by Kai Bird
The most contentious issue discussed that year, however, concerned the Europeans’ criticism of Washington’s China policy. Only three weeks earlier, Chiang Kai-shek had again instigated another crisis over Quemoy and Matsu. After he had steadily infiltrated a hundred thousand of his troops onto the two offshore islands, the Chinese communists had first protested and then initiated an artillery bombardment of the islands. Eisenhower was aware that Chiang had provoked the crisis, but he was unwilling to have the Chinese communists overrun the islands. Publicly, he announced that he had ordered two additional aircraft carriers to join the Seventh Fleet in the Formosa Straits. Privately, he was considering the use of tactical nuclear weapons, an action Foster Dulles fully advocated. Only two days before the Bilderberg Conference opened in Buxton, Eisenhower went on national television and warned that the United States was pledged to defend Formosa: “There is not going to be any appeasement.” Few people at home or abroad thought Quemoy and Matsu were worth going to war over. Most Europeans thought the whole crisis was absurd, and it frightened them to think that their American allies could even contemplate allowing Chiang Kai-shek to drag them into a war with China.96
It was in this context that McCloy and the other American invitees to the Bilderberg Group found themselves subjected to blistering criticism. The Europeans felt the two islands “should be treated as part of the mainland, and that the conflict over them was in reality a further episode in the Chinese Civil War. . . . Moreover, the islands were important to the Nationalists, not as a bastion for the defense of Formosa, but as a forward base for possible invasion of the mainland.” They believed the survival of Chiang’s regime was of “little importance” and the best that could happen would be to see a “transformation of the Nationalist regime into an independent state of Formosa, following some kind of popular consultation or plebiscite. . . .” In Quemoy and Matsu the United States had dug itself into an “untenable position.” The islands should be abandoned.
This was not all. Most of the European Bilderbergers favored seating communist China at the United Nations. This should be done, they said, not only because it was realistic, but because to do so might help the West to “break” the alliance between China and the Soviet Union.97
McCloy was not a stranger to these arguments. His old friend from Sullivan & Cromwell, Arthur Dean, had been saying much the same thing for several years. As chairman of the Council on Foreign Relations’ study group on Sino-Soviet relations, Dean had publicly linked the CFR to a “two-Chinas” policy.98 As early as 1955, David Rockefeller was saying that it was simple “political foolishness” to pretend that the Chinese didn’t exist.99 McCloy was also aware of his brother-in-law’s views. Lew Douglas, in fact, was writing the president that week to suggest that Quemoy and Matsu be “conceded to be a part of the mainland.” Eisenhower promptly wrote back, saying this would amount to “appeasement,” an argument Douglas thought was mere “sophistry.”100
For McCloy, the issue was simply pragmatism. How could one run a foreign policy in the Far East while ignoring the existence of “this mighty empire on the mainland”? He could remember speaking with General George C. Marshall after the general’s unsuccessful postwar mediation effort in China. Chiang had been rude and obstinate, and the trip had damaged Marshall’s reputation with the powerful China lobby back home. But Marshall had impressed upon McCloy that “the idea of ostracizing China even after they became communist” just wasn’t the right way to work things out.101 So, as McCloy sat in the Bilderberg meeting listening to the Europeans, he couldn’t help thinking that their criticism was directed not at himself or other like-minded members of the Council on Foreign Relations, but at C. D. Jackson, who was, after all, the personal representative of Henry Luce, the man probably more responsible than anyone else for what the Bilderbergers called America’s “emotional attitude” on this issue.102 McCloy thought the Eisenhower administration’s China policy was as wrong as the Europeans believed it to be.
So it was with some irony that upon his return to New York McCloy learned that Foster Dulles wanted to speak to him about Quemoy and Matsu. First they had a number of phone conversations about the ongoing crisis. The secretary told McCloy that, in the wake of this most recent war-scare, perhaps it was time to persuade Chiang to moderate his demands. Dulles was unsure, however, just how far he wanted to press Chiang. Disaffection with Chiang was such that some officials within the administration actually muttered veiled threats about having the Chinese leader assassinated.103 But Dulles just wanted to rein Chiang in, not eliminate him. The situation was further complicated by the fact that highly secret meetings were then taking place on an ambassadorial level between the Americans and the communist Chinese in Warsaw.104 Dulles briefed McCloy on these negotiations, which had taken place off and on since 1955.
Late in September, Dulles flew up to New York to continue his talks with McCloy in person. With Eisenhower’s approval, he had decided to ask the Chase chairman to fly to Formosa and “try to talk Chiang into giving up the islands.”105 McCloy took time out that day from a meeting of the Ford Foundation trustees to have lunch with Dulles. After listening to Dulles give his pitch, McCloy returned to his Ford Foundation meeting, where his colleagues voted to have him replace Rowan Gaither as chairman of the Foundation. (Gaither’s health had declined precipitously in the last year, since he had been diagnosed with cancer.) Several times that day, McCloy was again called out of the trustees’ deliberations to take phone calls from the president himself and other administration officials, all urging him to undertake the China mission. Some of the Ford Foundation trustees, however, advised their new chairman not to accept the assignment. Given Chiang’s disposition, they believed McCloy could not expect to accomplish anything.106
McCloy had his own doubts, and after pondering over the matter for twenty-four hours, he wrote Dulles a memo explaining why he had decided to decline. Too many times during World War II, he had been the bearer of negative replies to Chiang’s requests for more money and arms: “If he recalls me at all clearly it is probably in connection with unpleasant decisions.” He was also inclined to “go further in the way of concessions respecting Quemoy and Matsu than the Department or you feel it is wise to go.” Finally, he feared the “China Lobby”: “I must confess that I see something akin public relations-wise to the ill-fated mission of General Marshall to Chiang. Again a friend of the President’s is called upon to induce Chiang to moderate his attitude toward the Communists. The parallelism would not be lost on the China block and the columnists. . . .”107
Dulles was disappointed, and even more so when Eisenhower ordered him out to Formosa in McCloy’s place. In the event, he offered Chiang some American amphibious landing craft, necessary for any invasion of the mainland, in return for a withdrawal of the garrisons on Quemoy and Matsu. Chiang refused, but eventually he agreed to issue a statement renouncing force. The Chinese communists responded by agreeing to a cease-fire, and gradually the crisis receded.108 In the meantime, the Warsaw negotiations, which McCloy thought should have been given priority by the administration, dragged on without result. The strategic opening to communist China—which McCloy and many of his colleagues in the CFR and the Bilderberg Group thought so necessary—would not happen for another thirteen years.109
By the end of 1958, Cold War tensions in Germany were once again on the rise, and, inevitably, McCloy’s counsel was sought. On November 10, 1958, Khrushchev announced that he intended to sign an early peace agreement with East Germany, a political entity the West refused to recognize. Washington feared such a treaty would become the first step to an abrogation of Allied rights in the free city of West Berlin. Indeed, later that month Soviet troops began harassing U.S. Army trucks transporting supplies to West Berlin across the Autobahn. Eisenhower told Christian A. Herter, his undersecretary of state, that his “instinct was to make a very simple statement to the effect that if the Russians want war over the Berlin issue, they can have it.”110
M
cCloy thought the crisis atmosphere in Washington over the issue was rather overblown. He had been through this kind of thing with the Russians before. After discussing Berlin at some length with Lucius Clay one day in November, McCloy felt “it seemed like old times.” The next day he wrote the president, “I have a certain confidence that it is going to come out without too serious consequences.”111 And so it did, though Khrushchev’s posturing made for many a newspaper headline over the next few months. In the end, Khrushchev let one deadline after another pass, without ever moving against the Allied presence in West Berlin. Ultimately, the jockeying over the city’s peculiar status would not end until after Eisenhower left the White House.
In the midst of the 1958 Berlin crisis, Foster Dulles again checked into Walter Reed Hospital, and this time the doctors told him that his cancer had returned. Surgery would be required. Eisenhower’s secretary, Ann Whitman, noted in her diary, “. . . my hunch . . . is that this may be finis for Dulles as Secretary of State.”112 Dulles was a very sick man. But he insisted on postponing treatment of his cancer until early February 1959, when he returned from a trip to Europe. In the meantime, Christian Herter began to assume more of his duties, and so too did McCloy. The Chase chairman saw the president in mid-December, and a few days later was appointed to yet another panel of consultants, this time to the National Security Council. Joining him on this ad hoc panel were more than the usual number of Council on Foreign Relations types, including Hamilton Fish Armstrong, Robert Bowie, Arthur Dean, C. D. Jackson, Robert Lovett, and Dean Rusk. For the remainder of the Eisenhower administration, these consultants were frequently brought down to Washington from New York to discuss the Berlin situation, the Geneva arms-control talks, and planning for the upcoming Eisenhower-Khrushchev summit.113 Later that year, Eisenhower was told that McCloy had criticized a National Security Council report for assuming that the United States had to shoulder the “full burdens of the entire free world.” He disliked what he called an “Atlas complex” in some of the NSC’s assumptions and invariably argued that the West Europeans could and should be encouraged to participate more fully in the Cold War.114
In early 1959, McCloy met with the ailing secretary of state to talk again about the now stalled disarmament talks in Geneva. And later that spring, as Dulles’s health deteriorated, Christian Herter requested Eisenhower’s permission to reconvene the small committee of disarmament advisers. So once again McCloy, Gruenther, Smith, and Lovett were summoned to Washington for meetings. McCloy complained that the administration was drifting, giving the appearance of disarray. Foster Dulles was trying to conduct State Department business out of his hospital bed; his doctors had decided that surgery was no longer possible and instead placed the secretary of state on a debilitating course of radiation treatment. Finally, on April 15, 1959, Eisenhower accepted his resignation.
The president’s trusted former aide General Al Gruenther urged him to appoint McCloy to the position: “I have seen a good deal of McCloy in the past year,” Gruenther wrote. “He is very sound, and his associates have a high opinion of him always. . . . He keeps in close touch with foreign affairs; he goes around the world each year in connection with bank business. Foreign visitors of political importance constantly come to see him.”115 Gruenther wasn’t the only one pushing McCloy’s nomination. Drew Pearson reported that he was among the top four candidates to replace Dulles.116
Eisenhower never explained why he did not chose McCloy, but he later told a friend that there were only four candidates—and McCloy was not one of them. Herter, he said, was the “obvious choice,” but all the men he had in mind either were already in the Cabinet or worked in the State Department.117 Eisenhower knew he could exercise direct control over these men. Having just accepted the resignation of a strong-willed secretary of state, the president now wanted to run his own foreign policy. McCloy, he knew, would be as strong a secretary of state as Foster Dulles had been.
McCloy himself was not any longer so interested in the job as he had been earlier. There was too little time left in the Eisenhower administration for a new secretary of state to accomplish much. He had his own commitments to Chase, where he was due to retire at the mandatory age of sixty-five in 1960. Besides, he too thought Herter was the obvious successor. That spring, he told Frankfurter, “I cannot see how they could have made any other appointment under the circumstances.”118
He was, in fact, much closer to Herter than he had ever been to Foster Dulles. Born in the same year as McCloy, Herter had been a Foreign Service officer in his younger days, and then went on to become a congressman and governor of Massachusetts. But his personality was less that of a politician than the image of a soft-spoken Boston Brahmin. His six-foot-five-inch frame, crippled by osteoarthritis, made him walk slowly, with the gait of a man who lived in constant pain. He had none of the self-righteousness of Foster Dulles, or, as Eisenhower’s press aide later put it, he was “a little less arbitrary in his beliefs.”119 The new secretary frequently phoned McCloy to discuss various matters, particularly anything to do with Germany and the test-ban talks. McCloy continued to come down to Washington for meetings of the president’s panel of consultants to the National Security Council. Herter also consulted him on Middle East developments, China, the Soviet Union, and such broader policy questions as the U.S. balance-of-payments problem. McCloy made several trips to Germany that year, and each time he checked in with Herter. On one occasion, Herter used McCloy to carry a personal message to Adenauer, reassuring the German chancellor of Washington’s commitment to defend Berlin. On another trip, he was instructed to try to persuade Adenauer to patch up his relations with the British.
One of these trips was made to attend a conference in October 1959 organized by the American Council on Germany, a group dedicated to promoting German-American relations. Ellen McCloy served as vice-president, and McCloy’s old friend Eric Warburg handled the Council’s finances as treasurer. (Inevitably, the Ford Foundation funded some of the Council’s functions.) The previous year, the Council had sponsored Dean Acheson’s rebuttal of George Kennan’s much-publicized Reith Lectures in Great Britain, given during the autumn of 1957. Kennan had argued in these controversial lectures that the West should seriously consider the Soviet Union’s offer to demilitarize a reunified Germany.II The Council’s annual report that year charged that Kennan’s comments had “sparked a movement in Germany and Britain for steps toward Disengagement and German neutralization.” McCloy, Warburg, Shep Stone, and other men associated with the Council believed this kind of talk was somehow responsible for Khrushchev’s ultimatum on Berlin. Though men like Adenauer and McCloy paid lip service to the principle of German unification, they certainly did not wish to achieve this goal at the cost of seeing West Germany fall out of the NATO military alliance.121 For these reasons, the American Council on Germany during this period devoted itself to building up “confidence in the NATO nuclear shield in Germany” and generally shoring up the Atlantic alliance.122
On this particular occasion, McCloy was joined by Henry Kissinger, James Conant, Shep Stone, Dean Acheson, and an equally prominent list of Germans. Kissinger gave an address on the general military balance between the NATO and Warsaw paets, and McCloy presided over an open debate. Afterward, Adenauer hosted a reception for the conferees. Such gatherings resulted in no high-level decision-making. But they served, like the Bilderberg meetings, as a forum for cementing elite friendships and establishing the boundaries of an unofficial consensus on the issues of the day.
On one of his trips to Germany, in the summer of 1959, McCloy visited Villa Hugel, the three-hundred-room limestone Krupp castle perched atop a mountain overlooking Essen. Since walking out of Landsberg Prison, Alfried Krupp had done quite well. In 1957, Time put him on its cover and described him as “the wealthiest man in Europe—and perhaps the world.”123 McCloy was not surprised by Krupp’s business successes: “Given the base from which he had to move and the resurgence of Germany, it was almost inevitable.”124
Now Krupp had extended an invitation to McCloy to join him for lunch at Villa Hugel. This was not, however, to be a social occasion. McCloy had come to attend to some quite distasteful business.
A year earlier, McCloy had been approached by an old friend, Jacob Blaustein, to use his influence on Krupp to resolve a difficult problem. An oil man of substantial wealth, Blaustein also served as senior vice-president of the Conference on Jewish War Material Claims Against Germany, the organization that had McCloy’s old friend Benjamin Ferencz as its counsel. Ferencz had been persuaded to stay on in Germany after McCloy’s departure, and over the next few years he negotiated a reparations agreement with the Germans. Under the terms of the 1956 indemnification law, Israel was to receive some $700 million over a ten-year period. In addition, the Germans agreed to pay about $10 million each year over the same time period to rehabilitate Jewish communities in Europe. Ferencz was pleased with this settlement, but he was troubled that it provided no compensation for the Jewish and gentile survivors of slave camps operated by various German industrialists. Ferencz reasoned that the Krupp, Flick, and I. G. Farben industries could now well afford to compensate survivors of their slave camps. After quietly broaching the matter with the companies that had inherited I. G. Farben’s assets, he had obtained an out-of-court settlement of $1,200 for each surviving slave worker who had worked in that firm. It wasn’t much, but it was something for the few hundred survivors, many of whom were still destitute and in broken health.