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  Praise for

  ALL THE PRESIDENTS’ BANKERS

  “The relationship between Washington and Wall Street isn’t really a revolving door. It’s a merry-go-round. And, as Prins shows, the merriest of all are the bankers and financiers that get rich off the relationship, using their public offices and access to build private wealth and power. Disturbing and important.” —Robert B. Reich, Chancellor’s Professor of Public Policy, University of California at Berkeley

  “Nomi Prins follows the money. She used to work on Wall Street, and now she has written a seminal history of America’s bankers and their symbiotic relationship with all the presidents from Teddy Roosevelt through Barack Obama. It is an astonishing tale. All the Presidents’ Bankers relies on the presidential archives to reveal how power works in this American democracy. Prins writes in the tradition of C. Wright Mills, Richard Rovere, and William Greider. Her book is a stunning contribution to the history of the American Establishment.” —Kai Bird, Pulitzer Prize–winning biographer and author of The Good Spy: The Life and Death of Robert Ames

  “Nomi Prins takes us on a brisk, panoramic, and eye-opening tour of more than a century’s interplay between America’s government and its major banks—exposing the remarkable dominance of six major banks, and for most of the period, the same families, over US financial policy.” —Charles R. Morris, author of The Trillion-Dollar Meltdown

  “Nomi Prins has written a big book you just wish was bigger: page after page of killer stories of bank robbers who’ve owned the banks—and owned the White House. Prins is a born storyteller. She turns the history of the moneyed class into a breathless, page-turning romance—the tawdry affairs of bankers and the presidents who love them. It’s brilliant inside stuff on unforgettable, and unforgivable, scoundrels.” —Greg Palast, investigative reporter for BBC Television and author of Billionaires & Ballot Bandits

  “In this riveting, definitive history, Nomi Prins reveals how US policy has been largely dominated by a circle of the same banking and political dynasties. For more than a century, presidents often acquiesced or participated as bankers subverted democracy, neglected the public interest, and stole power from the American people.” —Paul Craig Roberts, former Wall Street Journal editor and assistant secretary of the US Treasury

  “Nomi Prins has done it again—this time with a must-read, a gripping, historical story on the first corporate staters—the handful of powerful bankers and their decisive influence over the White House and the Treasury Department from the inside and from the outside to the detriment of the people. All the Presidents’ Bankers speaks to the raw truth today of what Louis D. Brandeis said a hundred years ago: ‘We must break the Money Trust or the Money Trust will break us.’” —Ralph Nader

  “Money has been the common denominator in American politics for the last 115 years, as Nomi Prins admirably points out. All the Presidents’ Bankers is an excellent survey of how money influences power and comes dangerously close to threatening democracy.” —Charles Geisst, author of Wall Street: A History

  “All the Presidents’ Bankers is gracefully written, carefully researched, and accessible. It is a must-read for anyone concerned with politics and economics—in other words, just about everybody.” —Thomas Ferguson, professor of political science, University of Massachusetts, Boston, and senior fellow, Roosevelt Institute

  “From Taft to Obama, Nomi Prins gives the low-down on the cozy ties between bankers and presidents in America. And although the state has become more powerful and the bankers less necessary, things have gotten worse, not better, over the century she describes.” —James Galbraith, professor, The University of Texas at Austin, and author of The Predator State

  ALL THE

  PRESIDENTS’

  BANKERS

  Also by

  NOMI PRINS

  Other People’s Money: The Corporate Mugging of America (2004)

  Jacked: How “Conservatives” Are Picking Your Pocket (Whether You Voted for Them or Not) (2006)

  It Takes a Pillage: An Epic Tale of Power, Deceit, and Untold Trillions (2009)

  Black Tuesday: A Novel (2011)

  Copyright © 2014 by Nomi Prins.

  Published by Nation Books, A Member of the Perseus Books Group

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  Nation Books is a co-publishing venture of the Nation Institute and the Perseus Books Group.

  All rights reserved. No part of this book may be reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For information, address the Perseus Books Group, 250 West 57th Street, 15th Floor, New York, NY, 10107.

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  Designed by Pauline Brown

  Typeset in 11 point Minion Pro by the Perseus Books Group

  Library of Congress Cataloging-in-Publication Data

  Prins, Nomi.

  All the presidents’ bankers : the hidden alliances that drive American power / Nomi Prins.

  pagescm

  Includes bibliographical references and index.

  ISBN 978-1-56858-491-1 (electronic)

  1.United States—Politics and government—20th century.2.United States—Politics and government—2001–2009.3.United States—Politics and government—2009–4.Bankers—Political activity—United States—History—20th century.5.Bankers—Political activity—United States—History—21st century.6.Presidents—United States—History—20th century.7.Presidents—United States—History—21st century.8.Power (Social sciences)—United States—History.9.Alliances—Political aspects—United States—History.10.United States—Economic policy.I.Title.

  E743.P74 2013

  332.10973'0904—dc23

  2013036297

  10987654321

  CONTENTS

  Cast of Main Characters

  Preface

  INTRODUCTION: When the President Needed the Bankers

  CHAPTER 1: The Early 1910s: Post-Panic Creature and Party Posturing

  CHAPTER 2: The Mid-1910s: Bankers Go to War

  CHAPTER 3: The Late 1910s: Peace Treaties and Domestic Politics

  CHAPTER 4: The 1920s: Political Isolationism, Financial Internationalism

  CHAPTER 5: 1929: The Room at 23 Wall, Crash, and Big-Six Take

  CHAPTER 6: The Early 1930s: Tenuous Times, Tax-Evading Titans

  CHAPTER 7: The Mid- to Late 1930s: Policing Wall Street, World War II

  CHAPTER 8: The Early to Mid-1940s: World War II, Bankers, and War Bucks

  CHAPTER 9: The Late 1940s: World Reconstruction and Private Bankers

  CHAPTER 10: The 1950s: Eisenhower’s Buds, Cold War, Hot Money

  CHAPTER 11: The Early 1960s: “Go-Go” Youth, Murders, and Global Finance

  CHAPTER 12: The Mid- to Late 1960s: Progressive Policies and Bankers’ Economy

  CHAPTER 13: The Early to Mid-1970s: Corruption, Gold, Oil, and Bankruptcies

  CHAPTER 14: The Late 1970s: Inflation, Hostages, and Bankers

  CHAPTER 15: The Early to Mid-1980s: Free-Market Rules, Bankers Compete

  CHAPTER 16: The Late 1980s: Third World Staggers, S&Ls Implode

  CHAPTER 17: The Early to Mid-1990s: Killer Instinct, Bank Wars, and the Rise of Goldman Sachs

  CHAPTER 18: The Late 1990s: Currency Crises and Glass-Steagall Demise

 
CHAPTER 19: The 2000s: Multiple Crises, the New Big Six, and Global Catastrophe

  Glossary of Financial Terms

  Acknowledgments

  Notes

  Index

  ON THE MORNING OF MARCH 4, 1933, SECRETARY Hyde produced an account of two bankers involved in the Depression. He recounted that one of them, unshaven, hungry, his shirt gone, approached a circus manager for a job, saying he would do anything just for something to eat. The manager told him that he was not even able to feed his present employees, and that he had already killed the lion to feed the tigers. Just then an employee approached and said the gorilla had died of starvation, upon which the manager exclaimed in desperation, “This is the finish.” Thereupon, the unquenchable, enterprising spirit of the banker came into action, and he proposed they skin the gorilla; he would get into the skin and perform provided he had a square meal and a cut in on the receipts. While he was performing in his cage, the lion in the next compartment pulled open the bars between them and made for him ferociously. The gorilla cried desperately for help. Whereupon the lion whispered in his ear, “Shut up, you fool, you are not the only banker out of a job.”1

  CAST OF MAIN CHARACTERS

  Bankers

  Winthrop Aldrich: President of Chase, 1930–1934. Chairman of Chase, 1934–1953. Banker most publicly supportive of Glass-Steagall Act. Allied with FDR and Truman. Ambassador to Britain under Eisenhower.

  Henry Alexander: Chairman of the Morgan Guaranty Trust Company Bank, 1959–1967. Chairman of J. P. Morgan Bank, 1950–1959. Allied with Eisenhower.

  Samuel Armacost: Chairman of Bank of America, 1981–1986. Allied with Reagan.

  George Baker Sr.: Cofounder and leader of the First National Bank, 1863–1931 (though after 1913, his son George Baker Jr. was more involved running the bank).

  Lloyd Blankfein: Chairman and CEO of Goldman Sachs, 2006–present.

  W. Randolph Burgess: Vice chairman of National City Bank, 1938–1952. Roles up through vice president at Federal Reserve Bank of New York (New York Fed), 1919–1938. Head of NATO, 1956–1962.

  Willard Butcher: Chairman of Chase, 1980–1991.

  George Champion: Chairman of Chase, 1961–1969.

  A. W. Clausen: President and CEO of BankAmerica Corporation, 1970–1981. Chairman of Bank of America, 1986–1990. President of the World Bank, 1981–1986. Allied with Carter and Reagan.

  Jamie Dimon: Chairman of JPMorgan Chase, 2004–present. Class A director of New York Fed, 2007–2012. Received $23 million package in 2011, more than any other bank CEO.

  Thomas Gates: Chairman and CEO of Morgan Guaranty Trust Company, 1965–1976. Secretary of defense under Eisenhower.

  A. P. Giannini: West Coast–based founder of Bank of America. Allied with Truman’s Treasury secretary, John Snyder.

  Gabriel Hauge: Chairman of Manufacturers Hanover, 1970–1979. Eisenhower’s lead economic adviser.

  Thomas Labrecque: Chairman and CEO of Chase Manhattan Bank, 1990–1996.

  Thomas Lamont: Partner, then acting head of J. P. Morgan Bank, 1911–1943. Chairman of J. P. Morgan & Company, 1943–1948. Worked closely with Wilson on the Treaty of Versailles and promoted the League of Nations. Also allied with Hoover and FDR.

  Russell Leffingwell: Chairman of the J. P. Morgan Bank, 1948–1955. Assistant secretary of the Treasury under Wilson. Also allied with FDR and Truman.

  Ken Lewis: Chairman and CEO of Bank of America, 2001–2009.

  John McCloy: Chairman of Chase, 1953–1960. Chairman of Council on Foreign Relations, 1953–1970. President of the World Bank, 1947–1949. Assistant secretary of war during FDR years. US high commissioner to Germany, 1949–1952. Served on Warren Commission after JFK assassination. Involved with “Seven Sisters” oil companies.

  Hugh McColl: Chairman and CEO of Bank of America (having engineered its merger with NationsBank and many others), 1983–2001. Allied with Clinton.

  Charles Mitchell: Chairman of National City Bank, 1929–1933. Allied with Coolidge.

  George Moore: President of First National City Bank, 1959–1967. Chairman of National City Bank, 1967–1970. Mentor to Walter Wriston.

  Jack “J. P.” Morgan (J. P. Morgan Jr.): Head of the Morgan Bank, 1913–1943. Allied with Wilson for war financing effort in World War I. Supported FDR.

  John Pierpont “J. P.” Morgan: Head of the Morgan Bank, 1893–1913. Sponsored Jekyll Island meeting in 1910. Butted heads with Theodore Roosevelt over trustbusting.

  James “Jim” Perkins: Chairman of National City Bank, 1933–1940. Ally of FDR and proponent of Glass-Steagall Act.

  Rudolph Peterson: President and CEO of Bank of America, 1963–1969.

  John Reed: Chairman of Citicorp and postmerger Citigroup, 1984–2000. Protégé of Walter Wriston. Allied with Carter, George H. W. Bush, and Clinton.

  Gordon Rentschler: Chairman of National City Bank, 1940–1948. Allied with Truman.

  David Rockefeller: Chairman of Chase, 1969–1981. Chairman of Council on Foreign Relations, 1970–1985. Allied with (and adversary of) JFK. Also allied with LBJ, Nixon, and Ford. Allied and clashed with Carter on Iran hostage situation after pushing for the Shah to enter the United States.

  James Stillman Rockefeller: Chairman of National City Bank, 1959–1967 (joined the bank in 1930). Allied with Eisenhower.

  John D. Rockefeller: Founder with his brother, William Rockefeller, and head of the Standard Oil Company (1870–1897). With William, also formed a financial alliance with National City Bank.

  James Stillman: President of National City Bank, 1891–1908. Remained chairman of the bank until 1918. Early proponent of international banking expansion. Allied with the Rockefeller brothers and Wilson.

  John Thain: Goldman Sachs copresident, 1999–2004. President of the New York Stock Exchange, 2004–2007. Head of Merrill Lynch, 2007–2009.

  Frank Vanderlip: Vice president, then president, of National City Bank, 1909–1919. Assistant secretary of the Treasury under McKinley. Worked with Nelson Aldrich on Aldrich plan. Early friend of Wilson, later distant.

  Dennis Weatherstone III: Chairman of J. P. Morgan (and knighted by Queen Elizabeth in 1990), 1990–1994. Advocate for dialing back Glass-Steagall.

  Sandy Weill: Chairman of Citigroup, 2000–2006. Orchestrated final push to repeal Glass-Steagall after career of acquisitions that pushed its boundaries.

  Sidney Weinberg: Leader of Goldman Sachs, 1930–1969. Helped finance FDR’s election. Close to FDR, Truman, Eisenhower, JFK, LBJ, and Nixon.

  George Whitney: Chairman of the Morgan Bank, 1950–1955. Joined Morgan in 1915. Progressive banker, allied with Eisenhower.

  Albert “Al” Wiggin: Chairman of Chase, 1917–1933. Helped establish the Bank for International Settlements in 1930.

  Walter Wriston: Chairman of National City Bank (which was renamed Citicorp/Citibank in 1974), 1970–1984. Allied with LBJ, Nixon, and Ford.

  Attendees at the Jekyll Island meeting in 1910 where the Aldrich plan (Federal Reserve core) was created:

  Nelson Aldrich: Rhode Island senator. Allied with J. P. Morgan, the Rockefellers, and President Taft.

  Abraham Piatt Andrew: Assistant secretary of the Treasury.

  Henry Davison: Senior partner at J. P. Morgan.

  Benjamin Strong: Head of J. P. Morgan Bankers Trust Company. Later served as first head of New York Fed.

  Frank Vanderlip: (Noted earlier, in Bankers.)

  Paul Warburg: Partner in Kuhn, Loeb & Company. Representative of Rothschild banking dynasty in England and France. Later appointed by Wilson to Federal Reserve Board.

  The Original 1929 “Big Six”

  George Baker Jr.: Vice chairman, First National Bank

  Thomas Lamont: Acting head of the Morgan Bank

  Charles Mitchell: Chairman, National City Bank

  William Potter: President, Guaranty Trust Company

  Seward Prosser: Chairman, Bankers Trust Company

  Albert Wiggin: Chairman, Chase National Bank

  Ke
y Political Officials

  Nelson Aldrich: Rhode Island senator, 1881–1911. Head of National Monetary Commission, 1908–1911. Integrated with Rockefeller family through progeny.

  Ben Bernanke: Chairman of the Federal Reserve, 2006–2013.

  C. Douglas Dillon: Treasury secretary, 1961–1965. Chairman of the Rockefeller Foundation, 1972–1975.

  Henry “Joe” Fowler: Treasury secretary, 1965–1968. Partner at Goldman Sachs, 1969–1999.

  Timothy Geithner: President of the New York Fed, 2003–2009. Treasury secretary, 2009–2013.

  Carter Glass: US representative from Virginia, 1902–1919. Senator, 1920–1946. Led Senate committee to adopt plan that became the Federal Reserve Act. Treasury secretary, 1918–1920, coauthor Glass-Steagall Act.

  Alan Greenspan: Chairman of the Federal Reserve, 1987–2006. Major proponent and enabler of banking deregulation.

  Colonel Edward House: Friend, confidant, and unofficial adviser to Wilson.

  George Humphrey: Treasury secretary, 1953–1957. Honorary board chairman of the McHanna Company, 1957–1969.

  Jack Lew: Director of the Office of Management and Budget, 1998–2001, 2010–2012. Citigroup banker, 2006–2008. Treasury secretary, 2013–present.

  William Gibbs McAdoo: Son-in-law of Wilson. Treasury secretary, 1913–1918.

  Gates McGarrah: First chairman of New York Fed, 1925–1930. Executive Committee chairman of Chase, 1926–1930. First head of Bank for International Settlements, 1930–1933.

  Andrew William Mellon: Treasury secretary, 1921–1932. Prominent banker, industrialist, philanthropist, and art collector.

  Henry Morgenthau: Treasury secretary, 1934–1945.

  Henry “Hank” Paulson: CEO and chairman of Goldman Sachs, 1999–2006. Treasury secretary, 2006–2009.

  Donald Regan: Treasury secretary, 1981–1985. Chief of staff, 1985–1987. Chairman of Merrill Lynch, 1971–1980.

  Robert Rubin: Cochairman of Goldman Sachs, 1990–1992. Treasury secretary, 1995–1999. First director of National Economic Council, 1993–1995. Often appeared before Congress on behalf of banking deregulation. Joined Citigroup in October 1999, after Glass-Steagall repeal was passed by the Senate. Chairman of Citigroup, November 4–December 11, 2007. Chairman of Council of Foreign Relations, 2007–present.