Wall Street Buys The New Deal
The 1928 Presidential campaign matched Governor Alfred E. Smith, a Catholic with backing from Tammany Hall and a collectivist coloring to his politicking, against Herbert Hoover, a Quaker with a professed leaning to traditional American individualism and self-help. Herbert Hoover won by 21,392,000 votes to Smith's 15,016,000.
Where did the Wall Street banker-philosophers place their support and influence in the Smith-Hoover election? On the basis of the accepted interpretation of the philosophy of financiers, their support should have gone to Herbert Hoover. Hoover promoted the dearly beloved trade associations, dearly loved, that is, by the financial and business community. Further, in American Individualism1 Herbert Hoover made it clear that the ideal system for America was, in his own words, "no system of laissez faire" but, on the contrary, a regulated economy. On the other hand, the most vocally political member of the Wall Street financial establishment in 1928 was John J. Raskob, vice president of Du Pont and of General Motors and a director of Bankers Trust Co. and the County Trust Co. At the personal insistence of Governor Al Smith, Raskob became chairman of the Finance Committee of the Democratic Party. Raskob was also the largest single contributor, giving more than $350,000 to the campaign. What were the policy objectives sought by Raskob and his allies that made Al Smith so attractive a candidate?
1928 the key elements of what became the National Recovery program were
given a public airing by John J. Raskob, Bernard Baruch, and other Wall
Streeters. The promotion of Roosevelt's NRA actually dates from the 1928
Raskob speeches made in the Al Smith Presidential campaign. Although both
Al Smith and Herbert Hoover depended heavily on Wall Street's "golden
circle" for election funds, as we shall detail later in this chapter,
the Du Pont-Raskob-Baruch money was heavily on Al Smith.
Consequently, we can trace and will trace in this chapter the Baruch proposals for NRA and the financial backing of the two Presidential candidates in each election by Raskob, Baruch, Du Pont, Rockefeller, and others of the financial élite. The main backing in each case went to the Democratic candidate willing to promote corporate socialism. In 1928 this was Al Smith, who was also a director of the Morgan-controlled Metropolitan Life Insurance Company; in 1930 it went to Roosevelt with the early bird pre convention contributions for the 1932 Hoover-Roosevelt contest. This was followed in mid-1932 by withdrawal of a great deal of Wall Street support from Herbert Hoover and the wholesale transfer of influence and money toward the election of Roosevelt.
Subsequently, FDR did not abandon his backers. The National Recovery Act with its built-in ability to coerce small business was promised and in June 1933 became law. Let's look then more closely at these events and the related evidence.
According to his own statements Hugh Johnson, the Administrator of Roosevelt's NRA, went through a training program in the 1920s under Bernard Baruch's tutelage. Johnson records this experience as follows:
Johnson himself views the Raskob speeches of September and October 1928 in the Al Smith campaign as the start of Roosevelt's NRA: "There was nothing particularly new in the essence or principles developed. We had worked out and expressed precisely the same philosophy in Al Smith's campaign in 1928. . . ."3
Al Smith, the 1928 Democratic Presidential candidate was, as we have noted, a director of Metropolitan Life Insurance, the largest life insurance company in the U.S. and controlled by J.P. Morgan, and the greater part of his campaign funds came from the golden circle in Wall Street. Bernard Baruch outlined the NRA plan itself on May 1, 1930— an auspicious day for a socialist measure—in a speech at Boston. The content of NRA was all there, the regulation, codes, enforcement, and the carrot of welfare for the workers. It was repeated in Baruch's platform of June 1932—the one that Herbert Hoover refused to adopt. The NRA was presented again by Baruch in testimony before the Senate and in speeches before the Brookings Institution and at Johns Hopkins University. In all, Hugh Johnson counts ten documents and speeches, all presented before the election of Roosevelt in 1932, in which "will be found the development of the economic philosophy of the 1928 campaign and of almost all that happened since. Of a part of this philosophy NRA was a concrete expression."4
The following extracts from Baruch's May 1, 1930 speech contain the core of his proposals:
Baruch wanted by his own words a resurrection of the trade associations, relaxation of anti-trust laws, and control of business leaders and casts the reader back to the War Industries Board of 1918. To be sure, Baruch suggests "no power to coerce" and "open" deliberations, but such protestations of good faith carry small weight in the light of economic history and past furious efforts to establish cartels and combinations in restraint of trade by this same group. It was to further this end that financial support for both Democrats and Republican candidates was forthcoming; the greater part of the financing originated in a relatively small geographical area of New York.
WALL STREET FINANCES THE 1928 PRESIDENTIAL CAMPAIGN
The direction of political support can be measured and identified by related financial support. The origins of the financial contributions to the Smith and Hoover campaigns of 1928 can be identified, and we find, contrary to prevailing beliefs, that it was the Democrats who received the lion's share of funds from Wall Street; as we have seen, it was in the Democratic campaign that the outlines of the National Recovery Act were first promulgated by Baruch and Raskob.
After the 1928 Presidential election the Steiwer Committee of the U.S. House of Representatives investigated the sources of campaign funds funneled into the election6 The detailed information was published, but the Steiwer Committee did not probe into the corporate origins and affiliations of the contributors: it merely listed names and amounts contributed. Table XIII in the report is entitled "Persons contributing sums of $5,000 and over in behalf of Republican presidential candidate." The Republican Presidential candidate was, of course, Herbert Hoover. This table lists full names and the amounts contributed, but without the affiliation of the contributors. Similarly, Table XIV of the report is entitled "Persons contributing sums of $5,000 and over in behalf of Democratic presidential candidate." Again, full names and amounts are given, but the affiliations of the person are not stated.
These lists were taken and matched by the author to the Directory of Directors in the City of New York 1929-1930.7 Where the contributor as listed by the Steiwer Committee was identified as having an address within a one-mile circle of 120 Broadway in New York, the name and amount contributed were noted. No notation was made of persons not in the directory and most probably resident outside of New York City, but a record was kept of the sums of money contributed by the non New York residents. In other words, two totals were constructed from the Steiwer Committee data: (1) contributions from persons listed as directors of companies headquartered in New York and (2) contributions from all other persons. In addition, a list of names of the New York contributors was compiled. In practice, the research procedure was biased against inclusion of the New York-based directors. For example, in the Democratic Party list Van-Lear Black was listed by the author as a non-New York resident, although Black was chairman of the Fidelity & Casualty Co; the company had offices at 120 Broadway, and Franklin D. Roosevelt was their New York vice president in the early 1920s. However, Black was based in Baltimore and therefore not counted as a New York director. Again Rudolph Spreckels, the sugar millionaire, was listed in the Steiwer Committee report for a $15,000 contribution, but is not listed in the New York total, as he did not base himself in New York. Similarly, James Byrne contributed $6500 to the Smith for President campaign, but is not listed as a New York director —he was a director of the Fulton Savings Bank in Brooklyn and outside the one-mile circle. Jesse Jones, the Texas banker, contributed $20,000, but is not listed as a New York director because he was a Texas, not a New York, banker. In other words, the definition of a Wall Street contributor was very tightly and consistently drawn.
Major Wall Street Contributors to the Al Smith For President Campaign—1928
Source: Adapted from Louise Overacker, Money in Elections (New York: Macmillan, 1932), p. 155.
this restricted definition the total amount contributed by Wall Street
directors, mostly connected with major banks, to the Al Smith 1928 Presidential
campaign was $1,864,339. The total amount contributed by persons not within
this golden circle was $500,531, which makes a grand total of $2,364,870.
In brief, the percentage of the Al Smith for President campaign funds
coming from persons giving more than $5000 and also identified as Wall
Street directors was 78.83 per cent. The percentage from donors outside
the golden circle was a mere 21.17 per cent. Looking at the total Al Smith
contributors another way, the large contributors (over $5000) to the Smith
campaign, those in the best position to ask and receive political favors,
put up almost four dollars out of five.
Contributors of $25,000 or More to Democratic National Committee January to December 1928 (including contributions listed in previous table)
Source: Steiwer Committee Report, op. cit.
1928 by Directors* of the County Trust Company.
*The following directors of County Trust Company did not contribute (according
to the records): John J. Broderick, Peter J. Carey, John J. Cavanagh,
William H. English, James P. Geagan, G. Le Boutillier, Ralph W. Long,
John J. Pulleyn, and Parry D. Saylor.
HERBERT HOOVER'S ELECTION FUNDS
When we turn to Herbert Hoover's 1928 campaign, we also find a dependence on Wall Street financing, originating in the golden mile, but not nearly to the same extent as in Al Smith's campaign. Of a large donations total for Herbert Hoover of $3,521,141, about 51.4 per cent came from within this golden mile in New York and 48.6 per cent from outside the financial district.
Contributions of $25,000 or More to Republican National Committee, January to December 1928
Herbert Hoover was, of course, elected President; his relationship to the rise of corporate socialism has been misinterpreted in most academic and media sources. The bulk of liberal-oriented literature holds that Herbert Hoover was some kind of unreconstructed laissez faire Neanderthal. But this view is rejected by Hoover's own statements: for example:
Rothbard points out 9 that Herbert Hoover was a prominent supporter
of Theodore Roosevelt's Progressive Party and, according to Rothbard,
Hoover "challenged in a neo-Marxist manner, the orthodox laissez-faire
view that labor is a commodity and that wages are to be governed by laws
of supply and demand."10 As Secretary of Commerce Hoover
pushed for government cartelization of business and for trade associations,
and his "outstanding" contribution, according to Rothbard,"
was to impose socialism on the radio industry," while the courts
were working on a reasonable system of private property rights in radio
frequencies. Rothbard explains these ventures into socialism on the grounds
that Hoover "was . . . the victim of a terribly inadequate grasp
of economics."11 Indeed, Rothbard argues that Herbert
Hoover was the real creator of the Roosevelt New Deal.
New Deal, there is some validity to Rothbard's argument. Hoover's practical policies were not consistent. There are some pro-free market actions; there are many anti-free market actions. It seems plausible that Hoover was willing to accept a part, possibly a substantial part, of a socialist program, but had a definite limit beyond which he was not willing to go.
During the course of the 1920s, in the years after the formation of the American Construction Council, more than 40 codes of practice compiled by trade associations were adopted. When he became President, and in spite of his early association with the A.C.C., Herbert Hoover promptly ended these industrial codes. He did this on the grounds that they were probably illegal associations to police prices and production and that no government could regulate these in the interest of the public. Then in February 1931 the U.S. Chamber of Commerce formed a group entitled the Committee on Continuity of Business and Employment under Henry I. Harriman. This committee came up with proposals very much like those of the New Deal: that production should be balanced to equal consumption, that the Sherman anti-trust laws should be modified to allow agreements in restraint of trade, that a national economic council should be set up under the auspices of the U.S. Chamber of Commerce, and that provision should be made for shorter hours in industry, for pensions, and for unemployment insurance. This was followed by yet another Hoover committee known as the Committee on Work Periods in Industry under P.W. Litchfield, president of Goodyear Tire and Rubber Company. Then still another committee under Standard Oil Company of New Jersey president Walter Teagle recommended sharing work, a proposal endorsed by the Litchfield Committee. Then came the Swope Plan in 1931 (see Appendix A). The plans were forthcoming, but Herbert Hoover did very little about them.
So, under Herbert Hoover, while big business was prolific in publicizing plans designed to modify the Sherman anti-trust act, allow self regulation by industry, and establish codes in restraint of trade. President Herbert Hoover did nothing to encourage these ventures.
In fact, Hoover recognized the Swope Plan as a fascist measure and recorded this in his memoirs, along with the melancholy information that Wall Street gave him a choice of buying the Swope plan—fascist or not—and having their money and influence support the Roosevelt candidacy. This is how Herbert Hoover described the ultimatum from Wall Street under the heading of "Fascism comes to business—with dire consequences":
WALL STREET BACKS FDR FOR GOVERNOR OF NEW YORK
The chief fund raiser in FDR's 1930 reelection campaign was Howard Cullman, Commissioner of the Port of New York and a director of the County Trust Company. Freidel13 lists the campaign contributors in 1930 without their corporate affiliations. When we identify the corporate affiliations of these contributors, we find once again that County Trust Company of 97 Eighth Avenue, New York had an extraordinarily large interest in FDR's reelection. Apart from Howard Cullman, the following major contributors to FDR's campaign were also directors of the County Trust Company: Alfred Lehman, Alfred (Al) E. Smith, Vincent Astor, and John Raskob. Another director was FDR's old friend Dan Riordan, a customer from Fidelity & Deposit days at 120 Broadway, and William F. Kenny, yet another FDR supporter and director of County Trust. To place this list in focus, we must remember that Freidel lists 16 persons as major contributors to this campaign, and of this 16 we can identify no less than five as directors of County Trust and two other unlisted directors as known FDR supporters. Other prominent Wall Streeters financing FDR's 1930 campaign were the Morgenthau family (with the Lehmans, the heaviest contributors); Gordon Rentschler, president of the National City Bank and director of the International Banking Corporation; Cleveland Dodge, director of the National City Bank and the Bank of New York; Caspar Whitney; August Heckscher of the Empire Trust Company (120 Broadway); Nathan S. Jones of Manufacturers Trust Company; William Woodin of Remington Arms Company; Ralph Pulitzer; and the Warburg family. In brief, in the 1930 campaign the bulk of FDR's financial backing came from Wall Street bankers.
Contributors to the Pre Convention Expenses of FDR ($3,500 and Over)
Shortly after FDR's reelection in 1930, these backers started to raise funds for the 1932 Presidential campaign. These "early bird" pre convention contributions have been described by Flynn: "These contributors, who helped early when the need was great, so thoroughly won Roosevelt's devotion that in most instances they ultimately received substantial returns in public offices and honors."14
WALL STREET ELECTS FDR IN 1932
In 1932 Bernard Baruch was the key operator working behind the scenes—and sometimes not so much behind the scenes—to elect FDR, with the money and influence of big business (see epigraph to this chapter). Further, Bernard Baruch and Hugh Johnson collected numerous statistics and materials over the 1920s decade supporting their concept of national economic planning through trade associations. Johnson recounts how this information became available to FDR's speech writers. During the Roosevelt campaign of 1932:
In rereading the FDR campaign speeches, it becomes obvious that they lack concreteness and specific facts. Presumably the Moley-Tugwell team set out the general theme and Baruch and Johnson introduced supporting statements in such areas as credit expansion, the consequences of speculation, the role of the Federal Reserve system, and so on. It is remarkable, but perhaps not surprising, that these Baruch-influenced speeches took the reader back to World War I, cited the contemporary emergency as greater than that of the war, and then subtly suggested similar Baruchian solutions. For example, at the Jefferson Day Dinner speech of April 18, 1932 Roosevelt said, or was prompted to say:
Then in May 22, 1932 Roosevelt addressed himself to the theme "The Country Needs, the Country Demands, Persistent Experimentation" and called for national economic planning. This speech was followed on July 2, 1932 by the first hint of the New Deal. Finally, in accepting the nomination for the Presidency at Chicago, FDR said "I pledge you—I pledge myself to a New Deal for the American People."
1. New York: Doubleday, Page, 1922.
2. Hugh S. Johnson, The Blue Eagle from Egg to Earth (New York: Doubleday, Doran, 1935), p. 116.
3. Ibid., p. 141.
4. Ibid., p. 157
5. Ibid., pp. 156–7. Italics in original.
6. United States Congress, Senate Special Committee investigating Presidential campaign expenditures, Presidential Campaign Expenditures. Report Pursuant to S. Res. 234, February 25 (Calendar Day, February 28), 1929. 70th Congress, 2nd session. Senate Rept. 2024 (Washington: Government Printing Office, 1929). Cited hereafter as Steiwer Committee Report.
7. New York: Directory of Directors Co., 1929.
8. The Memoirs of Herbert Hoover: The Cabinet and the Presidency 1920-1923 (London: Hollis and Carter, 1952), p. 300.
9. New Individualist Review, Winter, 1966.
10. Ibid., p. 5.
11. Ibid., p.10.
12. Herbert Hoover, The Memoirs of Herbert Hoover: The Great Depression 1929-1941 (New York: Macmillan, 1952), p. 420.
13. Freidel, The Ordeal, op. cit, p. 159.
14. John T. Flynn, "Whose Child is the NRA?" Harper's Magazine Sept. 1932, pp. 84-5.
15. Hugh S. Johnson, The Blue Eagle from Egg to Earth, op. cit., pp. 140-1.
16. The Public Papers and Addresses of Franklin D. Roosevelt; Vol. 1, The Genesis of the New Deal, 1928-1932 (New York: Random House, 1938), p. 632.
Freidel, The Ordeal, op. cit., p. 172.