The Chairman

by Kai Bird

  On that same day in Bonn—May 23, 1952—Acheson arrived for the signing of the contractual treaties and was immediately briefed at McCloy’s office in Bad Godesberg. Even at this late date, the French were dragging their feet, demanding additional guarantees against the possibility that Germany might again one day pose a threat to European peace. In addition, they wished to tone down some language in the treaties that might preclude negotiating a deal with the Soviets for a comprehensive German peace treaty at a later date. Acheson, McCloy, and Adenauer once again adopted the tactic of all-night negotiating sessions, so tiring French Foreign Minister Robert Schuman that he kept dozing off. More concessions were made, including a pledge that the United States would help France finance her military operations in Indochina.26 Finally, on Monday morning, May 26, 1952, a signing ceremony was held in the German senate chamber. Afterward, Acheson announced, “On behalf of the President of the United States and the American people, I welcome the Federal Republic on its return to the community of nations.”27

  This was an exaggeration, for Germany was not quite a sovereign nation again. The Allies still reserved the right to intervene in German internal political affairs in the event of an emergency. And they retained their powers in Berlin and certain contractual rights to deal with the issue of reunification and the security of their troops in Germany. There was also a clause on the deconcentration of German industry and banking which was distinctly unpopular. Most Germans, in fact, thought the contractual treaty was nothing to celebrate, and many took to the streets to demonstrate against the whole event. Schumacher, whose health had so deteriorated that he was confined to his bed, issued a public statement condemning the “McCloy-Adenauer coalition” and suggested that “whoever approves the General Treaty ceases to be a German.”28 A member of Adenauer’s own coalition government privately told McCloy that he would “rather see Russians march in than assist voluntarily in reducing [the] Federal Republic to [the] status of [a] puppet.”29

  McCloy discounted such criticism and regarded the treaties as a fitting cap to his tenure as high commissioner. A twenty-nine-year-old Harvard scholar named Henry Kissinger disagreed. Building on his experience in occupied Germany with U.S. Army counterintelligence, Kissinger in 1952 had gotten himself hired as a consultant to the president’s Psychological Strategy Board, a new, rather shadowy executive agency that was supposed to help coordinate covert intelligence with sophisticated propaganda programs. He happened to be visiting Germany the week the contractual treaty was signed, and wrote a report highly critical of the treaties and McCloy’s administration. He believed McCloy had concentrated on the “framework of legal relationships and neglected the psychological climate which would make these relationships effective.” He observed that German reaction to the contractual treaty could best be summed up as “hysterical.” The signing ceremony itself, he reported, had led to an “outburst of anti-American feeling. . . .” The high commissioner’s timing had been all wrong; the United States should not have rejected the Soviet offer to have a four-power conference on Germany, and the treaty should have been “advertised as a last resort, not as the beginning of a new era in European policies.” Instead, the way it was done allowed the Soviets to shift “the onus for the division of Germany on the U.S.” Neutralist sentiment was spreading so rapidly that a “reverse Titoism is by no means impossible. . . .” A new approach was needed, Kissinger warned, “lest Germany be swallowed up by the Soviet orbit.” The United States should appear as the “advocate” of, not the barrier to, German unification.30

  Kissinger’s report was a pretty fair reflection of the opinions he had heard from a broad range of German academics, newspaper editors, and other intellectuals. What he was saying—that the contractual treaty was likely to perpetuate the division of Germany—was apparent to everyone. Many Germans did not believe that Washington could keep Germany divided for long without precipitating a war. The division was too artificial to last. McCloy’s critics, however, failed to understand that he was well aware of the historical forces behind German unification. He sought quite consciously what one diplomatic historian, Wolfram F. Hanrieder, has called a “reversal of truly historic proportions.”31 It was his and Adenauer’s gamble that they could—with a combination of economic incentives and a strong American military presence—force the postponement of any reunification for a generation or two, time enough perhaps to win the “struggle for the soul of Faust” and create a new Germany.32 They could not, of course, reveal their intentions in this matter; on the contrary, both McCloy and Adenauer so often felt compelled to proclaim their support for unification that the public rationale for the foreign policy they actually pursued seemed transparently contradictory. This at various times gave rise to a credibility gap with the German public.

  Early in June, McCloy made a short visit to the United States to promote the German treaties. In his only public appearance, he spoke before a Philadelphia audience gathered in a meeting hall named after one of his mother’s old hairdressing clients, John Wanamaker. “A democratic system of government,” he proclaimed, “is now thoroughly developing in Germany and the people of Europe are coming together in building a new order in their own defense.” In Washington he successfully lobbied the Senate for early ratification of the contractual treaty, saying there was one threat to the emergence of a peaceful and progressive Germany, and that it came from the Kremlin. “The Communists,” he warned, “are now engaged in a mighty campaign to prevent German ratification of the agreements. . . .”33 He called the treaty “solid proof of our desire for a peaceful alliance” with the new West German state.34 It was precisely this kind of talk that worried the French, who now began to feel that they had been bludgeoned into accepting both the contractual agreements and the treaty for a European Defense Community (EDC), which had been signed the following day in Paris. From the perspective of most Frenchmen, all the Americans seemed to care about was the rearmament of Germany, and it worried them that the Germans were already predicting that they would have five hundred thousand men under arms by 1954.35 General Charles de Gaulle bluntly told The New York Times ’ correspondent C. L. Sulzberger that the EDC was just plain “idiocy.” He predicted it would never pass muster in the French Parliament: “I will do everything against it. I will work with the Communists to block it. I will make a revolution against it. I would rather go with the Russians to stop it.”36

  For two years, the French sulked, and then, in May 1954, they fulfilled de Gaulle’s prediction and refused to ratify the EDC. The idea of an integrated European army was a dead letter, and with it any prospect for an early political union of Western Europe rapidly faded. Instead, in 1955 Washington negotiated West Germany’s admittance to NATO, at which time the Bonn government became unconditionally sovereign in its internal affairs. To the unease of many Europeans, Germany began to muster its own national army. In his haste to negotiate the contractual agreements, McCloy had settled for a cosmetic arrangement that quickly fell apart. He had failed. But by the time this failure had become apparent, it really didn’t matter. The Cold War had resumed its trajectory, and the possibility of a four-power negotiation of the “German problem” had once again receded. Instead, an increasingly vibrant and economically strong West German state was taking its place in the Atlantic alliance. This had been his major goal all along.

  After three years in Germany, the high-commission era ended. “We are closing out this great adventure,” McCloy told a gathering of his senior officers, “which has involved so much American wealth and so much American energy.”37 Shortly afterward, on a warm day in July 1952, he, Ellen, and their two children—who now both spoke fluent German—boarded the passenger ship America and sailed out of Bremerhaven harbor into the North Sea. Upon their arrival in New York eight days later, reporters asked him his views on the 1952 presidential campaign. He replied simply that he was a registered Republican and “well-disposed” to the candidacy of Dwight D. Eisenhower. This was an understatement: he had been
encouraging Ike to run for office for some time. They had resumed their friendship while Eisenhower was stationed in Europe as supreme commander of NATO, and McCloy was well aware that some of Ike’s closest New York friends, such as Lucius Clay, Maurice “Tex” Moore, and George Whitney, had begun to lay the groundwork for a presidential campaign as early as the summer of 1951. And though he did not now take any public position in the Eisenhower campaign, privately he continued to advise the Republican nominee on foreign-policy issues and helped draft at least one major speech for the candidate.38

  He had left Germany with the intention of returning either to the law or to some position in private industry. With the brief exception of his year at Milbank, Tweed in 1946, he had been supporting his family—which still included his mother and two aunts—on a government salary since 1940. At the age of fifty-seven, he now felt a pressing need to make some money once again. He just wasn’t sure how he wanted to do it, and whether he could find something that would still allow him to sustain his interest in foreign affairs. After a month-long vacation with Ellen and the children, he took on a short-term consulting project with the Ford Foundation. They wanted him to chair a task-force study on the problems of world peace. This suitably lofty subject would allow him to take stock of his opportunities for a few months. At the back of his mind, however, lay one immodest thought. He knew Ike respected and felt comfortable with him, and if his old friend won the election in November, it was possible that he might be nominated for the one job in government he still coveted, secretary of state.

  When Eisenhower won the election by a large margin, there was speculation in the press almost immediately that McCloy would become Acheson’s replacement. But there was another candidate for the job to whom the Republican Party felt obligated, John Foster Dulles. And though Ike did not know him well, it was assumed by many in the campaign that Dulles was the top candidate. When Eisenhower reportedly said he preferred McCloy as his secretary of state, he was given all sorts of reasons why McCloy was politically unsuitable. His aides explained that the Taft wing of the party thought McCloy too closely identified with “international bankers” and “Roosevelt New Dealers.” He was, after all, a good friend of “red” Dean Acheson and had worked at the highest levels for both the Truman and Roosevelt administrations. And though a Republican, they argued, McCloy was too well connected to the liberal East Coast Establishment. Finally, it was whispered, Republican business interests out west regarded McCloy as a Rockefeller man. Hadn’t he worked as a director of the Rockefeller Foundation, and wasn’t he associated with the Rockefeller law firm? “Every Republican candidate for President since 1936,” Taft had complained when he lost the nomination to Eisenhower, “has been nominated by the Chase Bank.”39 One could not reach out to Taft Republicans and simultaneously appoint to high office a staunch internationalist like McCloy. If Dulles had much the same background, at least he was a conservative Republican who hadn’t associated himself with the New Deal.

  Despite these arguments, Eisenhower waited three weeks before making a decision. And then, according to one account, he reluctantly agreed to anoint Dulles, but suggested that McCloy should become undersecretary of state with the understanding that Dulles would become a White House adviser after a year, paving the way for McCloy to take charge of the State Department. According to C. D. Jackson, who was about to become Ike’s “special assistant for psychological warfare” in the White House, Dulles accepted the proposal and then asked the president-elect if McCloy had been approached. Eisenhower said no, and suggested that Dulles put the proposition to him. Accordingly, Dulles phoned him for an appointment. McCloy later recalled the curious circumstances of the meeting.

  Instead of explaining Ike’s proposal, Dulles asked him what he thought of certain men as candidates for the job of undersecretary of state. At the top of the list was Lew Douglas, and naturally McCloy enthusiastically endorsed his brother-in-law. Finally, after talking about the merits of several other candidates, Dulles asked McCloy if he would take the job for a short time, later to be promoted into the slot of secretary of state. McCloy asked where Dulles would go in that event, and the Sullivan & Cromwell lawyer replied he would move over to the White House, where he expected to advise the president on all major foreign-policy matters. Upon further queries, McCloy learned that Dulles expected him to manage the State Department strictly “from the administrative point of view.” Since this did not sound as if he would have the full powers of a secretary of state, McCloy politely declined the offer. “That wasn’t for me,” he later recalled. “I wasn’t just going to ‘mind the store’ while Dulles was running foreign policy.” Eisenhower was so informed, and only much later did McCloy learn from Walter Bedell Smith, who had become undersecretary of state, that Dulles had misrepresented the president’s proposal.40

  McCloy had never much liked Foster Dulles, and this incident certainly did nothing to warm relations between the two lawyers. But in any case, by the time Dulles came to see him he was already seriously considering a lucrative prospect in the private sector. Robert Taft was soon to learn how right he was to think that the Rockefellers regarded McCloy as one of their own. When the chairman of Chase National Bank, Winthrop Aldrich—a Rockefeller in-law—was nominated by Eisenhower as ambassador to London, the bank’s directors immediately thought of McCloy as his possible successor. John D. Rockefeller, Jr., had already resumed his friendship with McCloy, and invited him to return to the Rockefeller Foundation as a director. Clearly, the Rockefellers would welcome him as chairman of the family bank. So, one day in late November, Aldrich went to see McCloy and explained the duties of a Chase banker. McCloy was intrigued by what he heard, and they agreed to talk at greater length.

  BOOK IV

  The Eisenhower Years

  CHAPTER 20

  Chairman of the Chase Manhattan Bank: 1953–60

  “New Chairman McCloy is a man adept at talk that is affable, wide-ranging, informative, discreet and effective.”

  FORTUNE MAGAZINE, 1953

  By the first week of December 1952, McCloy had struck a deal with Aldrich. He would be paid $150,000 a year plus benefits—the same as Aldrich—with a promise that, if he stayed with the bank until the age of sixty-five, he would receive an annual pension of $75,000.1 In addition, stock options and profit sharing would put his annual earnings well into six figures. McCloy saw in the chairmanship of Chase a position from which he could both earn a sizable amount of money and still influence the direction of U.S. foreign policy. The bank job not only permitted him such extracurricular activities, but actually demanded it. As he recalled later, “. . . the bank appealed to me, as it was both a national and international institution, with broad connections in industry and banking here and abroad.”2

  Soon after he and Aldrich concluded their negotiations, the press announced the name of the new Chase chairman and made a point of mentioning that McCloy would continue his work with the Ford Foundation on international matters.3 At the same time, he was consulted by both the president and the president-elect. Eisenhower talked with him about German matters. McCloy encouraged Ike to select Harvard President James B. Conant as the new high commissioner to Germany.4 Simultaneously, President Truman, Felix Frankfurter, and Dean Acheson persuaded him to serve on an ad hoc committee headed by Justice Learned Hand to review the loyalty of John Carter Vincent, a Foreign Service officer accused by Senator Joseph McCarthy of being a communist. McCloy was reluctant to take the job and told Frankfurter that he really didn’t know how “all this fits with just starting work as Chairman of the Board of Chase National Bank. . . .” Believing it was a matter of “real principle,” Frankfurter chided him, “If the Chairman of the Chase prevents you from doing jobs like that, you better call in Barton or Bernays or some other great advisors on business efficiency and public relations for the reorganization of your shop.” Both Frankfurter and Acheson were certain of Vincent’s loyalty and equally certain that Justice Hand, McCloy, and others on the committee
would exonerate the diplomat. McCloy, “for the sake of principle,” began reading through the Vincent case records. But before he could reach any conclusions, the new secretary of state, John Foster Dulles, wrote Justice Hand, requesting him to drop the matter. Dulles had decided to review the case himself and very shortly afterward announced that Vincent was neither a security risk nor disloyal. He concluded, however, that Vincent should be dismissed, because his reporting from China had failed “to meet the standard which is demanded of a Foreign Service officer. . . .” This abject display of political cowardice disgusted Acheson, and also annoyed McCloy, who was already highly critical of the political attacks being made on the foreign-policy bureaucracy.5 Indeed, by the time Dulles announced his decision in the Vincent case, McCloy had already publicly criticized McCarthyite attacks on the State Department.

  Starting on January 10, 1953, he gave the first of three speeches as an invitee of Harvard’s prestigious Godkin lecture series, named after Edwin L. Godkin, the late publisher of The Nation. Ellen accompanied him up to Cambridge, where they stayed in the Harvard president’s home. James Conant had agreed to take the high commissioner’s job in Germany, and so the McCloys, together with Shep Stone, who dropped by in the evenings, briefed the Conants on what they should expect in Germany. On the evening of the first Godkin lecture, the former and future high commissioners were given a standing ovation by an audience of four hundred students and faculty. McCloy chose as the title of his addresses “The Challenge to American Foreign Policy.” That summer, they were compiled into a slim volume and published by Harvard University Press. Given a forum in which most speakers usually wax philosophical about grandiose principles, McCloy’s message characteristically contained a set of fairly prosaic prescriptions for the ills of American foreign policy. The challenge, he said, was not primarily military but political, ideological, and economic. The rise of anti-Americanism in Western Europe had to be dealt with by U.S. diplomats possessing “the vision of the statesman, the insight of the philosopher and the healing powers of the doctor.”6 West Europeans, he explained, feared America’s rashness might expose them to the full horrors of atomic warfare. Our representatives had to demonstrate an ability to strike just the right balance between boldness and caution in dealing with the Soviets. The danger to the West, he argued, came from the threat of disunity among our West European allies. The French had to be reassured that we would never allow the Germans to dominate France again. The Germans had to be persuaded that their future lay in West European unity. And the British had to be encouraged to support European economic integration. These complicated diplomatic tasks could not, McCloy said, be achieved by a State Department whose loss of prestige in recent years had seriously impaired its morale and effectiveness abroad.7