained that he join the family firm, and he proved to be a competent, if overly conservative, banker. But his heart was not in it.
He was an easygoing and lighthearted young man, whose only real passion in life was sports. At the time McCloy met him, Freddie was an avid lawn-tennis player and routinely enticed the tennis pros from Forest Hills to play with him at the family’s estate in White Plains. When Freddie learned of McCloy’s tennis prowess, he too became a frequent visitor to White Plains.20
It did not escape Paul Cravath’s notice that McCloy regularly socialized with such Kuhn, Loeb personalities as Freddie Warburg and Benny Buttenwieser.
In the summer of 1925, McCloy hired William O. Douglas as a Cravath associate. Though he would someday, as a Supreme Court justice, be known as a populist and a critic of corporate America, Douglas, upon graduating from Columbia Law School, decided to try out Wall Street before returning to his native Washington. He chose Cravath because “everyone there seemed earnest and frank, and not at all pretentious.” McCloy recalled that Douglas “was not on our list” of those the firm was hoping to recruit from that year’s batch of law-school graduates. “He was a little off the beaten track. . . . In fact, he looked like a singed cat. But then he told me what he had done to get a legal education and I was inter
ested because I had worked my way through law school, too. He talked about his background and how hard life had been. I told Bob Swaine, ‘I think this fellow’s got something.’ “21
Swaine told McCloy he could have Douglas but the young lawyer would have to share McCloy’s office. Douglas was hired at an annual salary of $1,800 and moved into McCloy’s tiny office. There was barely room enough for two desks; McCloy took the one next to the only window. “In those days,” McCloy explained, “you may not have been a partner, but if you had a desk by a window it counted for something.”22
Both men worked closely with Don Swatland, whose fits of temper could rival Swaine’s. They sometimes stayed up all night preparing papers that had to be filed in court sharp at nine o’clock the next morning. The two men would order out for steak dinners and then puff away all night on stogies to keep themselves awake.23
About the same time, McCloy received his first mention in a daily newspaper. The case involved yet another railroad reorganization, this time the nation’s largest railroad bankruptcy. By 1925, the Chicago, Milwaukee & St. Paul Railroad (known as the St. Paul) was running a $2-million annual deficit, and $50 million worth of refunding bonds were to mature that year. St. Paul’s management turned to Cravath to prepare the inevitable receivership. What Cravath did was not illegal, but in a few years the case became the subject of contentious congressional investigations.
“Bill Douglas and I worked on the details of the St. Paul reorganization under Swatland’s supervision,” McCloy recalled. “Supervising the logistics of the massive reorganization was late night drudgery. There was some looking up of the law, but not too much, because there was not too much law on the books. It was mostly organizing a very big job. We prepared titles and deeds of transfer. There were trips to Chicago and leg work for the investment banks. It didn’t require legal genius to do it; it did require a lot of hard work.”24