Wall Street, Banks, and American
by Murray N. Rothbard
[This first appeared in World
Market Perspective (1984) and later as a monograph published by
the Center for libertarian Studies (1995). Afterword By Justin
Businessmen or manufacturers can either
be genuine free enterprisers or statists; they can either make
their way on the free market or seek special government favors
and privileges. They choose according to their individual preferences
and values. But bankers are inherently inclined toward statism.
Commercial bankers, engaged as they are
in unsound fractional reserve credit, are, in the free market,
always teetering on the edge of bankruptcy. Hence they are always
reaching for government aid and bailout.
Investment bankers do much of their business
underwriting government bonds, in the United States and abroad.
Therefore, they have a vested interest in promoting deficits and
in forcing taxpayers to redeem government debt. Both sets of bankers,
then, tend to be tied in with government policy, and try to influence
and control government actions in domestic and foreign affairs.
In the early years of the 19th century,
the organized capital market in the United States was largely
confined to government bonds (then called "stocks"),
along with canal companies and banks themselves. Whatever investment
banking existed was therefore concentrated in government debt.
From the Civil War until the 1890s, there were virtually no manufacturing
corporations; manufacturing and other businesses were partnerships
and had not yet reached the size where they needed to adopt the
corporate form. The only exception was railroads, the biggest
industry in the U.S. The first investment banks, therefore, were
concentrated in railroad securities and government bonds.
The first major investment-banking house
in the United States was a creature of government privilege. Jay
Cooke, an Ohio-born business promoter living in Philadelphia,
and his brother Henry, editor of the leading Republican newspaper
in Ohio, were close friends of Ohio U.S. Senator Salmon P. Chase.
When the new Lincoln Administration took over in 1861, the Cookes
lobbied hard to secure Chase the appointment of Secretary of the
Treasury. That lobbying, plus the then enormous sum of $100,000
that Jay Cooke poured into Chase's political coffers, induced
Chase to return the favor by granting Cooke, newly set up as an
investment banker, an enormously lucrative monopoly in underwriting
the entire federal debt.
Cooke and Chase then managed to use the
virtual Republican monopoly in Congress during the war to transform
the American commercial banking system from a relatively free
market to a National Banking System centralized by the federal
government under Wall Street control. A crucial aspect of that
system was that national banks could only expand credit in proportion
to the federal bonds they owned - bonds which they were forced
to buy from Jay Cooke.
Jay Cooke & Co. proved enormously
influential in the post-war Republican administrations, which
continued their monopoly in under-writing government bonds. The
House of Cooke met its well-deserved fate by going bankrupt in
the Panic of 1874, a failure helped along by its great rival,
the then Philadelphia-based Drexel, Morgan & Co.
After 1873, Drexel, Morgan and its dominant
figure J.P. Morgan became by far the leading investment firm in
the U.S. If Cooke had been a "Republican" bank, Morgan,
while prudently well connected in both parties, was chiefly influential
among the Democrats. The other great financial interest powerful
in the Democratic Party was the mighty European investment-banking
house of the Rothschilds, whose agent, August Belmont, was treasurer
of the national Democratic party for many years.
The enormous influence of the Morgans
on the Democratic administrations of Grover Cleveland (1884-88,
1892-96) may be seen by simply glancing at their leading personnel.
Grover Cleveland himself spent virtually all his life in the Morgan
ambit. He grew up in Buffalo as a railroad lawyer, one of his
major clients being the Morgan-dominated New York Central Railroad.
In between administrations, he became a partner of the powerful
New York City law firm of Bangs, Stetson, Tracey, and MacVeagh.
This firm, by the late 1880s, had become the chief legal firm
of the House of Morgan, largely because senior partner Charles
B. Tracey was J.P. Morgan's brother-in-law. After Tracey died
in 1887, Francis Lynde Stetson, an old and close friend of Cleveland's,
became the firm's dominant partner, as well as the personal attorney
for J.P. Morgan. (This is now the Wall St. firm of Davis, Polk,
Grover Cleveland's cabinets were honeycombed
with Morgan men, with an occasional bow to other bankers. Considering
those officials most concerned with foreign policy, his first
Secretary of State, Thomas F. Bayard, was a close ally and disciple
of August Belmont; indeed, Belmont's son, Perry, had lived with
and worked for Bayard in Congress as his top aide. The dominant
Secretary of State in the second Cleveland Administration was
the powerful Richard Olney, a leading lawyer for Boston financial
interests, who have always been tied in with the Morgans, and
in particular was on the Board of the Morgan-run Boston and Maine
Railroad, and would later help Morgan organize the General Electric
The War and Navy departments under Cleveland
were equally banker-dominated. Boston Brahmin Secretary of War
William C. Endicott had married into the wealthy Peabody family.
Endicott's wife's uncle, George Peabody, had established a banking
firm which included J.P. Morgan's father as a senior partner;
and a Peabody had been best man at J.P.'s wedding. Secretary of
the Navy was leading New York City financier William C. Whitney,
a close friend and top political advisor of Cleveland's. Whitney
was closely allied with the Morgans in running the New York Central
Secretary of War in the second Cleveland
Administration was an old friend and aide of Cleveland's, Daniel
S. Lamont, previously an employee and protégé of
William C. Whitney. Finally, the second Secretary of the Navy
was an Alabama Congressman, Hilary A. Herbert, an attorney for
and very close friend of Mayer Lehman, a founding partner of the
New York mercantile firm of Lehman Brothers, soon to move heavily
into investment banking. Indeed, Mayer's son, Herbert, later to
be Governor of New York during the New Deal, was named after Hilary
The great turning point of American foreign
policy came in the early 1890s, during the second Cleveland Administration.
It was then that the U.S. turned sharply and permanently from
a foreign policy of peace and non-intervention to an aggressive
program of economic and political expansion abroad. At the heart
of the new policy were America's leading bankers, eager to use
the country's growing economic strength to subsidize and force-feed
export markets and investment outlets that they would finance,
as well as to guarantee Third World government bonds. The major
focus of aggressive expansion in the 1890s was Latin America,
and the principal Enemy to be dislodged was Great Britain, which
had dominated foreign investments in that vast region.
In a notable series of articles in 1894,
Bankers' Magazine set the agenda for the remainder of the decade.
Its conclusion: if "we could wrest the South American markets
from Germany and England and permanently hold them, this would
be indeed a conquest worth perhaps a heavy sacrifice."
Long-time Morgan associate Richard Olney
heeded the call, as Secretary of State from 1895 to 1897, setting
the U.S. on the road to Empire. After leaving the State Department,
he publicly summarized the policy he had pursued. The old isolationism
heralded by George Washington's Farewell Address is over, he thundered.
The time has now arrived, Olney declared, when "it behooves
us to accept the commanding position... among the Power of the
earth." And, "the present crying need of our commercial
interests," he added, "is more markets and larger markets"
for American products, especially in Latin America.
Good as their word, Cleveland and Olney
proceeded belligerently to use U.S. might to push Great Britain
out of its markets and footholds in Latin America. In 1894, the
United States Navy illegally used force to break the blockade
of Rio de Janeiro by a British-backed rebellion aiming to restore
the Brazilian monarchy. To insure that the rebellion was broken,
the U.S. Navy stationed war-ships in Rio harbor for several months.
During the same period, the U.S. government
faced a complicated situation in Nicaragua, where it was planning
to guarantee the bonds of the American Maritime Canal Company,
to build a canal across the country. The new regime of General
Zelaya was threatening to revoke this canal concession; at the
same time, an independent reservation, of Mosquito Indians, protected
for decades by Great Britain, sat athwart the eastern end of the
proposed canal. In a series of deft maneuvers, using the Navy
and landing the Marines, the U.S. managed to bring Zelaya to heel
and to oust the British and take over the Mosquito territory.
In Santo Domingo (now the Dominican Republic)
France was the recipient of the American big stick. In the Santo
Domingo Improvement Company, in 1893, a consortium of New York
bankers purchased the entire debt of Santo Domingo from a Dutch
company, receiving the right to collect all Dominican customs
revenues in payment of the debt. The French became edgy the following
year when a French citizen was murdered in that country, and the
French government threatened to use force to obtain reparations.
Its target for reparations was the Dominican customs revenue,
at which point the U.S. sent a warship to the area to intimidate
But the most alarming crisis of this period
took place in 1895-96, when the U.S. was at a hair's breadth from
actual war with Great Britain over a territorial dispute between
Venezuela and British Guiana. This boundary dispute had been raging
for forty years, but Venezuela shrewdly attracted American interest
by granting concessions to Americans in gold fields in the disputed
Apparently, Cleveland had had enough of
the "British threat," and he moved quickly toward war.
His close friend Don Dickinson, head of the Michigan Democratic
Party, delivered a bellicose speech in May 1895 as a surrogate
for the President. Wars are inevitable, Dickinson declared, for
they arise out of commercial competition between nations. The
United States faces the danger of numerous conflicts, and clearly
the enemy was Great Britain. After reviewing the history of the
alleged British threat, Dickinson thundered that "we need
and must have open markets throughout the world to maintain and
increase our prosperity."
In July, Secretary of State Olney sent
the British an insulting and tub-thumping note, declaring that
"the United States is practically sovereign on this continent,
and its fiat is law upon the subjects to which it confines its
interposition." President Cleveland, angry at the British
rejection of the note, delivered a virtual war message to Congress
in December, but Britain, newly occupied in problems with the
Boers in South Africa, decided to yield and agree to a compromise
boundary settlement. Insultingly, the Venezuelans received not
a single seat on the agreed-upon arbitration commission.
In effect, the British, occupied elsewhere,
had ceded dominance to the United States in Latin America. It
was time for the U.S. to find more enemies to challenge.
The next, and greatest, Latin American
intervention was of course in Cuba, where a Republican Administration
entered the war goaded by its jingo wing closely allied to the
Morgan interests, led by young Assistant Secretary of the Navy
Theodore Roosevelt and by his powerful Boston Brahmin mentor,
Senator Henry Cabot Lodge. But American intervention in Cuba had
begun in the Cleveland-Olney regime.
In February 1895, a rebellion for Cuban
independence broke out against Spain. The original U.S. response
was to try to end the threat of revolutionary war to American
property interests by siding with Spanish rule modified by autonomy
to the Cubans to pacify their desires for independence. Here was
the harbinger of U.S. foreign policy ever since: to try to maneuver
in Third World countries to sponsor "third force" or
"moderate" interests which do not really exist. The
great proponent of this policy was the millionaire sugar grower
in Cuba, Edwin F. Atkins, a close friend of fellow-Bostonian Richard
Olney, and a partner of J.P. Morgan and Company.
By the fall of 1895, Olney concluded that
Spain could not win, and that, in view of the "large and
important commerce between the two countries" and the "large
amounts of American capital" in Cuba, the U.S. should execute
a 180-degree shift and back the rebels, even unto recognizing
Cuban independence. The fact that such recognition would certainly
lead to war with Spain did not seem worth noting. The road to
war with Spain had begun, a road that would reach its logical
conclusion three years later.
Ardently backing the pro-war course was
Edwin F. Atkins, and August Belmont, on behalf of the Rothschild
banking interests. The House' of Rothschild, which had been long-time
financiers to Spain, refused to extend any further credit to Spain,
and instead under-wrote Cuban Revolutionary bond issues, and even
assumed full obligation for the unsubscribed balance.
During the conquest of Cuba in the Spanish-American
War, the United States also took the occasion to expand its power
greatly in Asia, seizing first the port of Manila and then all
of the Philippines, after which it spent several years crushing
the revolutionary forces of the Philippine independence movement.
An Aggressive Asian Policy
The late 1890s also saw a new turn in
the United States' attitude toward the Far East. Expanding rapidly
into the Pacific in pursuit of economic and financial gain, the
U.S. government saw that Russia, Germany, and France had been
carving up increasing territorial and economic concessions in
the near corpse of the Chinese imperial dynasty. Coming late in
the imperial game of Asia, and not willing to risk large-scale
expenditure of troops, the U.S., led by Olney and continued by
the Republicans, decided to link up with Great Britain. The two
countries would then use the Japanese to provide the shock troops
that would roll back Russia and Germany and parcel out imperial
benefits to both of her faraway allies, in a division of spoils
known euphemistically as the "Open Door." With Britain
leaving the field free to the U.S. in Latin America, the U.S.
could afford to link arms in friendly fashion with Britain in
the Far East.
A major impetus toward a more aggressive
policy in Asia was provided by the lure of railroad concessions.
Lobbying heavily for railroad concessions was the American China
Development Company, organized in 1895, and consisting of a consortium
of the top financial interests in the U.S., including James Stillman
of the then Rockefeller-controlled National City Bank; Charles
Coster, railroad expert of J.P. Morgan and Co.; Jacob Schiff,
head of the New York investment bank of Kuhn, Loeb and Co.; and
Edward H. Harriman, railroad magnate. Olney and the State Department
pressed China hard for concessions to the ACDC for a Peking-Hankow
Railway and for a railway across Manchuria, but in both cases
the American syndicate was blocked. Russia pressured China successfully
to grant that country the right to build a Manchurian railway;
and a Belgian syndicate, backed by France and Russia, won the
Peking-Hankow concession from China.
It was time for sterner measures. The
attorney for the ACDC set up the Committee on American Interests
in China, which soon transformed itself into the American Asiatic
Association, dedicated to a more aggressive American policy on
behalf of economic interests in China. After helping the European
powers suppress the nationalist Boxer Rebellion in China in 1900,
the U.S. also helped push Russian troops out of Manchuria. Finally,
in 1904, President Theodore Roosevelt egged Japan on to attack
Russia, and Japan succeeded in driving Russia out of Manchuria
and ending Russia's economic concessions. Roosevelt readily acceded
to Japan's resulting dominance in Korea and Manchuria, hoping
that Japan would also protect American economic interests in the
Theodore Roosevelt had been a Morgan man
from the beginning of his career. His father and uncle were both
Wall Street bankers, both of them closely associated with various
Morgan-dominated railroads. Roosevelt's first cousin and major
financial adviser, W. Emlen Roosevelt, was on the board of several
New York banks, including the Astor National Bank, the president
of which was George F. Baker, close friend and ally of J.P. Morgan
and head of Morgan's flagship commercial bank, the First National
Bank of New York.' At Harvard, furthermore, young Theodore married
Alice Lee, daughter of George Cabot Lee, and related to the top
Boston Brahmin families. Kinsman Henry Cabot Lodge soon became
T.R.'s long-time political mentor.
Throughout the 19th century, the Republicans
had been mainly a high-tariff, inflationist party, while the Democrats
had been the party of free trade and hard money, i.e., the gold
standard. In 1896, however, the radical inflationist forces headed
by William Jennings Bryan captured the Democratic presidential
nomination, and so the Morgans, previously dominant in the Democratic
Party, sent a message to the Republican nominee, William McKinley,
through Henry Cabot Lodge. Lodge stated that the Morgan interests
would back McKinley provided that the Republicans would support
the gold standard. The deal was struck.
William McKinley reflected the dominance
of the Republican Party by the Rockefeller/Standard Oil interests.
Standard Oil was originally headquartered at Rockefeller's home
in Cleveland, and the oil magnate had long had a commanding influence
in Ohio Republican politics. In the early 1890s, Marcus Hanna,
industrialist and high school chum of John D. Rockefeller, banded
together with Rockefeller and other financiers to save McKinley
from bankruptcy, and Hanna became McKinley's top political adviser
and chairman of the Republican National Committee. As a consolation
prize to the Morgan interests for McKinley's capture of the Republican
nomination, Morgan man Garret A. Hobart, director of various Morgan
companies, including the Liberty National Bank of New York City,
The death of Hobart in 1899 left a "Morgan
vacancy" in the Vice-Presidential spot, as McKinley walked
into the nomination. McKinley and Hanna were both hostile to Roosevelt,
considering him "erratic" and a "Madman,"
but after several Morgan men turned down the nomination, and after
the intensive lobbying of Morgan partner George W. Perkins, Teddy
Roosevelt at last received the Vice-Presidential nomination. It
is not surprising that virtually Teddy's first act after the election
of 1900 was to throw a lavish dinner in honor of J.P. Morgan.
Teddy Roosevelt and the "Lone Nut"
The sudden appearance of one of the "lone
nuts" so common in American political history led to the
assassination of McKinley, and suddenly Morgan man Theodore Roosevelt
was President. John Hay, expansionist Secretary of State whom
Roosevelt inherited from McKinley, had the good fortune of having
his daughter marry the son of William C. Whitney of the great
Morgan-connected family. TR's next Secretary of State and former
Secretary of War was his old friend Elihu Root, personal attorney
for J.P. Morgan. Root appointed as his Assistant Secretary a close
friend of TR's, Robert Bacon, a Morgan partner, and in due course
Bacon became TR's Secretary of State. TR's first appointed Secretary
of the Navy was Paul Morton, vice-president of the Morgan-controlled
Atchison, Topeka and Santa Fe Railroad, and his Assistant Secretary
was Herbert L. Satterlee, who had the distinction of being J.P.
Theodore Roosevelt's greatest direct boost
to the Morgan interests is little known. It is well known that
Roosevelt engineered a phony revolution in Columbia in 1903, creating
the new state of Panama and handing the Canal Zone to the United
States. What has not been fully disclosed is who benefited from
the $40 million that the U.S. government paid, as part of the
Panama settlement, to the owners of the old bankrupt Panama Canal
Company, a French company which had previously been granted a
Colombian concession to dig a Panama canal.
The Panama Canal Company's lobbyist, Morgan-connected
New York attorney William Nelson Cromwell, literally sat in the
White House directing the "revolution" and organizing
the final settlement. We now know that, in 1900, the shares of
the old French Panama Canal Company were purchased by an American
financial syndicate, headed by J.P. Morgan & Co., and put
together by Morgan's top attorney, Francis Lynde Stetson. The
syndicate also included members of the Rockefeller, Seligman,
and Kuhn, Loeb financial groups, as well as Perkins and Saterlee.
The syndicate did well from the Panama
revolution, purchasing the shares at two-thirds of par and selling
them, after the revolution, for double the price. One member of
the syndicate was especially fortunate: Teddy Roosevelt's brother-in-law,
Douglas E. Robinson, a director of Morgan's Astor National Bank.
For William Cromwell was named the fiscal agent of the new Republic
of Panama, and Cromwell promptly put $6 million of the $10 million
payoff the U.S. made to the Panamanian revolutionaries into New
York City mortgages via the real estate firm of the same Douglas
After the turn of the century, a savage
economic and political war developed between the Morgan interests
on the one hand, and the allied Harriman-Kuhn, Loeb-Rockefeller
interests on the other. Harriman and Kuhn, Loeb grabbed control
of the Union Pacific Railroad and the two titanic forces battled
to a draw for control of the Northern Pacific. Also, at about
the same time, a long-lasting and world-wide financial and political
"oil war" broke out between Standard Oil, previously
a monopolist in both the crude and export markets outside of the
U.S., and the burgeoning British Royal Dutch Shell-Rothschild
And since the Morgans and Rothschilds
were longtime allies, it is certainly sensible to conclude - though
there are no hard facts to prove it - that Teddy Roosevelt launched
his savage anti-trust assault to break Standard Oil as a Morgan
contribution to the worldwide struggle. Furthermore, Mellon-owned
Gulf Oil was allied to the Shell combine, and this might well
explain the fact that former Morgan-and-Mellon lawyer Philander
Knox, TR's Attorney-General, was happy to file the suit against
Roosevelt's successor, William Howard
Taft, being an Ohio Republican, was allied to the Rockefeller
camp, and so he proceeded to take vengeance on the Morgans by
filing anti-trust suits to break up the two leading Morgan trusts,
International Harvester and United States Steel. It was now all-out
war, and so the Morgans in 1912 deliberately created a new party,
the Progressive Party, headed by former Morgan partner, George
W. Perkins. The successful aim of the Progressive Party was to
bring Theodore Roosevelt out of retirement to run for President,
in order to break Taft, and to elect, for the first time in a
generation, a Democratic President. The new party was liquidated
Supporters of Roosevelt were studded with
financiers in the Morgan ambit, including Judge Elbert Gary, chairman
of the board of U.S. Steel; Medill McCormick of the International
Harvester family, and Willard Straight, Morgan's partner. In the
same year, Straight and his heiress wife, Dorothy Whitney, founded
the weekly magazine of opinion, The New Republic, symbolizing
the growing alliance for war and statism between the Morgans and
various of the more moderate (i.e., non-Marxist) progressive and
Morgan, Wilson and War
The Morgan-Progressive Party ploy deliberately
insured the election of Woodrow Wilson as a Democratic President.
Wilson himself, until almost the time of running for President,
was for several years on the board of the Morgan-controlled Mutual
Life Insurance Company. He was also surrounded by Morgan men.
His son-in-law, William Gibbs McAdoo, who became Wilson's Secretary
of the Treasury, was a failing businessman in New York City when
he was bailed out and befriended by J.P. Morgan and his associates.
The Morgans then set McAdoo up as president of New York's Hudson
and Manhattan Railroad until his appointment in the Wilson Administration.
McAdoo was to spend the rest of his financial and political life
securely in the Morgan ambit.
The main sponsor of Wilson's run for the
Presidency was George W. Harvey, head of Morgan-controlled Harper
& Brothers publishers; other major backers included Wall Street
financier and Morgan associate Thomas Fortune Ryan, and Wilson's
college classmate and Morgan ally, Cyrus H. McCormick, head of
Another close friend and leading political
adviser of Wilson was New York City banker George Foster Peabody,
son of the Boston Brahmin and a Morgan banker. A particularly
fascinating figure in Wilson's fateful foreign policy was "Colonel"
Edward Mandell House, of the wealthy House family of Texas, which
was deeply involved in landowning, trade, banking, and railroads.
House himself was head for several years of the Trinity and Brazos
Valley Railway, financed by the House family in collaboration
with Morgan-associated Boston financial interests, particularly
of the Old Colony Trust Company. The mysterious House, though
never graced with an official government post, is generally acknowledged
to have been Wilson's all-powerful foreign policy adviser and
aide for virtually his entire two terms.
By 1914, the Morgan empire was in increasingly
shaky financial shape. The Morgans had long been committed to
railroads, and after the turn of the century the highly subsidized
and regulated railroads entered their permanent decline. The Morgans
had also not been active enough in the new capital market for
industrial securities, which had begun in the 1890s, allowing
Kuhn-Loeb to beat them in the race for industrial finance. To
make matters worse, the $400 million Morgan-run New Haven Railroad
went bankrupt in 1914.
At the moment of great financial danger
for the Morgans, the advent of World War I came as a godsend.
Long connected to British, including Rothschild, financial interests,
the Morgans leaped into the fray, quickly securing the appointment,
for J.P. Morgan & Co., of fiscal agent for the warring British
and French governments, and monopoly underwriter for their war
bonds in the United States. J.P. Morgan also became the fiscal
agent for the Bank of England, the powerful English central bank.
Not only that: the Morgans were heavily involved in financing
American munitions and other firms exporting war material to Britain
and France. J.P. Morgan & Co., moreover, became the central
authority organizing and channeling war purchases for the two
The United States had been in a sharp
recession during 1913 and 1914; unemployment was high, and many
factories were operating at only 60% of capacity. In November
1914, Andrew Carnegie, closely allied with the Morgans ever since
his Carnegie Steel Corporation had merged into the formation of
United States Steel, wrote to President Wilson lamenting business
conditions but happily expecting a great change for the better
from Allied purchases of U.S. exports.
Sure enough, war material exports zoomed.
Iron and steel exports quintupled from 1914 to 1917, and the average
profit rate of iron and steel firms rose from 7.4% to 28.7% from
1915 until 1917. Explosives exports to the Allies rose over ten-fold
during 1915 alone. Overall, from 1915 to 1917, the export department
of J.P. Morgan and Co. negotiated more than $3 billion of contracts
to Britain and France. By early 1915, Secretary McAdoo was writing
to Wilson hailing the "great prosperity" being brought
by war exports to the Allies, and a prominent business writer
wrote the following year that "War, for Europe, is meaning
devastation and death; for America a bumper crop of new millionaires
and a hectic hastening of prosperity revival."
Deep in Allied bonds and export of munitions,
the Morgans were doing extraordinarily well; and their great rivals,
Kuhn-Loeb, being pro-German, were necessarily left out of the
Allied wartime bonanza. But there was one hitch: it became imperative
that the Allies win the war. It is not surprising, therefore,
that from the beginning of the great conflict, J.P. Morgan and
his associates did everything they possibly could to push the
supposedly neutral United States into the war on the side of England
and France. As Morgan himself put it: "We agreed that we
should do all that was lawfully in our power to help the Allies
win the war as soon as possible."
Accordingly, Henry P. Davison, Morgan
partner, set up the Aerial Coast Patrol in 1915, to get the public
in the mood to search the skies for German planes. Bernard M.
Baruch, long-time associate of the extremely wealthy copper magnates,
the Guggenheim family, financed the Businessmen's Training Camp,
at Plattsburgh, New York, designed to push for universal military
training and preparations for war. Also participating in financing
the camp were Morgan partner Willard Straight, and former Morgan
partner Robert Bacon. In addition to J.P. Morgan himself, a raft
of Morgan-affiliated political leaders whooped it up for immediate
entry of the U.S. into the war on the side of the Allies: including
Henry Cabot Lodge, Elihu Root, and Theodore Roosevelt.
In addition, the National Security League
was founded in December, 1914, to call for American entry into
the war against Germany. The NSL issued warnings against a German
invasion of the U.S., once England was defeated, and it called
all advocates of peace and non-intervention, "pro-German,"
"dangerous aliens," "traitors," and "spies."
The NSL also advocated universal military
training, conscription, and the U.S. buildup of the largest navy
in the world. Prominent in the organization of the National Security
League were Frederic R. Coudert, Wall Street attorney for the
British, French, and Russian governments; Simon and Daniel Guggenheim;
T. Coleman DuPont, of the munitions, family; and a host of prominent
Morgan-oriented financiers; including former Morgan partner Robert
Bacon; Henry Clay Prick of Carnegie Steel; Judge Gary of U.S.
Steel; George W. Perkins, Morgan partner, who has been termed
"the secretary of state" for the Morgan interests; former
President Theodore Roosevelt; and J.P. Morgan himself.
A particularly interesting founding associate
of NSL was a man who has dominated American foreign policy during
the 20th century: Henry L. Stimson, Secretary of War under William
H. Taft and Franklin D. Roosevelt, and Secretary of State under
Herbert Hoover. Stimson, a Wall Street lawyer in the Morgan ambit,
was a protégé of Morgan's personal attorney Elihu
Root, and two of his cousins were partners in the Morgan-dominated
Wall Street utility stock market and banking firm of Bonbright
While the Morgans and other financial
interests were beating the drums for war, even more influential
in pushing the only partially reluctant Wilson into the war were
his foreign policy Svengali, Colonel House, and House's protégé,
Walter Hines Page, who was appointed Ambassador to Great Britain.
Page's salary in this prestigious influential post was handsomely
subsidized through Colonel House by copper magnate Cleveland H.
Dodge, a prominent adviser to Wilson, who benefited greatly from
munitions sales to the Allies.
Colonel House liked to pose as an abject
instrument of President Wilson's wishes. But before and after
U.S. entry into the war, House shamelessly manipulated Wilson,
in secret and traitorous collaboration with the British, to push
the President first into entering the war and then into following
British wishes instead of setting an independent American course.
Thus, in 1916, House wrote to his friend
Frank L. Polk, Counselor to the State Department and later counselor
to J.P. Morgan, that "the President must be guided"
not to be independent of British desires. Advising British Prime
Minister Arthur Balfour on how best to handle Wilson, House counselled
Balfour to exaggerate British difficulties in order to get more
American aid, and warned him never to mention a negotiated peace.
Furthermore, Balfour leaked to Colonel House the details of various
secret Allied treaties that they both knew the naïve Wilson
would not accept, and they both agreed to keep the treaties from
Similarly, soon after the U.S. entered
the war, the British sent to the U.S. as personal liaison between
the Prime Minister and the White House the young chief of British
military intelligence, Sir William Wiseman. House and Wiseman
quickly entered a close collaboration, with House coaching the
Englishman on the best way of dealing with the President, such
as "tell him only what he wants to hear," never argue
with him, and discover and exploit his weaknesses.
In turn, Britain's top intelligence agent
manipulated House, constantly showering him with flattery, and
established a close friendship with the Colonel, getting an apartment
in the same building in New York City, and travelling together
abroad. Collaborating with House in his plan to manipulate Wilson
into pro-British policies was William Phillips, an Assistant Secretary
of State who had married into the Astor family.
Collaborating with House in supplying
Wiseman with illegal information and working with the British
agent against Wilson were two important American officials. One
was Walter Lippman, a young socialist who had been named by Morgan
partner Willard Straight as one of the three editors of his New
Republic, a magazine which, needless to say, led 'the parade of
progressive and socialist intellectuals in favor of entering the
war on the side of the Allies.
Lippmann soon vaulted into important roles
in the war effort: assistant to the Secretary of War; then secretary
of the secret group of historians called The Inquiry, established
under Colonel House in late 1917 to plan the peace settlement
at the end of the war. Lippmann later left The Inquiry to go overseas
for American military intelligence.
Another important collaborator with Wiseman
was businessman and scholar George Louis Beer, who was in charge
of African and Asian colonial matters for The Inquiry. Wiseman
secretly showed British documents on African colonies to Beer,
who in turn leaked Inquiry reports to British intelligence.
The plans of Colonel House and his biased
young historians of The Inquiry were put into effect at the peace
settlement at Versailles. Germany, Austria-Hungary, and Russia
were cruelly dismembered, thus insuring that Germany and Russia,
once recovered from the devastation of the war, would bend their
energies toward getting their territories back. In that way, conditions
were virtually set for World War II.
Not only that: the Allies at Versailles
took advantage of the temporary power vacuum in Eastern Europe
to create new independent states that would function as client
states of Britain and France, be part of the Morgan-Rothschild
financial network, and help keep Germany and Russia down permanently.
It was an impossible task for these new small nations, a task
made more difficult by the fact that the young historians managed
to rewrite the map of Europe at Versailles to make the Poles,
the Czechs, and the Serbs dominant over all the other minority
nationalities forcibly incorporated into the new countries. These
subjugated peoples - the Germans, Ukrainians, Slovaks, Croats,
Slovenes, etc - thus became built-in allies for the revanchist
dreams of Germany and Russia.
American entry into World War I in April
1917 prevented negotiated peace between the warring powers, and
drove the Allies forward into a peace of unconditional surrender
and dismemberment, a peace which, as we have seen, set the stage
for World War II. American entry thus cost countless lives on
both sides, chaos and disruption throughout central and eastern
Europe at war's end, and the consequent rise of Bolshevism, fascism,
and Nazism to power in Europe. In this way, Woodrow Wilson's decision
to enter the war may have been the single most fateful action
of the 20th century, causing untold and unending misery and destruction.
But Morgan profits were expanded and assured.
The Fortuitous Fed
The massive U.S. loans to the Allies,
and the subsequent American entry into the war, could not have
been financed by the relatively hard-money, gold standard system
that existed before 1914. Fortuitously, an institution was established
at the end of 1913 that made the loans and war finance possible:
the Federal Reserve System. By centralizing reserves, by providing
a government-privileged lender of last resort to the banks, the
Fed enabled the banking system to inflate money and credit, finance
loans to the Allies, and float massive deficits once the U.S.
entered the war. In addition, the seemingly odd Fed policy of
creating an acceptance market out of thin air by standing ready
to purchase acceptance at a subsidized rate, enabled the Fed to
rediscount acceptance on munitions exports.
The Federal Reserve was the outgrowth
of five years of planning, amending, and compromising among various
politicians and concerned financial groups, led by the major financial
interests, including the Morgans, the Rockefellers, and the Kuhn,
Loebs, along with their assorted economists and technicians.
Particularly notable among the Rockefeller
interests were Senator Nelson W. Aldrich (R.-R.I.), father-in-law
of John D. Rockefeller, Jr., and Frank A. Vanderlip, vice president
of Rockefeller's National City Bank of New York. From the Kuhn,
Loebs came the prominent Paul Moritz Warburg, of the German investment-banking
firm of M.M. Warburg and Company. Warburg emigrated to the United
States in 1902 to become a senior partner at Kuhn, Loeb &
Co., after which he spent most of his time agitating for a central
bank in the United States.
Also igniting the drive for a Federal
Reserve System was Jacob H. Schiff, powerful head of Kuhn, Loeb
to whom Warburg was related by marriage. Seconding and sponsoring
Warburg in academia was the prominent Columbia University economist
Edwin R.A. Seligman, of the investment-banking family of J. &
W. Seligman and Company; Seligman was the brother of Warburg's
The Morgans were prominently represented
in the planning and agitation for a Central Bank by Henry P. Davison,
Morgan partner; Charles D. Norton, president of Morgan's First
National Bank of New York; A. Barton Hepburn, head of Morgan's
Chase National Bank; and Victor Morawetz, attorney and banker
in the Morgan ranks and chairman of the executive committee of
the Morgan-controlled Atchison, Topeka, and Santa Fe Railroad.
While the establishment of the Federal
Reserve System in late 1913 was the result of a coalition of Morgan,
Rockefeller, and Kuhn, Loeb interests, there is no question which
financial group controlled the personnel and the policies of the
Fed once it was established. (While influential in framing policies
of the Fed, Federal Reserve Board member Warburg was disqualified
from leadership because of his pro-German views.) The first Federal
Reserve Board, appointed by President Wilson in 1914, included
Warburg; one Rockefeller man, Frederic A. Delano, uncle of Franklin
D. Roosevelt, and president of the Rockefeller-controlled Wabash
Railway; and an Alabama banker, who had both Morgan and Rockefeller
Overshadowing these three were three definite
Morgan men, and a university economist, Professor Adolph C. Miller
of Berkeley, whose wife's family had Morgan connections. The three
definite Morgan men were Secretary of the Treasury McAdoo; Comptroller
of the Currency John Skelton Williams, a Virginia banker and long-time
McAdoo aide on Morgan railroads; and Assistant Secretary of the
Treasury Charles S. Hamlin, a Boston attorney who had married
into a wealthy Albany family long connected with the Morgan-dominated
New York Central Railroad.
But more important than the composition
of the Federal Reserve Board was the man who became the first
Governor of the New York Federal Reserve Bank and who single-handedly
dominated Fed policy from its inception until his death in 1928.
This man was Benjamin Strong, who had spent virtually his entire
business and personal life in the circle of top associates of
J.P. Morgan. A secretary of several trust companies (banks doing
trust business) in New York City, Strong became neighbor and close
friend of three top Morgan partners, Henry P. Davison, Dwight
Morrow, and Thomas W. Lamont. Davison, in particular, became his
mentor, and brought him into Morgan's Bankers Trust company, where
he soon succeeded Lamont as vice-president, and then finally became
president. When Strong was offered the post of Governor of the
New York Fed, it was Davison who persuaded him to take the job.
Strong was an enthusiast for American
entry into the war, and it was his mentor Davison who had engineered
the coup of getting Morgan named as sole underwriter and purchasing
agent for Britain and France. Strong worked quickly to formalize
collaboration with the Bank of England, collaboration which would
continue in force throughout the 1920s. The Federal Reserve Bank
of New York became foreign agent for the Bank of England, and
The main collaboration throughout the
1920s, much of it kept secret from the Federal Reserve Board in
Washington, was between Strong and the man who soon became Governor
of the Bank of England, Montagu Collet Norman. Norman and Strong
were not only fast friends, but had important investment-banking
ties, Norman's uncle having been a partner of the great English
banking firm of Baring Brothers, and his grandfather a partner
in the international banking house of Brown Shipley & Co.,
the London branch of the Wall Street banking firm of Brown Brothers.
Before coming to the Bank of England, Norman himself had worked
at the Wall Street office of Brown Brothers, and then returned
to London to become a partner of Brown Shipley.
The major fruit of the Norman-Strong collaboration
was Strong's being pressured to inflate money and credit in the
U.S. throughout the 1920s, in order to keep England from losing
gold to the U.S. from its inflationary policies. Britain's predicament
came from its insistence on going back to the gold standard after
the war at the highly overvalued pre-war par for the pound, and
then insisting on inflating rather than deflating to make its
exports competitively priced in the world market. Hence, Britain
needed to induce other countries, particularly the U.S., to inflate
along with it. The Strong-Norman-Morgan connection did the job,
setting the stage for the great financial collapse of 1929-1931.
As World War I drew to a close, influential
Britons and Americans decided that intimate post-war collaboration
between the two countries required more than just close cooperation
between the central banks. Also needed were permanent organizations
to promote joint Anglo-American policies to dominate the postwar
The Round Table
In England, Cecil Rhodes had launched
a secret society in 1891 with the aim of maintaining and expanding
the British Empire to re-incorporate the United States. After
the turn of the 20th century, the direction, organization, and
expansion of the society fell to Rhodes's friend and executor,
Alfred Lord Milner. The Milner Group dominated domestic planning
in Britain during World War I, and particularly the planning for
post-war foreign and colonial policy. The Milner Group staffed
the British delegation of experts to Versailles. To promote the
intellectual agitation for such a policy, the Milners had also
set up the Round Table Groups in England and abroad in 1910.
The first American to be asked to join
the Round Table was George Louis Beer, who came to its attention
when his books attacked the American Revolution and praised the
British Empire of the 18th century. Such loyalty could not go
unrewarded, and so Beer became a member of the Group about 1912
and became the American correspondent of Round Table magazine.
We have seen Beer's pro-British role as colonial expert for The
Inquiry. He was also the chief U.S. expert on colonial affairs
at Versailles, and afterward the Milner Group made Beer head of
the Mandate Department of the League of Nations.
During the war, Beer, Anglophile Yale
historian George Burton Adams, and powerful Columbia University
historian James T. Shotwell, an important leader of The Inquiry
and head of the National Board for Historical Services, which
emitted deceptive propaganda for the war effort, formed a secret
society to promote Anglo-American collaboration. Finally, led
by Beer for the United States and the head of the Round Table
group in England, Lionel Curtis, the British and U.S. historical
staffs at Versailles took the occasion to found a permanent organization
to agitate for an informally, if not formally, reconstituted Anglo-American
The new group, the Institute of International
Affairs, was formed at a meeting at the Majestic Hotel in Paris
on May 3O, 1919. A six-man organizing committee was formed, three
Milnerites from Britain, and three Americans: Shotwell; Harvard
historian Archibald C. Coolidge, head of the Eastern European
desk of the Inquiry, and member of the Morgan-oriented Boston
financial family; and James Brown Scott, Morgan lawyer who was
to write a biography of Robert Bacon. The British branch, the
Royal Institute of International Affairs, set up a committee to
supervise writing a multi-volume history of the Versailles Peace
Conference; the committee was financed by a gift from Thomas W.
Lamont, Morgan partner.
The American branch of the new group took
a while to get going. Finally, the still inactive American Institute
of International Affairs merged with a defunct outfit, begun in
1918, of New York businessmen concerned with the postwar world,
and organized as a dinner club to listen to foreign visitors.
This organization, the Council on Foreign Relations, had as its
honorary chairman Morgan lawyer Elihu Root, while Alexander Hemphill,
chairman of Morgan's Guaranty Trust Company, was chairman of its
finance committee. In August 1921, the two organizations merged
into the new Council on Foreign Relations, Inc., a high-powered
organization embracing bankers, lawyers, and intellectuals.
While varied financial interests were
represented in the new organization, the CFR was Morgan-dominated,
from top to bottom. Honorary president was Elihu Root. President
was John W. Davis, Wilson's Solicitor-General, and now chief counsel
for J.P. Morgan & Co. Davis was to become Democratic Presidential
candidate in 1924. Secretary-Treasurer of the new CFR was Harvard
economic historian Edwin F. Gay, director of planning and statistics
for the Shipping Board during the war, and now editor of the New
York Evening Post, owned by his mentor, Morgan partner, Thomas
It was Gay who had the idea of founding
Foreign Affairs, the CFR's quarterly journal, and who suggested
both his Harvard colleague Archibald Coolidge as the first editor,
and the New York Post reporter Hamilton Fish Armstrong as assistant
editor and executive director of the CFR. Other prominent officials
in the new CFR were: Frank L. Polk, former Under-Secretary of
State and now lawyer for J.P. Morgan & Co; Paul M. Warburg
of Kuhn, Loeb; Otto H. Kahn of Kuhn, Loeb; former Under-Secretary
of State under Wilson, Norman H. Davis, a banking associate of
the Morgans; and as vice-president, Paul D. Cravath, senior partner
of the Rockefeller-oriented Wall Street law firm of Cravath, Swaine,
After World War II, the Council on Foreign
Relations became dominated by the Rockefeller rather than by the
Morgan interests, a shift of power reflecting a general alteration
in financial power in the world at large. After World War II,
the rise of oil to prominence brought the Morgans and Rockefellers
- once intense rivals - into an Eastern Establishment of which
the Rockefellers were the senior, and the Morgans the junior,
Rockefeller, Morgan, and War
During the 1930s, the Rockefellers pushed
hard for war against Japan, which they saw as competing with them
vigorously for oil and rubber resources in Southeast Asia and
as endangering the Rockefellers' cherished dreams of a mass "China
market" for petroleum products. On the other hand, the Rockefellers
took a non-interventionist position in Europe, where they had
close financial ties with German firms such as I.G. Farben and
Co., and very few close relations with Britain and France. The
Morgans, in contrast, as usual deeply committed to their financial
ties with Britain and France, once again plumped early for war
with Germany, while their interest in the Far East had become
minimal. Indeed, U.S. Ambassador to Japan, Joseph C. Grew, former
Morgan partner, was one of the few officials in the Roosevelt
Administration genuinely interested in peace with Japan.
World War II might therefore be considered,
from one point of view, as a coalition war: the Morgans got their
war in Europe, the Rockefellers theirs in Asia. Such disgruntled
Morgan men as Lewis W. Douglas and Dean G. Acheson (a protégé
of Henry Stimson), who had left the early Roosevelt Administration
in disgust at its soft money policies and economic nationalism,
came happily roaring back into government service with the advent
of World War II. Nelson A. Rockefeller, for his part, became head
of Latin American activities during World War II, and thereby
acquired his taste for government service.
After World War II, the united Rockefeller-MorganKuhn,
Loeb Eastern Establishment was not allowed to enjoy its financial
and political supremacy unchallenged for long. "Cowboy"
Sun Belt firms, maverick oil men and construction men from Texas,
Florida, and southern California, began to challenge the Eastern
Establishment "Yankees" for political power. While both
groups favor the Cold War, the Cowboys are more nationalistic,
more hawkish, and less inclined to worry about what our European
allies are thinking. They are also much less inclined to bail
out the now Rockefeller-controlled Chase Manhattan Bank and other
Wall Street banks that loaned recklessly to Third World and Communist
countries and expect the U.S. taxpayer - through outright taxes
or the printing of U.S. dollars - to pick up the tab.
It should be clear that the name of the
political party in power is far less important than the particular
regime's financial and banking connections. The foreign policy
power for so long of Nelson Rockefeller's personal foreign affairs
adviser, Henry A. Kissinger, a discovery of the extraordinarily
powerful Rockefeller-Chase Manhattan Bank elder statesman John
J. McCloy, is testimony to the importance of financial power.
As is the successful lobbying by Kissinger and Chase Manhattan's
head, David Rockefeller, to induce Jimmy Carter to allow the ailing
Shah of Iran into the U.S. - thus precipitating the humiliating
Despite differences in nuance, it is clear
that Ronald Reagan's originally proclaimed challenge to Rockefeller-Morgan
power in the Council of Foreign Relations and to the Rockefeller-created
Trilateral Commission has fizzled, and that the "permanent
government" continues to rule regardless of the party nominally
in power. As a result, the much-heralded "bipartisan foreign
policy" consensus imposed by the Establishment since World
War II seems to remain safely in place.
David Rockefeller, chairman of the board
of his family's Chase Manhattan Bank from 1970 until recently,
established the Trilateral Commission in 1973 with the financial
backing of the CFR and the Rockefeller Foundation. Joseph Kraft,
syndicated Washington columnist who himself has the distinction
of being both a CFR member and a Trilateralist, has accurately
described the CFR as a "school for statesmen," which
"comes close to being an organ of what C. Wright Mills has
called the Power Elite - a group of men, similar in interest and
outlook, shaping events from invulnerable positions behind the
scenes." The idea of the Trilateral Commission was to internationalize
policy formation, the commission consisting of a small group of
multinational corporate leaders, politicians, and foreign policy
experts from the U.S., Western Europe, and Japan, who meet to
coordinate economic and foreign policy among their respective
Perhaps the most powerful single figure
in foreign policy since World War II, a beloved adviser to all
Presidents, is the octogenarian John J. McCloy. During World War
II, McCloy virtually ran the War Department as Assistant to aging
Secretary Stimson; it was McCloy who presided over the decision
to round up all Japanese-Americans and place them in concentration
camps in World War II, and he is virtually the only American left
who still justifies that action.
Before and during the war, McCloy, a disciple
of Morgan lawyer Stimson, moved in the Morgan orbit; his brother-in-law,
John S. Zinsser, was on the board of directors of J.P. Morgan
& Co. during the 1940s. But, reflecting the postwar power
shift from Morgan to Rockefeller, McCloy moved quickly into the
Rockefeller ambit. He became a partner of the Wall Street corporate
law firm of Milbank, Tweed, Hope, Hadley & McCloy, which had
long served the Rockefeller family and the Chase Bank as legal
From there he moved to become Chairman
of the Board of the Chase Manhattan Bank, a director of the Rockefeller
Foundation, and of Rockefeller Center, Inc., and finally, from
1953 until 1970, chairman of the board of the Council on Foreign
Relations. During the Truman Administration, McCloy served as
President of the World Bank and then U.S. High Commissioner for
Germany. He was also a special adviser to President John F. Kennedy
on Disarmament, and chairman of Kennedy's Coordinating Committee
on the Cuban Crisis. It was McCloy who "discovered"
Professor Henry A. Kissinger for the Rockefeller forces. It is
no wonder that John K. Galbraith and Richard Rovere have dubbed
McCloy "Mr. Establishment."
A glance at foreign policy leaders since
World War II will reveal the domination of the banker elite. Truman's
first Secretary of Defense was James V. Forrestal, former president
of the investment-banking firm of Dillon, Read & Co., closely
allied to the Rockefeller financial group. Forrestal had also
been a board member of the Chase Securities Corporation, an affiliate
of the Chase National Bank.
Another Truman Defense Secretary was Robert
A. Lovett, a partner of the powerful New York investment-banking
house of Brown Brothers Harriman. At the same time that he was
Secretary of Defense, Lovett continued to be a trustee of the
Rockefeller Foundation. Secretary of the Air Force Thomas K. Finletter
was a top Wall Street corporate lawyer and member of the board
of the CFR while serving in the cabinet. Ambassador to Soviet
Russia, Ambassador to Great Britain, and Secretary of Commerce
in the Truman Administration was the powerful multi-millionaire
W. Averell Harriman, an often underrated but dominant force within
the Democratic Party since the days of FDR. Harriman was a partner
of Brown Brothers Harriman.
Also Ambassador to Great Britain under
Truman was Lewis W. Douglas, brother-in-law of John J. McCloy,
a trustee of the Rockefeller Foundation, and a board member of
the Council on Foreign Relations. Following Douglas as Ambassador
to the Court of St. James was Walter S. Gifford, chairman of the
board of AT&T, and member of the board of trustees of the
Rockefeller Foundation for almost two decades. Ambassador to NATO
under Truman was William H. Draper, Jr., vice-president of Dillon,
Also influential in helping the Truman
Administration organize the Cold War was director of the policy
planning staff of the State Department, Paul H. Nitze. Nitze,
whose wife was a member of the Pratt family, associated with the
Rockefeller family since the origins of Standard Oil, had been
vice-president of Dillon, Read & Co.
When Truman entered the Korean War, he
created an Office of Defense Mobilization to run the domestic
economy during the war. The first director was Charles E. ("Electric
Charlie") Wilson, president of the Morgan-controlled General
Electric Company, who also served as board member of the Morgans'
Guaranty Trust Company. His two most influential assistants were
Sidney J. Weinberg, ubiquitous senior partner in the Wall Street
investment-banking firm of Goldman Sachs & Co., and former
General Lucius D. Clay, chairman of the board of Continental Can
Co., and a director of the Lehman Corporation.
Succeeding McCloy as President of the
World Bank, and continuing in that post throughout the two terms
of Dwight Eisenhower, was Eugene Black. Black had served for fourteen
years as vice-president of the Chase National Bank, and was persuaded
to take the World Bank post by the bank's chairman of the board,
Winthrop W. Aldrich, brother-in-law of John D. Rockefeller, Jr.
The Eisenhower Administration proved to
be a field day for the Rockefeller interests. While president
of Columbia University, Eisenhower was invited to high-level dinners
where he met and was groomed for President by top leaders from
the Rockefeller and Morgan ambits, including the chairman of the
board of Rockefeller's Standard Oil of New Jersey, the presidents
of six other big oil companies, including Standard of California
and Socony-Vacuum, and the executive vice-president of J.P. Morgan
One dinner was hosted by Clarence Dillon,
the multi-millionaire retired founder of Dillon, Read & Co.,
where the guests included Russell B. Leffingwell, chairman of
the board of both J.P. Morgan & Co. and the CFR (before McCloy);
John M. Schiff, a senior partner of the investment-banking house
of Kuhn, Loeb & Co.; the financier Jeremiah Milbank, a director
of the Chase Manhattan Bank; and John D. Rockefeller, Jr.
Even earlier, during 1949, Eisenhower
had been introduced through a special study group to key figures
in the CFR. The study group devised a plan to create a new organization
called the American Assembly - in essence an expanded CFR study
group - whose main function was reputedly to build up Eisenhower's
prospects for the Presidency. A leader of the "Citizens for
Eisenhower" committee, who later became Ike's Ambassador
to Great Britain, was the multi-millionaire John Hay Whitney,
scion of several wealthy families, whose granduncle, Oliver H.
Payne, had been one of the associates of John D. Rockefeller,
Sr. in founding the Standard Oil Company. Whitney was head of
his own investment concern, J.H. Whitney & Co., and later
became publisher of the New York Herald Tribune.
Running foreign policy during the Eisenhower
Administration was the Dulles family, led by Secretary of State
John Foster Dulles, who had also concluded the U.S. peace treaty
with Japan under Harry Truman. Dulles had for three decades been
a senior partner of the top Wall Street corporate law firm of
Sullivan & Cromwell, whose most important client was Rockefeller's
Standard Oil Company of New Jersey. Dulles had been for fifteen
years a member of the board of the Rockefeller Foundation, and
before assuming the post of Secretary of State was chairman of
the board of that institution. Most important is the little-known
fact that Dulles's wife was Janet Pomeroy Avery, a first cousin
of John D. Rockefeller, Jr.
Heading the super-secret Central Intelligence
Agency during the Eisenhower years was Dulles's brother, Allen
Welsh Dulles, also a partner in Sullivan & Cromwell. Allen
Dulles had long been a trustee of the CFR and had served as its
president from 1947 to 1951. Their sister, Eleanor Lansing Dulles,
was head of the Berlin desk of the State Department during that
Under-Secretary of State, and the man
who succeeded John Foster Dulles in the spring 1959, was former
Massachusetts Governor Christian A. Herter. Herter's wife, like
Nitze's, was a member of the Pratt family. Indeed, his wife's
uncle, Herbert L. Pratt, had been for many years president or
chairman of the board of Standard Oil Company of New York. One
of Mrs. Herter's cousins, Richardson Pratt, had served as assistant
treasurer of Standard Oil of New Jersey up to 1945. Furthermore,
one of Herter's own uncles, a physician, had been for many years
treasurer of the Rockefeller Institute for Medical Research.
Herter was succeeded as Under-Secretary
of State by Eisenhower's Ambassador to France, C. Douglas Dillon,
son of Clarence, and himself Chairman of the Board of Dillon,
Read & Co. Dillon was soon to become a trustee of the Rockefeller
Perhaps to provide some balance for his
banker-business coalition, Eisenhower appointed as Secretary of
Defense three men in the Morgan rather than the Rockefeller ambit.
Charles B. ("Engine Charlie") Wilson was president of
General Motors, member of the board of J.P. Morgan & Co. Wilson's
successor, Neil H. McElroy, was president of Proctor & Gamble
Co. His board chairman, R.R. Deupree, was also a director of J.P.
Morgan & Co. The third Secretary of Defense, who had been
Under-Secretary and Secretary of the Navy under Eisenhower, was
Thomas S. Gates, Jr., who had been a partner of the Morgan-connected
Philadelphia investment-banking firm of Drexel & Co. When
Gates stepped down as Defense Secretary, he became president of
the newly formed flagship commercial bank for the Morgan interests,
the Morgan Guaranty Trust Co.
Serving as Secretary of the Navy and then
Deputy Secretary of Defense (and later Secretary of the Treasury)
under Eisenhower was Texas businessman Robert B. Anderson. After
leaving the Defense Department, Anderson became a board member
of the Rockefeller-controlled American Overseas Investing Co.,
and, before becoming Secretary of the Treasury, he borrowed $84,000
from Nelson A. Rockefeller to buy stock in Nelson's International
Basic Economy Corporation.
Head of the important Atomic Energy Commission
during the Eisenhower years was Lewis L. Strauss. For two decades,
Strauss had been a partner in the investment-banking firm of Kuhn,
Loeb & Co. In 1950, Strauss had become financial adviser to
the Rockefeller family, soon also becoming a board member of Rockefeller
A powerful force in deciding foreign policy
was the National Security Council, which included on it the Duller
brothers, Strauss, and Wilson. Particularly important is the post
of national security adviser to the President. Eisenhower's first
national security adviser was Robert Cutler, president of the
Old Colony Trust Co., the largest trust operation outside New
York City. The Old Colony was a trust affiliate of the First National
Bank of Boston.
After two years in the top national security
post, Cutler returned to Boston to become chairman of the board
of Old Colony Trust, returning after a while to the national security
slot for two more years. In between, Eisenhower had two successive
national security advisers. The first was Dillon Anderson, a Houston
corporate attorney, who did work for several oil companies. Particularly
significant was Anderson's position as chairman of the board of
a small but fascinating Connecticut firm called Electro-Mechanical
Research, Inc. Electro-Mechanical was closely associated with
certain Rockefeller financiers; thus, one of its directors was
Godfrey Rockefeller, a limited partner in the investment-banking
firm of Clark, Dodge & Co.
After more than a year, Anderson resigned
from his national security post and was replaced by William H.
Jackson, a partner of the investment firm of J. H. Whitney &
Co. Before assuming his powerful position, Dillon Anderson had
been one of several men serving as special hush-hush consultants
to the National Security Council. Another special adviser was
Eugene Holman, president of Rockefeller's Standard Oil Company
of New Jersey.
We may mention two important foreign policy
actions of the Eisenhower Administration which seem to reflect
the striking influence of personnel directly tied to bankers and
financial interests. In 1951, the regime of Mohammed Mossadegh
in Iran decided to nationalize the British-owned oil holdings
of the Anglo-Iranian Oil company. It took no time for the newly
established Eisenhower Administration to intervene heavily in
this situation. CIA director and former Standard Oil lawyer Allen
W. Dulles flew to Switzerland to organize the covert overthrow
of the Mossadegh regime, the throwing of Mossadegh into prison,
and the restoration of the Shah to the throne of Iran.
After lengthy behind-the-scenes negotiations,
the oil industry was put back into action as purchasers and refiners
of Iranian oil. But this time the picture was significantly different.
Instead of the British getting all of the oil pie, their share
was reduced to 40 percent of the new oil consortium, with five
top U.S. oil companies (Standard Oil of New Jersey, Socony-Vacuum
- formerly Standard Oil of N.Y. and now Mobil - Standard Oil of
California, Gulf, and Texaco) getting another 40 percent.
It was later disclosed that Secretary
of State Dulles placed a sharp upper limit on any participation
in the consortium by smaller independent oil companies in the
United States. In addition to the rewards to the Rockefeller interests,
the CIA's man-on-the-spot directing the operation, Kermit Roosevelt,
received his due by quickly becoming a vice-president of Mellon's
Gulf Oil Corp.
The Guatemalan Coup
Fresh from its CIA triumph in Iran, the
Eisenhower Administration next turned its attention to Guatemala,
where the left-liberal regime of Jacob Arbenz Guzman had nationalized
234,000 acres of uncultivated land owned by the nation's largest
landholder, the American-owned United Fruit Company, which imported
about 60 percent of all bananas coming into the United States.
Arbenz also announced his intention of
seizing another 173,000 acres of idle United Fruit land along
the Caribbean coast. In late 1953, Eisenhower gave the CIA the
assignment of organizing a counter-revolution in Guatemala. With
the actual operation directed by former Wall Street corporate
lawyer Frank Wisner of the CIA, the agency launched a successful
invasion of Guatemala, led by exiled Army Colonel Castilo Armas,
which soon overthrew the Arbenz regime and replaced it with a
military junta. The Arbenz land program was abolished, and most
of its expropriated property was returned to the United Fruit
Allen W. Dulles had financial connections
with United Fruit and with various sugar companies which had also
suffered land expropriation from the Arbenz regime. For several
years, while a partner at Sullivan & Cromwell, he had been
a board member of the Rockefeller-controlled J. Henry Schroder
Banking Corporation. Members of the board of Schroder during 1953
included Delano Andrews, Sullivan & Cromwell partner who had
taken Dulles's seat on the board; George A. Braga, president of
the Manati Sugar Company; Charles W. Gibson, vice-president of
the Rockefeller-affiliated Air Reduction Company; and Avery Rockefeller,
president of the closely linked banking house of Schroder, Rockefeller,
& Co. Members of the board of Manati Sugar, in the meanwhile,
included Alfred Jaretski, Jr., another Sullivan & Cromwell
partner; Gerald F. Beal, president of J. Henry Schroder and chairman
of the board of the International Railways of Central America;
and Henry E. Worcester, a recently retired of executive of United
United Fruit, furthermore, was a controlling
shareholder in International Railways, while, as in the case of
Beal, the board chairmanship of the railway had long been held
by a high official of Schroder. The close ties between United
Fruit, Schroder, and International Railways may also be seen by
the fact that, in 1959, the board chairman of the railway became
James McGovern, general counsel for United Fruit. International
Railway, in fact, carried most of United Fruit's produce from
the interior to the port in Guatemala. In addition, Dulles's close
associate and fellow trustee of the Council of Foreign Relations
in this period, and former treasurer of the CFR, was Whitney H.
Shepardson, formerly vice-president of International Railways.
Not only that: Robert Cutler, national
security adviser to the President at the time of the coup against
Arbenz, had himself very close ties to United Fruit. Cutler's
boss at Old Colony Trust, chairman of the board T. Jefferson Coolidge,
was also, and more importantly, board chairman at United Fruit.
Indeed, many members of the board of United Fruit, a Boston-based
company, were also on the board of Old Colony or its mother company,
the First National Bank of Boston.
Furthermore, during the period of planning
the Guatemalan coup, and up till a few months before its success
in 1954, the Assistant Secretary of State for Inter-American Affairs
was John Moors Cabot, a well-known anti-Arbenz hawk. Cabot's brother
Thomas D., was an executive of United Fruit and a member of the
board of the First National Bank of Boston.
The Council on Foreign Relations played
an important role in the Guatemalan invasion. It began in the
fall of 1952, when Spruille Braden, a former Assistant Secretary
of State for Inter-American Affairs and then consultant for United
Fruit, led a CFR study group on Political Unrest in Latin America.
Discussion leader at the first meeting of the CFR-Braden group
was John McClintock, an executive of United Fruit. Former leading
New Dealer and Assistant Secretary of State Adolf A. Berle, Jr.,
a participant in the study group, recorded in his diary that the
U.S. should welcome an overthrow of the Arbenz government, and
noted that, "I am arranging to see Nelson Rockefeller (himself
Assistant Secretary of State for Inter-American Affairs during
World War II) who knows the situation and can work a little with
In the actual Guatemalan operation, President
Eisenhower himself was a CFR member, as were Allen Dulles, John
M. Cabot and Frank Wisner, the man in charge of the coup and the
CIA's deputy director for plans. Of the twelve people in the U.S.
government identified as being involved at the top level in the
Guatemalan affair, eight were CFR members or would be within a
few years. These included, in addition to the above, Henry F.
Holland, who succeeded Cabot in the assistant secretary of state
slot in 1954; Under-Secretary of State Walter Bedell Smith, a
former director of the CIA; and Ambassador to the UN Henry Cabot
Paving the way for the coup was a public
report, issued in December 1953 by the Committee on International
Policy of the National Planning Association on the Guatemalan
situation. Head of the Committee was Frank Altschul, secretary
and vice-president of the CFR and a partner of the international
banking house of Lazard Freres, as well as a director of the Chase
National Bank and president of the General American Investor Corp.,
a firm largely controlled by Lehman Brothers. The Altschul report,
signed by twenty-two committee members of whom fifteen were CFR
members, warned that "Communist infiltration in Guatemala"
was a threat to the security of the Western Hemisphere and hinted
that drastic action would probably be necessary to deal with this
Of those involved in the drastic action,
Secretary of State John Foster Dulles, while at Sullivan &
Cromwell, had once represented United Fruit in negotiating a contract
with Guatemala. Under-Secretary of State Walter Bedell Smith,
after leaving the government, became director of United Fruit,
as did Robert D. Hill, who participated in the Guatemala operation
as Ambassador to Costa Rica. Furthermore, future president of
Guatemala, Miguel Ydigoras Fuentes, noted that his own cooperation
in the coup against Arbenz was obtained by Walter Turnbull, a
former executive at United Fruit, who came to him along with two
JFK and the Establishment
When John F. Kennedy assumed the office
of President, the first person he turned to for foreign policy
advice was Robert A. Lovett, partner of Brown Brothers, Harriman,
even though Lovett had backed Richard Nixon. Kennedy asked Lovett
to take his pick of any of three top jobs in the Cabinet - State,
Defense, and Treasury - but the ill and aging Lovett demurred.
It was at Lovett's urging, however, that Kennedy chose as Secretary
of State Dean Rusk, president of the Rockefeller Foundation, a
post he had acquired because of the strong backing of John Foster
Dulles. Under-Secretary of State was Chester Bowles, a trustee
of the Rockefeller Foundation; Bowles was soon replaced by corporate
lawyer George Bail, who was later to become a senior managing
partner at Lehman Brothers.
For Secretary of Defense Kennedy chose
Robert S. McNamara, President of Ford Motor Company. One influential
force in the McNamara appointment was the backing of Sidney J.
Weinberg, partner of the investment-banking firm of Goldman, Sachs,
& Co., and powerful fund-raiser for the Democratic Party.
Weinberg was a member of the board of Ford Motor Company. Perhaps
even more important was the intimate Ford connection with the
investment-banking house of Lehman Brothers, which had long carried
great weight in the party; at that time, five high-ranking Ford
executives sat on the board of the One William Street Fund, a
mutual fund recently established by Lehman Brothers.
Secretary of the Air Force was Eugene
Zuckert, chairman of the board of the small Pittsburgh firm, the
Nuclear Science and Engineering Corp., controlled by the powerful
Lehman Brothers. Before going to this firm, Zuckert had been a
member of the Atomic Energy Commission; former ABC Commissioner
Gordon Dean, who had preceded Zuckert as chairman of the board
of Nuclear Science and Engineering, was also a partner of Lehman
General counsel of the Defense Department,
and soon to become Secretary of the Army, was Wall Street corporate
lawyer Cyrus Vance, later to become Secretary of State under Carter.
Vance's law firm - Simpson, Thacher & Bartlett - represented
Lehman Brothers and Manufacturers Hanover Trust Co. Moreover,
Vance had married into New York's wealthy W & J Sloane family;
his father-in-law, John Sloane, had served as a director of the
United States Trust Co.
Secretary of the Treasury in the Kennedy
Cabinet was C. Douglas Dillon, of Dillon, Read and the Rockefeller
Foundation. Dillon saw no problem in serving for eight years as
Ambassador to France and as a State Department official during
the Eisenhower Era, and then segueing to the Democratic Kennedy
Cabinet. Like Lovett, he too was chosen even though he had been
a big contributor to the Nixon effort of 1960.
In the powerful post of National Security
Adviser, Kennedy selected Harvard Dean McGeorge Bundy, who had
been part of a high-powered foreign policy team advising Thomas
B. Dewey in the 1948 campaign, a virtually all-Rockefeller dominated
team headed by John Foster Dulles and including Dulles's brother
Allen, C. Douglas Dillon, and Christian Herter. After that, Bundy
worked for the Council on Foreign Relations.
Bundy had been born into the wealthy Boston
Brahmin Lowell family, his mother having been a Lowell. His father
Harvey H. Bundy, was a partner in Boston's top law firm of Choate,
Hall & Stewart, a high official of the Foreign Bondholders
Protective Council, and a director of the Merchants National Bank
of Boston. McGeorge's brother, William, a high CIA official, was
married to the daughter of former Secretary of State Dean Acheson,
and his sister Katherine married into the socially prominent Auchinchloss
family, the family of Jacqueline Kennedy.
The strong Rockefeller influence on Kennedy
foreign policy is best seen in the fact that the new President
continued Allen W. Dulles as head of the CIA. It was at the urging
of Dulles that Kennedy decided to go ahead with the CIA's previously
planned and disastrous Bay of Pigs invasion of Cuba. Fidel Castro's
regime had recently nationalized a large number of American-owned
sugar companies in Cuba. It might be noted that Dulles's old law
firm of Sullivan & Cromwell served as general counsel for
two of these large sugar companies, the Francisco Sugar Co. and
the Manati Sugar Co., and that one of the board members of these
firms was Gerald F. Beal, president of the Rockefeller-oriented
J. Henry Schroder Bank, of which Dulles had once been a director.
Not only that. John L. Loeb of the Loeb,
Rhoades investment bank, whose wife was a member of the Lehman
banking family, owned a large block of stock in the nationalized
Compania Azucarera Atlantica del Golfo, a big sugar plantation
in Cuba, while one of the directors of the latter company was
Harold F. Linder, vice-chairman of the General American Investors
Company, dominated by Lehman Brothers and Lazard Freres investment
bankers. Linder was appointed head of the Export-Import Bank by
After the Bay of Pigs fiasco, Dulles was
replaced as head of the CIA by West Coast industrialist John A.
McCone, who also had the capacity to serve the administrations
of either party with equal ease. Under-Secretary of the Air Force
under Truman and head of the Atomic Energy Commission under Eisenhower,
McCone was president of the Bechtel-McCone Corporation, and represents
the first major incursion of the international Bechtel construction
interests into American politics. McCone was also a board member
of the California Bank of Los Angeles, and of the Rockefeller-dominated
Standard Oil Company of California.
The CIA was also heavily involved about
this time in the short-lived Katanga secession movement in the
old Belgian Congo. One of the largest of the American companies
in Katanga, and a major backer of the secession movement, was
the Anglo-American Corporation of South Africa, one of whose partners
was mining magnate Charles W. Engelhard. Engelhard's investment
banker was Dillon, Read, the family firm of Kennedy's Secretary
of the Treasury, C. Douglas Dillon.
We have seen that Mr. Establishment, the
Rockefeller-oriented John J. McCloy, served as Kennedy's special
adviser on disarmament. When the U.S. Arms Control and Disarmament
Agency was created in the fall of 1961, its first head was William
C. Foster, former Under-Secretary of State and Defense under Truman.
In between, Foster had served as a high official of the Olin Mathieson
Chemical Corp., and then board chairman of the Rockefeller-dominated
United Nuclear Corp. Foster was also a director of the CFR.
Kennedy continued Rockefeller's Eugene
Black as head of the powerful World Bank. When Black reached retirement
age in 1962, he was replaced by George D. Woods, chairman of the
board of the prominent investment bank, First Boston Corporation.
Woods had many connections with the Rockefeller interests, including
being a director of the Chase International Investment Corp.,
of the Rockefeller Foundation, and of other Rockefeller-dominated
Two important foreign policy actions of
the Kennedy Administration were the Cuban Missile Crisis and the
escalation of the war in Vietnam. Kennedy was advised during the
Cuban missile crisis by an ad hoc group called the Ex Comm, which
included, along with his official major foreign policy advisers,
Robert A. Lovett and John J. McCloy. In the Vietnam War, Kennedy
brought in as Ambassador to South Vietnam the Boston Brahmin and
Morgan-oriented Henry Cabot Lodge, who had been Eisenhower's Ambassador
to the United Nations and who had run for Vice-President on the
Nixon ticket in 1960. Virtually the last foreign policy act of
John F. Kennedy was to give the green light to Lodge and the CIA
to oust, and murder, South Vietnamese President Ngo Dinh Diem.
LBJ and the Power Elite
Lyndon Johnson's foreign policy was dominated
by his escalation of the Vietnam conflict into a full-scale (if
undeclared) war, and of the increasing splits over the war among
the financial power elite. Johnson retained the hawkish Rusk,
McNamara, McCone, and Lodge in their posts. As newly minted Vietnam
doves were ousted from foreign policy positions, they were replaced
by hawks. Thus, William Bundy became Assistant Secretary of State
for Far Eastern Affairs, at the same time becoming a director
of the CFR. On the other hand, the increasingly critical W. Averell
Harriman was ousted from his post of Under-Secretary of State.
Cyrus Vance continued as Johnson's Secretary
of the Army; when he rose to Deputy Secretary of Defense, he was
replaced by Vance's old friend and roommate at Yale, Stanley R.
Resor. Resor was a partner in the major Wall Street law firm of
Debevoise, Plimpton, Lyons, & Gates, and was the brother-in-law
of economist and banker Gabriel Hauge, president of the Manufacturers
Hanover Trust, and treasurer of the CFR.
Resor had married into the Pillsbury flour
family of Minneapolis, which had long been connected with the
holding company, the Northwest BanCorporation. After Vance retired
as Deputy Secretary of Defense to return to law practice, he was
replaced by Johnson's hard-line Secretary of the Navy Paul Nitze,
former partner of Dillon, Read, whose wife was a member of the
Rockefeller-connected Pratt family.
One important meeting at which it was
decided to escalate the Vietnam War was held in July 1965. The
meeting consisted of Johnson, his designated foreign policy and
military officials, and three key unofficial advisers: Clark M.
Clifford, the chairman of the President's Foreign Intelligence
Advisory Board, and an attorney for the duPonts and the Morgan-dominated
General Electric Co.; Arthur H. Dean, a partner in Rockefeller-oriented
Sullivan & Cromwell and a director of the CFR; and the ubiquitous
John J. McCloy.
Shortly after the meeting, a distinguished
national committee of power elite figures was formed to back President
Johnson's aggressive policies in Vietnam. Chairman of the committee
was Arthur H. Dean; other members were Dean Acheson; Eugene Black,
who, after retiring as head of the World Bank, returned to be
a director of Chase Manhattan; Gabriel Hauge of Manufacturers'
Trust and the CFR; David Rockefeller, president of the Chase Manhattan
Bank and a vice-president of the CFR; and two board members of
AT&T, William B. Murphy and James R. Killian, Jr. Indeed,
of the 46 members of this pro-Vietnam War committee, 19 were prominent
businessmen, bankers or corporate lawyers. Later, when Johnson
needed to raise taxes to supply more funds for the war effort,
he selected thirteen businessmen to head the lobbying effort.
A fascinating aspect of the Johnson Administration
was the heavy influence of men connected with the powerful Democratic
investment-banking house of Lehman Brothers. Johnson's first Under-Secretary
of State, George Ball, who left because of increasing disillusionment
with the Vietnam War, would later become a key partner of Lehman
Brothers. Johnson's most influential unofficial adviser was long-time
and personal legal and financial adviser, Edwin L. Weisl, a New
York attorney who was a senior law partner to Cyrus Vance at Simpson,
Thacher & Bartlett. Not only was this law firm the general
counsel to Lehman Brothers, but Weisl himself was dubbed by Fortune
magazine as "Lehman's eighteenth partner." Weisl had
great influence at Lehman and occasionally sat in on partners'
meetings. He was also reputed to be the closest friend of senior
partner Robert Lehman, and sat on the board of the Lehman-controlled
One William Street Fund.
Another very close and influential Johnson
adviser, and a consistent hard-liner on Vietnam, was his old friend
Abe Fortas, a Washington lawyer and veteran New Dealer. During
the Johnson years, Fortas served as director, vice-president,
and general counsel for the Texas-based Greatamerica Corp., a
giant holding company controlling several insurance companies,
Braniff Airways, and two banks, including the First Western Bank
and Trust Co. of California.
During the same period, Fortas was also
a director and vice-president of the large Federated Department
Stores. Both Federated and Greatamerica had close ties with Lehman
Brothers. Fred Lazarus, Jr., a top official of Federated, sat
on the board of the Lehman-controlled One William Street Fund,
along with Edwin Weisl. And the only two non-Texans on the board
of Greatamerica Corp. were William H. Osborn, Jr., of Lehman Brothers,
and Gustave L. Levy, a partner in the closely allied Wall Street
investment bank of Goldman, Sachs & Co. Goldman, Sachs was
the senior banking adviser for the Murchison Texas oil interests,
a group with whom Lyndon Johnson was personally allied.
Finally, after Henry Cabot Lodge retired
as the hawkish Ambassador to South Vietnam in 1967, he was replaced
by Ellsworth Bunker. Bunker, who had been president of the National
Sugar Refining Company, served as ambassador to various countries
in the Eisenhower Administration, and then Ambassador to the Organization
of American States under Johnson. Bunker was connected to John
L. Loeb, the Lehman kinsman who headed the investment-banking
firm of Carl M. Loeb, Rhoades & Co. Loeb placed Bunker on
the board of Curtis Publishing Co., after he obtained control
of that firm for Loeb, Rhoades. Loeb also installed Bunker's son,
John, as president of Curtis. Furthermore, Ellsworth Bunker's
younger brother, Arthur, had served as director of the Lehman
Corporation, and of Lehman's One William Street Fund until his
death in 1964.
While Bunker had served Johnson as Ambassador
to the OAS, he continued to sit on the board of the National Sugar
Refining Company. In late 1965, Bunker played a crucial role in
Johnson's massive U.S. invasion of the Dominican Republic, an
intervention into a Dominican civil war to prevent a victory by
left-wing forces who would presumably pose a dire threat to American
sugar companies in the republic. As President Johnson's emissary
to the Dominican Republic just after the invasion, Bunker played
a decisive role in installing the conservative Hector Garcia-Godoy
Increasingly, however, the power elite
became divided over the morass of the Vietnam War. Under the blows
of the Tet offensive in January 1968, Robert McNamara had become
increasingly dovish and was replaced as Secretary of Defense by
hard-liner Clark Clifford, with McNamara moving gracefully to
take charge of the World Bank. But, on investigating the situation,
Clifford too became critical of the war, and Johnson called a
crucial two-day meeting on March 22, 1968, of his highly influential
Senior Informal Advisory Group on Vietnam, known as the "Wise
Men," made up of all his key advisors on foreign affairs.
Johnson was stunned to find that only
Abe Fortas and General Maxwell Taylor continued in the hard-line
position. Arthur Dean, Cabot Lodge, John J. McCloy, and former
General Omar Bradley took a confused middle-of-the-road position,
while all the other elite figures such as Dean Acheson, George
Ball, McGeorge Bundy, C. Douglas Dillon, and Cyrus Vance had swung
around to a firm opposition to the war.
As David Halberstam put it in his The
Best and the Brightest, these power elite leaders "let him
(Johnson) know that the Establishment - yes, Wall Street - had
turned on the war... It was hurting the economy, dividing the
country, turning the youth against the country's best traditions."
LBJ knew when he was licked. Only a few days afterward, Johnson
announced that he was not going to run for re-election and he
ordered what would be the beginnings of U.S. disengagement from
The foreign-policy aims of the Nixon Administration
had a decided Rockefeller stamp. Secretary of State William P.
Rogers was a Wall Street lawyer who had long been active in the
liberal Dewey-Rockefeller wing of the New York Republican Party.
Indeed, Thomas E. Dewey was the main backer of Rogers for the
State Department post.
Dewey's entire political career was beholden
to the Rockefeller interests, as was dramatically shown one election
year when, in an incident that received unaccustomed publicity,
Winthrop W. Aldrich, Rockefeller kinsman who was president of
the Chase National Bank, literally ordered Governor Dewey into
his Wall Street offices and commanded him to run for re-election.
The governor, who had previously announced his retirement into
private practice, meekly obeyed. Furthermore, Roger's law partner,
John A. Wells, had long been one of Nelson Rockefeller's top political
aides and had served as Nelson's campaign manager for President
Second-tier posts in the Nixon State Department
went to financial elite figures. Thus, the following men were
successively Under Secretaries of State (after 1972, Deputy Secretaries)
in the Nixon White House: Elliot L. Richardson, partner of a Boston
Brahmin corporate law firm and a director of the New England Trust
Co., and a man whose uncle, Henry L. Shattuck, had long been a
director of the New England Merchants National Bank and of the
Mutual Life Insurance Co. of New York.
John N. Irwin II, partner of a Wall St.
law firm (Patterson, Belknap & Webb) long associated with
the Rockefeller interests, and whose wife was a sister of the
Watson brothers family of IBM.
Kenneth Rush, president of Union Carbide
Corp., and a director of the Bankers Trust Co. of New York. Robert
S. Ingersoll, chairman of the board of Borg-Warner Corp. and a
director of the First National Bank of Chicago.
Also, the Deputy Under-Secretary of State
for Economic Affairs under Nixon was Nathaniel Samuels, a partner
in the investment-banking house of Kuhn, Loeb & Co., and a
director of the Rockefeller-controlled International Basic Economy
Henry A. Kissinger
But of course the dominant foreign policy
figure in both the Nixon and Ford Administrations was not William
Rogers but Henry A. Kissinger, who was named national security
adviser and soon became virtually the sole force in foreign policy,
officially replacing Rogers as Secretary of State in 1973.
Kissinger was virtually "Mr. Rockefeller."
As a Harvard political scientist, Kissinger had been discovered
by John J. McCloy, and made director of a CFR group to study the
Soviet threat in the nuclear age. He was soon made director of
a special foreign policy studies project of the Rockefeller Brothers
Fund, and from there became for more than a decade Nelson Rockefeller's
chief personal foreign policy adviser.
Only three days before accepting the Nixon
Administration post, Rockefeller gave Kissinger $50,000 to ease
the fiscal burdens of his official post. Nixon and Kissinger re-escalated
the Vietnam War by secretly bombing and then invading Cambodia
in 1969 and 1970; they could be sure of compliance from Ellsworth
Bunker, whom Nixon retained as Ambassador to South Vietnam until
the end of the war.
Apart from the Vietnam War, the Nixon
Administration's major foreign policy venture was the CIA-led
overthrow of the Marxist Allende regime in Chile. U.S. firms controlled
about 80 percent of Chile's copper production, and copper was
by far Chile's major export. In the 1970 election, the CIA funnelled
$1 million into Chile in an unsuccessful attempt to defeat Allende.
The new Allende regime then proceeded to nationalize large U.S.-owned
firms, including Anaconda and Kennecott Copper and the Chile Telephone
Co., a large utility which was a subsidiary of ITT (International
Telephone and Telegraph Co.).
Under the advice of Henry Kissinger and
of ITT, the CIA funneled $8 million into Chile over the next three
years, in an ultimately successful effort to overthrow the Allende
regime. Particularly helpful in this effort was John A. McCone,
the West Coast industrialist whom Johnson had continued in charge
of the CIA. Now a board member of ITT, McCone continued in constant
contact by being named a consultant to the CIA on the Chilean
question. President Nixon continued Johnson holdover Richard Helms
as head of the CIA, and Helm's outlook may have been influenced
by the fact that his grandfather, Gates W. McGarrah, had been
the head of the Mechanics and Metals National Bank of New York,
director of Bankers Trust, and chairman of the board of the powerful
Federal Reserve Bank of New York.
Of the $8 million poured into Chile by
the CIA, over $1.5 million was allocated to Chile's largest opposition
newspaper, El Mercurio, published by wealthy businessman Augustin
Edwards. Edwards was also, not coincidentally, vice president
of Pepsico, a company headed by President Nixon's close friend
Donald M. Kendall. The transaction was arranged at a quiet breakfast
meeting in Washington, set up by Kendall, and including Edwards
and Henry Kissinger. After the successful overthrow of Allende
by a military junta in September 1973, the man who became the
first Minister of Economy, Development, and Reconstruction was
Fernando Leniz, a high official of El Mercurio who also served
on the board of the Chilean subsidiary of the Rockefeller-controlled
International Basic Economy Corporation.
Richard Nixon also established, for the
first time, diplomatic relations with Communist China. Nixon was
urged to take this step by a committee of prominent businessmen
and financiers interested in promoting trade with and investments
in China. The group included Kendall; Gabriel Hauge, chairman
of Manufacturers Hanover Trust Co.; Donald Burnham, head of Westinghouse;
and David Rockefeller, chairman of the Chase Manhattan Bank.
The first envoy to China was the veteran
elite figure and diplomat, David K.E. Bruce, who had married a
Mellon, and who had served in high diplomatic posts in every Administration
since that of Harry Truman. After Bruce became Ambassador to NATO,
he was replaced by George H.W. Bush, a Texas oil man who had served
briefly as Ambassador to the United Nations. More important than
Bush's Texas oil connections was the fact that his father, Connecticut
Senator Prescott Bush, was a partner at Brown Brothers, Harriman.
The Trilateral Commission
In July 1973 a development occurred which
was to have a critical impact on U.S. foreign - and domestic -
policy. David Rockefeller formed the Trilateral Commission, as
a more elite and exclusive organization than the CFR, and containing
statesmen, businessmen, and intellectuals from Western Europe
The Trilateral Commission not only studied
and formulated policy, but began to place its people in top governmental
posts. North American secretary and coordinator for the Trilaterals
was George S. Franklin, Jr., who had been for many years executive
director of the CFR. Franklin had been David Rockefeller's roommate
in college and had married Helena Edgell, a cousin of Rockefeller.
Henry Kissinger was of course a key member of the Trilaterals,
and its staff director was Columbia University political scientist
Zbigniew Brzezinski, who was also a recently selected director
of the CFR.
President Ford continued Kissinger as
his Secretary of State and top foreign policy director. Kissinger's
leading aide during the Ford years was Robert S. Ingersoll, Trilateralist
from Borg-Warner Corp. and the First National Bank of Chicago.
In 1974, Ingersoll was replaced as Deputy Secretary of State by
Charles W. Robinson, a businessman and Trilateralist.
Ambassador to Great Britain - and then
moved to several other posts - was Elliot Richardson, now a Trilateralist
and a director of the CFR. George Bush, Trilateralist, was retained
as Ambassador to China, and then became director of the CIA. He
was replaced as Ambassador by Thomas S. Gates, Jr., head of the
Morgans' flagship bank, Morgan Guaranty Trust Co. Meanwhile, Robert
McNamara continued to head the World Bank. Becoming head of the
Export-Import Bank in 1975 was Stephen M. DuBrul, Jr., who had
had the distinction of being a partner of both Lehman Brothers
and Lazard Freres.
James Earl Carter and his administration
were virtually complete creatures of the Trilateral Commission.
In the early 1970s, the financial elite was looking for a likely
liberal Southern governor who might be installed in the White
House. They were considering Reubin Askew and Terry Sanford, but
they settled on the obscure Georgia governor, Jimmy Carter. They
were aided in their decision by the fact that Jimmy came highly
In the first place, it must be realized
that "Atlanta" has for decades meant Coca-Cola, the
great multi-billion dollar corporation which has long stood at
the center of Atlanta's politico-economic power elite. Jimmy Carter's
long-time attorney, close personal friend, and political mentor
was Charles Kirbo, senior partner at Atlanta's top corporate law
firm of King & Spalding.
King & Spalding had long been the
general counsel to Coca-Cola, and also to the mighty financial
firm, the Trust Co. of Georgia, long known in Atlanta as "the
Coca-Cola bank." The long-time head and major owner of Coca-Cola
was the octogenarian Robert W. Woodruff, who had long been highly
influential in Georgia politics. With Kirbo at his elbow, Jimmy
Carter soon gained the whole-hearted political backing of the
Financial contributors to Carter's race
in the 1971 Democratic primary for governor were: John Paul Austin,
powerful chairman of the board of Coca-Cola; and three vice-presidents
of Coke, including Joseph W. Jones, the personal assistant to
Robert Woodruff. If Pepsi was a Republican firm, Coke had long
been prominent in the Democratic Party; thus, James A. Farley,
long-time head of the Democratic National Committee, was for thirty-five
years head of the Coca-Cola Export Company.
In 1971, Carter was introduced to David
Rockefeller by the latter's friend J. Paul Austin, who was to
become a founding member of the Trilateral Commission. Austin
was long connected with the Morgan interests, and served as a
director of the Morgan Guaranty Trust Co., and of Morgan's General
Electric Co. Other early political backers of Jimmy Carter were
the Gambrell brothers, David and E. Smyth, of a family which was
a major stockholder in Rockefeller-controlled Eastern Air Lines.
The Gambrell law firm, indeed, served as the general counsel for
Eastern. They, too, aided in forming the Carter-Rockefeller connection.
During the same period, Carter was also
introduced to the powerful Hedley Donovan, editor-in-chief of
Time magazine, who was also to be a founding Trilateral. Rockefeller
and Donovan liked what they saw, and Carter was also recommended
to the Trilaterals by the Atlanta Committee of the Council on
Jimmy Carter was invited to become a member
of the Trilateral Commission shortly after it was formed, and
he agreed enthusiastically. Why did the Trilaterals appoint an
obscure Georgia governor with admittedly no knowledge of foreign
affairs? Ostensibly because they wanted to hear the views of a
Southern governor. Far more likely, they were grooming him for
the Presidency and wanted to instruct him in trilateralism. Carter
took instruction well, and he wrote later of the many happy hours
he spent sitting at the feet of Trilateral executive director
and international relations expert Zbigniew Brzezinski.
What the unknown Carter needed more than
even money for his 1975-1976 campaign for President was extensive
and favorable media exposure. He received it from the Trilateral-influenced
Establishment media, led by Time's Hedley Donovan and Trilateral
syndicated columnists Joseph Kraft and Carl Rowan.
Major New York Carter backers, who served
on the Wall Street Committee for Carter or hosted gatherings on
his behalf, included Roger C. Altman, partner of Lehman Brothers,
the chairman of which, Peter G. Peterson, was a Trilateral member;
banker John Bowles; C. Douglas Dillon, of Dillon, Read, who also
served as a member of the international advisory board of the
Chase Manhattan Bank; and Cyrus Vance, a Trilateral founder and
vice-chairman of the CFR.
Furthermore, of the six national finance
directors of Jimmy Carter's costly pre-convention race for the
Presidential nomination, three were high officials at Lehman Brothers,
one was a vice-president of Paine, Webber, another was a vice-president
of Kidder, Peabody, and a sixth was the venerable John L. Loeb,
senior partner of Loeb, Rhodes, & Co., and a Lehman by marriage.
Other prominent business fund-raisers for Carter's election campaign
included Walter Rothschild, who had married a member of the Warburg
family of Kuhn, Loeb & Co., and Felix Rohatyn, a partner of
The Carter Administration proved to be
Trilateral through and through, especially in foreign affairs.
Trilateral members holding high posts in the Carter Administration
President, James Earl Carter;
Vice-President Walter, ("Fritz") Mondale;
National Security Adviser, Zbigniew Brzezinski;
Secretary of State Cyrus Vance, who was now chairman of the board
of the Rockefeller Foundation. Vance's law firm of Simpson, Thacher
& Bartlett had long served as general counsel for Lehman Brothers
and Manufacturers Hanover Trust Co. Vance himself served up to
1977 as a director of IBM, the New York Times Co., and Lehman's
One William Street Fund. It perhaps also helped Vance's cause
that Simpson, Thacher & Bartlett was the New York general
counsel for Coca-Cola Co.
Deputy Secretary of State, Warren Christopher. This Los Angeles
corporate lawyer had no diplomatic experience whatever for this
high post, but his law firm of O'Melveny and Myers was a prominent
one, and he acted as the Los Angeles attorney for IBM. More important
was the fact that Christopher was the only Trilateral Commission
member from the Western half of the United States.
Under-Secretary of State for Economic Affairs, Richard Cooper.
This Yale professor was also on the board of the Rockefeller-controlled
J. Henry Schroder Banking Corporation.
Under-Secretary of State for Security Assistance, Science, and
Technology, Lucy Wilson Benson. Mrs. Benson had been a longtime
president of the League of Women Votes and highly active in Common
Cause; she was also a board member of the Lehman-oriented Federated
Assistant Secretary of State for East Asian and Pacific Affairs,
Ambassador at Large, Henry D. Owen, of the Brookings institution
and the CFR.
Ambassador at Large for the Law of the Sea Treaty, Elliot Richardson.
Ambassador at Large for Non-Proliferation Matters (nuclear weapons
negotiations), Gerald C. Smith, head of the U.S. delegation at
the SALT talks under Nixon, Washington attorney at Wilmer, Cutler
& Pickering, and North American Chairman of the Trilateral
Ambassador to the United Nations Andrew Young.
Chief Disarmament Negotiator, Paul C. Warnke, senior partner
of Clark Clifford's influential Washington law firm.
Assistant Secretary of the Treasury for International Affairs,
C. Fred Bergsten, of the Brookings Institution, consultant to
the Rockefeller Foundation, and a member of the editorial board
of the CFR's prestigious quarterly journal, Foreign Affairs.
Ambassador to Communist China, Leonard Woodcock, formerly head
of the United Automobile Workers. It is interesting to note that
it was under the Carter-Woodcock aegis that, one week after the
first establishment of formal ambassadorial relations with Communist
China, China signed an agreement with Coca-Cola giving it exclusive
cola sales in that country.
Secretary of Defense, Harold Brown. This physicist was president
of the California Institute of Technology - the only Trilateral
college president - and also served on the board of IBM and of
Schroders, Ltd., the Rockefeller-controlled British parent company
of J. Henry Schroder Bank of New York.
Deputy to the Director of the CIA, Harvard Professor Robert R.
Secretary of the Treasury, W. Michael Blumenthal, head of Bendix
Corp., a director of the CFR, and a trustee of the Rockefeller
Chairman of the Federal Reserve Board, Paul A. Volcker. Volcker
was named chairman by President Carter at the suggestion of David
Rockefeller. Small wonder, since Volcker had been an executive
at the Chase Manhattan Bank, and was a director of the CFR and
a trustee of the Rockefeller Foundation.
And finally, White House Advisor on Domestic and Foreign Policy,
Hedley Donovan, formerly editor-in-chief of Time magazine.
One of the first important Carter foreign policy actions was the
negotiation of the Panama Canal treaty, giving the Canal to Panama,
and settling the controversy in such a way that U.S. taxpayers
paid millions of dollars to the Panama government so they could
repay their very heavy loans to a number of Wall Street banks.
One co-negotiator of the treaty was Ellsworth
Bunker, who bad been engaged in fruitless negotiations since 1974.
The treaty was not concluded until Carter added as co-negotiator
the Trilateralist Sol Linowitz, a senior Washington partner of
the Wall Street corporate law firm of Coudert Brothers, and a
board member of Pan-Am Airways, the Marine Midland Bank of New
York, and Time, Inc.
The Marine Midland Bank itself held part
of two bank consortium loans to Panama. Furthermore, no fewer
than 32 Trilaterals were on the boards of the 31 banks participating
in a $115 million 10-year Eurodollar Panama loan issued in 1972;
and 15 Trilaterals were on the boards of fourteen banks participating
in the $20 million Panama promissory note issued in the same year.
Another crucial foreign policy action
of the Carter regime was the President's reluctant decision to
admit the Shah of Iran into the U.S., a decision that led directly
to the Iran hostage crisis and the freezing of Iranian assets
in the U.S. Carter was pressured into this move by the persistent
lobbying of David Rockefeller and Henry Kissinger, who might well
have realized that a hostage crisis would ensue. As a result,
Iran was prevented from pursuing its threat of taking its massive
deposits out of Chase Manhattan Bank, which would have caused
Chase a great deal of financial difficulty. In politics, one hand
washes the other.
Kissinger, by the way, was scarcely put
back in the shadows when he left government office in 1977. He
quickly became a director of the CFR, a member of the executive
committee of the Trilateral Commission, and chairman of the International
Advisory Board of the Chase Manhattan Bank.
While Ronald Reagan's early campaigning
included attacks on the Trilateral Commission, the Trilateralists
have by now been assured that the Reagan Administration is in
The signal was Reagan's choice of Trilateralist
George Bush, who had also become a director of the First International
Bank of London and Houston, as Vice-President of the United States,
and of Reagan's post-convention reconciliation visit to Washington
and to the home of David Rockefeller.
Reagan's most influential White House
aides, like James A. Baker, had been top campaigners for Bush
for President in 1980. The most influential corporate firm in
the Reagan Administration is the California-based Bechtel Corporation.
Bechtel vice-president and general counsel Caspar Weinberger,
a Trilateralist, is Secretary of Defense, and fellow top Bechtel
executive George Shultz, former board member of Borg-Warner Corp,
General American Transportation Corp., and Stein, Roe & Farnham
Balanced Fund, is Secretary of State.
Trilateralist Arthur F. Burns, former
Chairman of the Fed, is ambassador to West Germany, Paul Volcker
has been reappointed as head of the Fed, and Henry Kissinger is
at least partially back as head of a Presidential Commission to
study the question of Central America.
It is hard to see how the Trilateralists
can lose in the 1984 elections. On the Republican ticket they
have George Bush, the heir apparent to Ronald Reagan; and in the
Democratic race the two front-runners, Walter Mondale and John
Glenn, are both Trilateralists, as is Alan Cranston of California.
And, as a long shot, John Anderson of the "National Unity
Party" is also a Trilateral member. To paraphrase a famous
statement by White House aide Jack Valenti about Lyndon Johnson,
the Trilateralists and the financial power elite can sleep well
at night regardless of who wins in 1984.
Murray N. Rothbard (1926-1995) was the
author of Man, Economy, and State, Conceived in Liberty, What
Has Government Done to Our Money, For a New Liberty, The Case
Against the Fed, and many other books and articles. He was also
the editor - with Lew Rockwell - of The Rothbard-Rockwell Report.
Afterword By Justin Raimondo
Murray Rothbard's 1984 analysis of modern
American history as a great power struggle between economic elites,
between the House of Morgan and the Rockefeller interests, culminates
in the following conclusion: "the financial power elite can
sleep well at night regardless of who wins in 1984." By the
time you get there, the conclusion seems understated indeed, for
what we have here is a sweeping and compressed history of 20th
century politics from a power elite point of view. It represents
a small and highly specialized sample of Rothbard's vast historical
knowledge coming together with a lifetime devoted to methodological
individualism in the social sciences. It appeared first in 1984,
in the thick of the Reagan years, in a small financial publication
called World Market Perspective. It was printed for a larger audience
by the Center for Libertarian Studies in 1995, and appears in
2005 online for the first time.
Theoreticians Left and Right are constantly
referring to abstract "forces" when they examine and
attempt to explain historical patterns. Applying the principle
of methodological individualism - which attributes all human action
to individual actors - and the economic principles of the Austrian
School, Rothbard formulated a trenchant overview of the American
elite and the history of the modern era.
Rothbard's analysis flows, first, from
the basic principles of Austrian economics, particularly the Misesian
analysis of banking and the origin of the business cycle. This
issue is also discussed and elaborated on in one of his last books,
The Case Against the Fed (Mises Institute, 1995). Here, the author
relates the history of how the Federal Reserve System came to
be foisted on the unsuspecting American people by a high-powered
alliance of banking interests. Rothbard's economic analysis is
clear, concise, and wide-ranging, covering the nature of money,
the genesis of government paper money, the inherent instability
(and essential fraudulence) of fractional reserve banking, and
the true causes of the business cycle.
As Rothbard explains in his economic writings,
the key is in understanding that money is a commodity, like any
other, and thus subject to the laws of the market. A government-granted
monopoly in this, the very lifeblood of the economic system, is
a recipe for inflation, a debased currency - and the creation
of a permanent plutocracy whose power is virtually unlimited.
In the present essay, as in The Case Against
the Fed, it is in the section on the history of the movement to
establish the Federal Reserve System that the Rothbardian power
elite analysis comes into full and fascinating play. What is striking
about this piece is the plethora of details. Rothbard's argument
is so jam-packed with facts detailing the social, economic, and
familial connections of the burgeoning Money Power, that we need
to step back and look at it in the light of Rothbardian theory,
specifically Rothbard's theory of class analysis.
Rothbard eagerly reclaimed the concept
of class analysis from the Marxists, who expropriated it from
the French theorists of laissez-faire. Marx authored a plagiarized,
distorted, and vulgarized version of the theory based on the Ricardian
labor theory of value. Given this premise, he came up with a class
analysis pitting workers against owners.
One of Rothbard's many great contributions
to the cause of liberty was to restore the original theory, which
pitted the people against the State. In the Rothbardian theory
of class struggle, the government, including its clients and enforcers,
exploits and enslaves the productive classes through taxation,
regulation, and perpetual war. Government is an incubus, a parasite,
incapable of producing anything in its own right, and instead
feeds off the vital energies and productive ability of the producers.
This is the first step of a fully-developed
libertarian class analysis. Unfortunately, this is where the thought
processes of all too many alleged libertarians come to a grinding
halt. It is enough, for them, to know the State is the Enemy,
as if it were an irreducible primary.
As William Pitt put it in 1770, "There
is something behind the throne greater than the king himself."
Blind to the real forces at work on account of their methodological
error, Left-libertarians are content to live in a world of science
fiction and utopian schemes, in which they are no threat to the
powers that be, and are thus tolerated and at times even encouraged.
The Left-libertarian failure to take the
analytical process one step further is, in many cases, a failure
of nerve. For it is clear, given libertarian theory and the economic
insights of the Austrian School, where the next step leads. No
empirical evidence is necessary, at this point (although that
will come later, and in spades); the truth can be deduced from
pure theory, specifically the Austrian theory of the nature of
money and banking, and the Misesian analysis of the origin of
the business cycle.
This deduction was brilliantly and colorfully
made in the first issue of The Journal of Libertarian Studies
(Winter 1977), by two students of Rothbard, Walter E. Grinder
and John Hagel III, in "Toward a Theory of State Capitalism:
Ultimate Decision-Making and Class Structure."
While a pure free market would necessarily
prevent the development of a banking monopoly, "however,
the market system does concentrate entrepreneurial activity and
decision-making within the capital market because of the considerable
benefits which are rendered by a certain degree of specialization."
This "specialized capital market,
by the very nature of its integrative role within the market system,
will emerge as a strategic locus of ultimate decision-making."
Given that some individuals will choose the political means over
the economic, some of these great fortunes will utilize their
tremendous resources to cartelize the market and insulate themselves
against risk. The temptation for bankers in particular to wield
the power of the State to their benefit is very great because
it permits banks to inflate their asset base systematically. The
creation of assets made possible by these measures to a great
extent frees the banking institutions from the constraints imposed
by the passive form of ultimate decision-making exercised by their
depositors. It thereby considerably strengthens the ultimate decision-making
authority held by banks vis-à-vis their depositors. The
inflationary trends resulting from the creation of assets tend
to increase the ratio of external financing to internal financing
in large corporations and, as a consequence, the ultimate decision-making
power of banking institutions increase over the activities of
The Austrian insight focuses on the key
role played by the central banks in generating the distortion
of market signals that leads to periodic booms and busts, the
dreaded business cycle which is always blamed on the inherent
contradictions of unfettered capitalism.
But in fact this capitalism is anything
but unfettered. (Try starting your own private bank.) The last
thing American bankers want is an unfettered banking system. Rothbard
not only traces the original market distortion that gives rise
to the business cycle, but also identifies the source (and chief
beneficiaries) of this distortion. It was Mises who pointed out
that government intervention in the economy invariably leads to
yet more intervention in order to "fix" the havoc wreaked
- and there is a certain logic in the fact that it was the original
culprits who decided to "fix" the distortions and disruptions
caused by their policies with further assaults on the market mechanism.
As Grinder and Hagel put it:
In the U.S., this intervention initially
involved sporadic measures, both at the federal and state level,
which generated inflationary distortion in the monetary supply
and cyclical disruptions of economic activity. The disruptions
which accompanied the business cycle were a major factor in the
transformation of the dominant ideology in the U.S. from a general
adherence to laissez-faire doctrines to an ideology of political
capitalism which viewed the state as a necessary instrument for
the rationalization and stabilization of an inherently unstable
Capitalists as Enemies of Capitalism
This explains the strange historical fact,
recounted at length and in detail by Rothbard, that the biggest
capitalists have been the deadliest enemies of true capitalism.
For virtually all of the alleged social "reforms" of
the past fifty years were pushed not only by "idealistic"
Leftists, but by the very corporate combines caricatured as the
top-hatted, pot-bellied "economic royalists" of Wall
The neoconservative Right depicts the
battle against Big Government as a two-sided Manichean struggle
between the forces of light (that is, of capitalism) and the remnants
of largely discredited Leftist elites. But Rothbard's historical
analysis reveals a much richer, more complex pattern: instead
of being two-sided, the struggle for liberty pits at least three
sides, each against the other. For the capitalists, as John T.
Flynn, Albert Jay Nock, and Frank Chodorov all pointed out, were
never for capitalism. As Nock put it:
It is one of the few amusing things in
our rather stodgy world that those who today are behaving most
tremendously about collectivism and the Red menace are the very
ones who have cajoled, bribed, flattered and bedeviled the State
into taking each and every one of the successive steps that lead
straight to collectivism. ["Impostor Terms," Atlantic
Monthly, February 1936.]
The New Deal economic policy was, as Rothbard
demonstrated, prefigured by Herbert Hoover, champion of big business,
and foreshadowed in the reforms of the Progressive era. As the
revisionist economic historians, such as Gabriel Kolko, have shown,
those who regulated the great industries in the name of progressive
"reform" were recruited from the very cartels and trusts
they were created to tame.
And of course the monopolists didn't mind
being tamed, so long as their competitors were tamed (if not eliminated).
Every giant leap forward of economic planning and centralization
- central banking, the welfare state, "civil rights,"
and affirmative action - was supported if not initiated by the
biggest and most politically powerful business interests in the
country. The House of Morgan, the Rockefellers, and the Kuhn-Loebs
must take their place alongside the First, Second, and Third Internationals
as the historic enemies of liberty.
Giant multinational corporations, and
their economic satellites, in alliance with governments and the
big banks, are in the process of extending their influence on
a global scale: they dream of a world central bank, global planning,
and an international welfare state, with American troops policing
the world to guarantee their profit margins.
After the long battle to create a central
bank in the U.S., the high priests of high finance finally seized
and consolidated control of domestic economic policy. It only
remained for them to extend their dominance internationally, and
for this purpose they created the Council on Foreign Relations,
and, later, the Trilateral Commission.
These two groups have been seized upon
by the new populist Right as the virtual embodiments of the Power
Elite, and rightly so. It is only by reading Rothbard, however,
that this insight is placed in its proper historical perspective.
For the fact of the matter is that, as Rothbard shows, the CFR/
Trilateralist network is merely the latest incarnation of a trend
deeply rooted in modern American history. Long before the founding
of the CFR or the Trilateral Commission, there was a power elite
in this country; that elite will likely endure long after those
organizations are gone or transmuted into something else. Rothbard's
unmasking of the historical and economic roots of this trend is
vital in understanding that this is not a "conspiracy"
centered in the CFR and the Trilateralist groups, as such, but
an ideological trend traditionally centered in the Northeast,
among the upper classes, and deeply rooted in American history.
I put the word "conspiracy"
in quotes because it has become the favorite swearword of the
Respectable Right and the "extremist"-baiting Left.
If it is conspiracy-mongering to believe that human beings engage
in purposeful activity to achieve their economic, political, and
personal goals, then rational men and women must necessarily plead
guilty. The alternative is to assert that human action is purposeless,
random, and inexplicable. History, in this view, is a series of
Yet it would be inaccurate to call the
Rothbardian world view a "conspiracy theory." To say
that the House of Morgan was engaged in a "conspiracy"
to drag the U.S. into World War I, when indeed it openly used
every stratagem, every lever both economic and political, to push
us into "the war to end all wars," seems woefully inadequate.
This was not some secret cabal meeting in a soundproof corporate
boardroom, but a "conspiracy" of ideas openly and vociferously
expressed. (On this point, please note and underscore Rothbard's
analysis of the founding of The New Republic as the literary flagship
of "the growing alliance for war and statism" between
the Morgan interests and liberal intellectuals - and isn't it
funny how some things never change?)
A conspiracy theory attributes virtually
all social problems to a single monolithic agency. Radical feminism,
which attributes all the evil in the world to the existence of
men, is a classic conspiracy theory; the paranoid views of the
ex-Communists in the conservative movement, who were obsessed
with destroying their ex-comrades, was another.
But the complexity and subtlety of the
Rothbardian analysis, backed up by the sheer mass of rich historical
detail, sets Rothbard on an altogether different and higher plane.
Here there is no single agency, no omnipotent central committee
that issues directives, but a multiplicity of interest groups
and factions whose goals are generally congruent.
In this milieu, there are familial, social,
and economic connections, as well as ideological complicity, and
none is better than Rothbard at ferreting out and unraveling these
biographical details. Taken together, the author's small and studied
brushstrokes paint a portrait of a ruling class whose ruthlessness
is surpassed only by its brazen disloyalty to the nation.
It is a portrait that remains unchanged,
in its essentials, to this day. Wall Street, Banks, and American
Foreign Policy was written and published in 1984, during the Reagan
Reagan started out by denouncing the power
elite and specifically the CFR and the Trilateralists, but wound
up with that epitome of the Establishment, Skull-&-Bonesman
George Bush as his vice president and successor.
Bush is a longtime CFR director, and Trilateralist;
most of his major cabinet officers, including his chairman of
the joint chiefs, Colin Powell, were CFR members. The Clinton
administration is similarly afflicted, from the President (CFR/Trilateral)
on down through Donna Shalala (CFRJ Trilateral) and George Stephanopoulos
(CFR), with the CFR honeycombed (as usual) throughout the State
Department. In addition to Secretary of State Warren Christopher,
other CFR members in the Clinton cabinet include Laura Tyson,
chairman of the Council of Economic advisors, Treasury Secretary
Robert Rubin; Interior Secretary Bruce Babbitt, HUD honcho Henry
Cisneros; and Alice Rivlin, 0MB director.
The other side of the aisle is equally
co-opted at the leadership level, as vividly dramatized by Gingrich's
retreat before the power and majesty of Henry Kissinger. One naturally
expects cowardice from politicians, but the indictment also includes
what passes for the intellectual leaders of the Republican free-market
There is a certain mentality that, no
matter how convincing the evidence, would never even consider
the argument put forward in Wall Street, Banks, and American Foreign
Policy. This attitude stems from a particular kind of cowardice.
It is a fear, first of all, of not being listened to, a dread
of consigning oneself to the role of Cassandra, the ancient Greek
prophetess who was granted the power of foresight by the gods,
with but a single limitation: that none would ever heed her warnings.
It is far easier, and so much more lucrative, to play the role
of court historian.
This is a role the author of this scintillating
pamphlet never could have played, even if he had tried. For the
truth (or, at least, the search for it) is so much more interesting
than the official histories and the conventional wisdom of the
moment. The sheer pleasure Rothbard took in unearthing the truth,
in carrying out his vocation as a true scholar, is evident not
only on every page of the present work but throughout his 28 books
and thousands of articles and speeches.
Rothbard was not afraid of sharing Cassandra's
fate because, in the first place, truth is a value in its own
right, and ought to be upheld for its own sake. Second, the truth
has a way of eventually getting out, in spite of the most strenuous
efforts to suppress it.
Justin Raimondo, author of An Enemy of
the State: the Life of Murray N. Rothbard and other books, is
editor of Antiwar.com.
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