Monday, April 27, 2015

Yoakum's Dream

Excerpt from "The Frisco: A Look Back..."

The second Frisco Company, formed in 1896, lasted until 1913. These were years of expansion, and it gradually took form as the Frisco directorate was cleared of officers connected with the Santa Fe system, which had dominated the Frisco since 1880. When the Frisco was reorganized as the St. Louis and San Francisco Railroad Company on June 20, 1896, the road owned and operated some 990 miles of track. On June 30, 1897, this had increased to 1,162 miles. At that time its directors were in part hang-overs from the joint Frisco Santa Fe entanglement. D.B. Robinson was president, and Benjamin F. Yoakum was vice-president and general manager. In 1900, shed of its Santa Fe influence in the directorate, B. F. Yoakum became the President, and in 1903 became Chairman of the Board. Often referred to in rail history as 'Yoakum's Dream', one of the most spectacular and rapid developments of rail growth in western and Mississippi valley history took place. This history is highlighted in the following 11 paragraphs.

1. A network of new branches of the original Frisco was built to cover central, western and southern Oklahoma.

2. The system was enlarged by acquisition of the Kansas City, Fort Scott and Gulf system, extending from Kansas City, Mo., through Missouri, Arkansas and to Memphis and Birmingham, Ala. The Frisco was interconnected with the 'Gulf' by a number of short stretches, such as the one from Baxter Springs, Kansas through Quapaw and Miami to Afton, Okla.

3. A concerted effort was made to tie Chicago and St. Louis to the Gulf of Mexico at New Orleans, by acquiring control over the Chicago and Eastern Illinois Railroad, building for that road a double track from Pana, Illinois to St. Louis along the right of way of the 'Big Four' (NYC). This C&EI system was directly connected to Gulf ports by arrangements for at least temporary track rights from the Illinois Central, the Missouri Pacifc, the Iron Mountain, and the Texas Pacific railroads.

4. As might become desirable or necessary, entirely new, low-gradient track would be built on a new line down the west bank of the Mississippi River, starting at St. Louis, connecting up to the Chicago and Eastern Illinois terminus at Chaffee, Mo., and running thence to Memphis. This much was the main line of the St. Louis, Memphis and Southeastern Railroad. From Memphis, as needed, the new line would run to a river crossing at Baton Rouge, where it would intersect the new line to be built from New Orleans to Brownsville, Texas. Thence it had track rights to New Orleans.

5. Proceeding on a half-and-half basis with the Southern Railway Company, the Frisco, represented by the New Orleans Terminal Company, its subsidiary, built and acquired extensive terminal track and facilities in and around the city of New Orleans, including the Chalmette docks and terminals. Use of such facilities were traded the Illinois Central and Missouri Pacific systems for track rights from Memphis to New Orleans. These terminal properties cost the Frisco several million dollars.

6. From New Orleans, a brand new trunk line, now called the 'Costal Lines', but then the St.Louis, Brownsville and Mexican Railroad (New Orleans, Texas and Mexico Railroad) was built not only to develop the coastal region traversed from New Orleans to Galveston, Corpus Christi and Brownsville, but also the potentially rich San Benito Valley, in the extreme southern tip of Texas, on the Rio Grande River -- now one of the richest of America's fruit and vegetable farming centers. This line also was designed to interconnect Frisco Lines with Mexican National Railways at Laredo, Texas, and at Eagle Pass.

7. A new southern Oklahoma line, known as the St. Louis, San Francisco and New Orleans Railroad, running from Ardmore and Hugo in Oklahoma to Hope, Ark., was projected and built to facilitate transport of traffic originating in Colorado, south and west Oklahoma, and northern Texas, to New Orleans. This route was designed to be extended west from Ardmore to Lawton, or to Wichita Falls, Texas. From Hope, Ark., it was to run east to a connection with the main new trunk down the Mississippi west bank from Memphis.

8. Through control of the Fort Worth and Rio Grande Railroad, extending southwest from Fort Worth to Brownwood, Brady and Menard and eventually to San Antonio, with a branch from Brady to Eagle Pass, both Dallas and Fort Worth, as well as the west network of the Frisco System, were to be connected to the Southern Pacific Railroad, and to Mexican lines terminating at Eagle Pass.

9. Direct connections to Galveston from Fort Worth and from Dallas were planned directly over a two-forked road called the Trinity and Brazos Valley Railroad. The Dallas and Fort Worth forks converged at Teague, and ran thence a single line to Galveston.

10. The New Orleans terminal facilities, the Chicago and Eastern Illinois road and improvements made thereto, the east-west branch in south Oklahoma (St. Louis, San Francisco and New Orleans), and the St. Louis, Memphis and Southeastern Lines with all the new road or roads on which track rights were procured, were welded together under a new giant railroad company, the Chicago, St. Louis, Memphis and New Orleans Railroad Company. This had a capital stock of one hundred fifty million dollars, all of which was guaranteed by the main Frisco corporation.

11. Link the entire Frisco System, as thus developed to the Rock Island Railroad. Most of the Rock Island network was then located to the north of the bulk of the Frisco network. The Rock Island connected Chicago with territory to the Northwest of Chicago, including Iowa, and Minnesota. It also covered central and north Missouri, a good portion of Kansas, portions of Arkansas, and had terminal lines in Denver and Colorado Springs. It had a main line connecting Topeka and Herigton with Wichita Kans., to Enid, Chickasha and Terral, Okla. with connecting line into Fort Worth. It also had a line which, as far back as 1845, had been projected by General Fremont as part of the 35th Parallel route to be taken by the Atlantic & Pacific, predecessor of the Frisco. This line extended from Memphis through Little Rock, Ark., to Oklahoma City and beyond to Amarillo, Texas. This line was in the process of extension to Tucumcari, New Mexico, for connection with the Southern Pacific line up from El Paso, and so to the Pacific Coast. Also, a new line was being built from Herington and Hutchinson, Kansas to join the Oklahoma line terminating at Tucumcari. Various other short lines, such as the one from Bonner to Newport, Arkansas, interconnected the Frisco and Rock Island for more effective coordination.

By 1911 practically every feature of the Yoakum plan as outlined above had been carried into effect and completed. The principal link left out was the 'west-side' main line down the Mississippi from Memphis to New Orleans, and the link eastward from Hope, Arkansas joining it. The New Orleans, 'Chalmette' dock facilities were finished, and the 977 mile coastline the 'Brownsville Road' was in operation. As already shown, the Frisco had expanded greatly in Oklahoma, and had taken over the Kansas City, Fort Scott and Gulf System, with its lines to Birmingham.

The St. Louis, Memphis and Southeastern line, 666 miles, connecting St. Louis to Memphis, was operated by the Frisco from July 1,1904. The Chicago and Eastern Illinois lines had been taken over and its Pana-St.Louis line constructed.

Trackage of the Frisco System proper rose from 1,162 miles in 1897 to 1,659 miles in 1900. In 1901 it rose to 1,915 miles and was increased to 3,033 by addition of the 'Gulf' system. By June of 1902, with Oklahoma extensions and the Texas 'Brownwood' line counted, the total mileage was 4,201 and on June 30, 1904 it reached 5,456 miles.

This phenomenal successful development of the Frisco System and relations with the Rock Island was followed by a long string of disasters. Some of these, contributory to the collapse of Frisco's empire were

1. Mexican Republic became the victim of devastating revolutions, wrecking Mexican Railroads and thus the business for the 'Brownsville' road (New Orleans, Texas and Mexico).

2. Operating deficits in 1912-1913 of $904,000 and 1913-1914 of $1,214,000.

3. On March 24, 1912 the Mississippi broke its levees and so completely inundated the Frisco low lying tracks in Arkansas, tying up traffic until May 12, 1912.

4. Levees in Louisiana broke on May 3, 1912, flooding sections of the Brownsville line until June 24, 1912.

5. Because of floods in 1912 net profits were reduced to $177,400 for 1911-1912.

6. In 1911, coal strikes contributed a heavy loss of business.

No railroad system could withstand such operating conditions and on May 27, 1913, the Frisco went into the hands of receivers.

With the Frisco, the C&EI went into receivership. That ended its relations with the Frisco. The New Orleans Brownsville line (New Orleans, Texas and Mexico Railroad) also went into receivership. Frisco and Rock Island systems were dissolved. Certain other short lines like the Brownwood line in Texas were sold.

The Frisco continued in receivership up to August 24, 1916, when the present St. Louis-San Francisco Railway Company took over what property the system had left. The road was operated during World War I by the United States Government, being released in 1920.

Wednesday, December 3, 2014

The Cooperative Movement



Co-operative Directions
By Murray D. Lincoln
The Antioch Review, Vol. 4, No. 4 (Winter, 1944), pp. 607-616

THE CO-OPERATIVE MOVEMENT has firmly established itself on the main street of the American business community. It has, in the past decade, achieved a stature which clearly indicates its place and potential force in the pattern of national economics.

While present co-operative influence in our economy offers no total solution to the limitations of capitalism, co-operatives have clearly indicated their ability to meet certain of these limitations. They have augmented the real income of urban and rural members. They have demonstrated an effective challenge to monopoly. They have created durable and intelligent functional groups. And they have emphasized self-help rather than greater dependence upon state aids. In an economy which promises to solve more of its problems on the state level, cooperatives will be distinguished not only for their self-reliance, but for their practical devotion to genuinely free competition and enterprise.

The past several years have found mounting endorsement of cooperatives in many important segments of American life. Indeed, current attacks on certain types of farm co-operatives by the National Tax Equality Association give additional evidence of increasing public awareness of co-operative institutions.

Co-operatives, then, have come of age. There is every indication that they will continue to grow in both size and influence. What directions may such growth and development take? Some trends are already clearly indicated while others are admittedly conjectural.

GENERAL DIRECTIONS

The co-operative movement in America is predominantly a rural phenomenon. Agriculture accounts for all important producer-marketing activity (annual volume over three billion dollars) and for three-fourths of the nation's consumer co-operative activity. Conservative estimates indicate that one out of four farmers participate in one or more farm co-operative enterprises.

Farm co-operatives (other than service types) fall into three general categories. They include:
  • groups which perform marketing services alone; 
  • groups which perform purchasing services alone; and 
  • general purpose organizations which provide both marketing and purchasing services.

Producer-marketing co-operatives, representing approximately one-third of our farm co-operative organizations, are moving consistently in the direction of general purpose co-operatives. Indications further suggest that they, along with other marketing organizations, will process more raw products for ultimate consumption. The strictly purchasing type of co-operative, in turn, appears to be directing interest toward marketing services, so that the over-all farm co-operative end is toward the general purpose organization.

General purpose co-operatives performing both marketing and purchasing services represent approximately one-half of our farm co-operative organizations. The spectacular purchasing volume of this group has not only attracted wide attention but its entrance into production of farm supplies has been cause for concern in many American business circles.

There is no clearly defined pattern of emphasis on either purchasing or marketing in this group but seventeen such organizations had cooperative purchasing volumes of over two million dollars in 1943. The convenience and efficiency of integrating marketing and purchasing operations through one co-operative organization suggests that such associations will dominate the farm co-operative scene of the future. Indeed, in twenty-five years such organizations may represent the strongest and most vocal agricultural voice in the nation.

Co-operative marketing  of farm products faces its most promising era. The relative simplicity and low cost of quick-freezing and dehydration will influence the marketing operations of all co-operatives in the period ahead. These new processes make possible decentralized on-the-spot preparation of foodstuffs for the ultimate consumer. Co-operative exploitation in this field will bring wider margins to the farmer. Still greater gains may be realized when farm co-operatives  relate their output to growing co-operative consumer demands in our cities. Such relationships may benefit both farmer and consumer. The city consumer will become more and more familiar with the word "co-operative" on the packaged foods he buys in the future.

Farm purchasing co-operatives have clearly indicated their usefulness to members and will expand, both in areas of service and in ownership of production facilities. Towards greater self-sufficiency farmers have through their regional organizations secured ownership of a number of factories. While there is no indication that co-operatively owned production units are more efficient than old-line firms, substantial savings have been effected in distribution. The entrance of farm co-operatives into the manufacture of tractors and farm implements is a fundamental step toward the solution of a vital problem.

Co-operative farmers have long realized the disproportion between manufacturing costs and sales price in this field. Co-operative production of farm machinery should, as it has in other areas, influence the costs downward. The path of monopoly in farm factors of production will be challenged increasingly by co-operatives. Farmers have already indicated their determination and ability to produce for themselves. The ownership, for example, of a tractor factory in Indiana by a number of strongly financed regionals both here and in Canada suggests a pattern which can have tremendous implications for American agriculture.

If present signs are significant, we may expect purchasing c o-operatives to move into still another important field of member service. Recognizing that he spends as much as fifty per cent of his income for food, clothing, and other consumer needs, the farmer is showing increased interest in this phase o f consumer co-operation. While some few purchasing associations already provide general consumer services, most do not. The ramifications of such a development are many. Farm co-operatives offering complete consumer services may attract many urban members. Not only can this strengthen the enterprise but it may facilitate rural-urban relationships.

Farmers will then be encouraging urban co-operative development, which development may in turn provide a more direct and profitable outlet for raw and processed food products. In some cases, certainly, the farmer will choose to limit membership to his occupational group. It remains to be seen how the over-all trend will develop. But farmer interest in more directly meeting his consumer needs is already established and the next decade should witness considerable enterprise in this field.

Urban consumer co-operatives.

In our cities, co-operative development has been limited by a number of factors. Keen competition in the retail field has kept margins low and exploitation at a minimum. Successful invasion of the anonymity and heterogeneity of cities by the co-operative philosophy has been a slow and uphill task for organizers. Progress, however, is constant and current signs are more promising than at any other time in the past twenty-five years. We can reasonably expect urban membership and volume to double in the next ten years. Organization techniques are reaching a new level of realism and effectiveness. Broad endorsement of consumer co-operation by labor union groups is "softening" resistance in many urban centers.

Greater responsibility for organization is being taken by regional wholesale units in the East and Middle West. Streamlined techniques for financing from the "top down" are receiving attention in some sections of the country. Methods of advertising and publicity are approaching competitive quality. Physical plant and equipment, likewise, are more nearly meeting the high standards of competitors.

The attitude today is no longer one of waiting until the public spirit moves. It is one of aggressive and intelligent organization, limited only by the availability of competent staff organizers. Realistic appraisal of present co-operative groups is giving the cue to a more effective education of similar groups. New housing units, publc and private, have lent themselves with particular ease to co-operative organization. The postwar trend toward suburban housing units is a promising field for co-operative penetration.

With a myriad of services offered by consumer associations the food co-operative continues to receive major emphasis. While co-operative production of strictly consumer items represents less than seven per cent of total co-operative manufacture, we may reasonably anticipate expansion of consumer production in the next few years. Such a trend will be augmented by the increasing consumer interest of our farm groups.

Urban consumer development is the number one co-operative problem today. Progress is being made but at few points do we find the spontaneous and natural enthusiasm which so often characterized the rural development. Expansion will take place but it will require tireless and intelligent organizational effort.

Service co-operatives.
Because of their specialized functions, service co-operatives too often receive less attention than their more glamorous associates. These units do, however, play an important role in the over-all co-operative picture. From barbering to burials, these enterprises serve several million rural and  urban Americans. By their almost infinite variety they indicate that co-operatives can adapt themselves to a wide range of consumer experiences.

Co-operatively sponsored insurance now services nearly a score of states. Expansion in all lines is indicated with special emphasis on the extension of health protection. Rural electric co-operatives are growing likewise and have already established a sound basis for the trend toward public ownership of such utilities. Credit unions servicing over three million members have deposits of more than one quarter billion dollars. The small decline in loans and membership during the war is not significant in the long-run development of this enterprise. It is hoped that the future will indicate methods of relating this important service more directly to other areas of consumer co-operation.

The efficiency and quality of service which these service c o-operatives are displaying will doubtless stimulate the trend towards greater public control and ownership in these fields.

OPERATIONAL DIRECTIONS


Three operational areas, including finance, personnel, and national integration, appear to merit special if brief attention. These trends relate themselves to the rural-urban co-operative pattern as a whole.

Finance directions.
Financial stability of co-operative organizations on both local and regional levels is generally the best in their histories. Member equity in ratio to capital structure is at a new high. While warborn
prosperity has made this possible in many cases it also reflects the determination of most organizations to prepare for possible slumps ahead.

While much of this capitalization has resulted from plowing savings back into the various organizations, a considerable amount has come from member subscription. This appears to indicate a rising level of confidence by members in their own institutions. With the existence of strong and well-financed regionals which provide technical assistance to local associations, co-operatives are reaching a new level of business stability.

Few large co-operatives, however, have yet been able to meet all of their credit demands. Short and long term credit requirements are being met largely by commercial and government co-operative banks. It is in this field that a promising direction is indicated. In process of organization is the National Co-operative Finance Association. At the outset this institution will meet credit demands of its affiliates by providing discount services. In the long run it may provide banking services for the movement as a whole through a local, regional, and central bank structure. Cooperatives today are paying for credit they are clearly able to provide themselves. Such credit bears strategic relation to the safety, stability, and financial independence of the co-operative movement.

Personnel Directions.
In the formative years most co-operatives were long-hour and low-pay institutions. Skilled personnel was difficult to attract under these conditions. Familiarity with and devotion to the cooperative philosophy was too often the first requisite of employment. While such conditions still prevail in many areas, the over-all personnel picture is improving.

War pressures on labor supply plus the improved f inancial structure of most co-operatives probably account for increased attention to the general personnel problem. Most regional organizations now employ personnel officers. The national League has put into operation a Personnel Committee. Job instruction and job relations are receiving greater staff attention. Regional and national training programs for employees have improved in quality. Greater emphasis is given to techniques and less to ideologies. Wage levels for employees have generally advanced to meet higher wartime l iving costs. Hiring of technically skilled staffs is becoming more commonplace. And the movement as a whole is gradually outgrowing the conviction that top employees must take half their salaries "in the good of the cause." Such an attitude plus the reluctance of cooperatives to pay for the services of technically skilled personnel has generally retarded co-operative development.

The entire field of labor relations is opening up for co-operatives. This area will present many practical problems in the future. Co-operative commitment to broad social goals will constantly influence its relation to the employee. Co-operatives in the long run have the responsibility of not being merely "good" employers; they must be "better" employers.

National integration.
There exists in co-operative circles today certain pressures toward the integration of all co-operatives into a functional national movement. This implies an organization of sufficient size and scope to integrate the operations of the wide range of producer, marketing, consumer, and service co-operatives. From a practical point of view such a national organization has much to recommend it. There is no present indication, however, that such an organization will develop in the near future. It will take considerable time and effort.

If European and Scandinavian precedents were to apply here in America we might ultimately expect a strong federation of consumer co-operatives-with marketing co-operatives relating themselves to, but not becoming a part of, such a federation. But even this situation cannot be accurately forecast. Co-operative integration in America is still too much in process to predict what national directions it will take. There is as yet no clearly defined national consumers' movement. Farm groups with basic loyalties on the producer-marketing side are dominant factors in American co-operation. Their strong purchasing programs have related specifically to their own producer interests (i.e. the purchase and production of producer supplies). As earlier stated, these groups are gradually turning their attention to the consumer aspects of farmers' own needs.

When and if the activities of these strong co-operative groups should reach a balance between consumer and producer interest, we may expect the greatest possible national integration. But whether this should or should not happen, we may anticipate a growing number of economic and operating relationships between these two groups. The fact that the urban consumer movement today is not yet strong enough to provide marketing co-operatives with general outlets for their products is in itself a curb on national integration. The hope is that with (i) the emergence of a stronger urban consumer development, (2) with farm marketing groups relating their products directly to such groups, and (3) with the growing number of economic relationships which appear likely between the two groups--we may some day find ourselves woven into an effective pattern of friendly and purposeful relationships. National integration is a goal we strive for. We cannot help reaching it if our basic co-operative groups will consider first the areas in which they may serve each other effectively. In the long run their differences w ill merge into a vital pattern of service, both to themselves and to the American community.

SOCIAL-POLITICAL DIRECTIONS

Social directions.
We have in the preceding discussion considered principally the economic and structural aspects of the co-operative move ment. As co-operation in America grows and expands, so will its moral force contribute to the changing social f abric of our national community. Co-operatives have brought meaningful integration to thousands of American communities. They have brought dynamic group relationships into the vacuum of twentieth century individualism. They have given to individuals the sense of belonging, the values of participation and the fact of ownership. They have related millions of citizens to the social and economic world about them. And they have brought Christian idealism into practical focus with daily living.

We seek here in America to maintain the fact and values of democracy. But democracy is not a static quantity which perpetuates itself. It is a process demanding constant and effective participation. The man on the street must be able to relate his voice as a citizen to the very halls of Congress. Today, our danger lies in the fact that too many have too little understanding of this vital two-way relationship. The problems we face and the decisions we as a nation must make in the near future will severely test the quality and strength of American democracy. The existence of thousands of co-operative organizations throughout America with informed members who both know and practice democracy, will serve us well in the period ahead.

Wherever co-operatives operate they are providing, at least in part, the fundamental grassroots organization which America needs today. They are providing practical education. They are building a more responsible and moral citizenry. And they are relating those citizens to their local and national communities as well.

The total influence of  these co-operative "by-products" is admittedly small in terms of the over-all national community. But as the movement grows, and as it invades our great urban areas, we may expect to find less and less of the helpless and apathetic individualism we see there today. The strong cohesive forces of co-operation have yet to demonstrate themselves in an American emergency. But in the stormy political and
military chaos that is Europe today, we are learning that co-operative structures-in spite of invasion and suppression--still stand strong and ready to assist in the reintegration of people and nations. The whirlwinds
of war and political upheaval have not destroyed them.

Political directions. 
Co-operatives traditionally maintain strict neutrality in the political sphere and there is no present indication that such a policy will change. This does not preclude, however, united co-operative action in legislative matters relating to co-operative welfare. The current National Association of Co-operatives, for example, has been organized in defense against possible legislative changes which would affect farm co-operatives adversely. Co-operatives must, at any moment, be prepared to enter the legislative arena on their own behalf. In the current field of political pressure the National Council of Farm Co-operatives is our strongest co-operative voice in Washington. This organization, composed of a wide variety of farm co-operatives, primarily reflects farm producer interests. Regardless of increased consumer activities in the farm co-operative field this organization is likely to continue its emphasis on producer problems. And if current expansion of farm cooperatives continues we may expect this organization or its counterpart eventually to present one of the strongest and most effective agricultural voices in the nation.

A new political direction for co-operatives, however, is indicated. Pressure for adequate consumer co-operative representation in Washington is growing. Not only will such an organization represent the
co-operatives, but it will tend to represent the broad interests of all consumers as well. Such an organization is needed today. The Co-operative League through its office and staff in Washington is equipped to perform some of these services, but genuinely effective consumer representation will come only when it has the backing of a great consumer movement.

INTERNATIONAL DIRECTIONS

Before this war national federations of co-operative societies in forty countries throughout the world were united in the International Cooperative Alliance. This organization brought together over one hundred thousand societies and a hundred million members. With the successful conclusion of the war we will make another effort at world peace. The continuation and expansion of these co-operative relationships can augment the common understanding and friendly relationships necessary for such peace.

International co-operative trade among the many countries in Europe before the war was an important factor in continental commerce. Cooperative imports from the United States involved upwards of thirty million dollars annually. American co-operatives, coming out of this war the strongest in their histories, are making plans to relate at least part of their production to this form of international trade. At the outset, petroleum will represent the principal factor of trade.

It is further hoped that raw and processed foodstuffs may be exchanged. As co-operative production increases, especially in the machinery and farm supply field, it may be possible to relate part of such goods to foreign co-operatives. Multilateral trade agreements are indicated. Under such a plan American co-operatives might, for example, ship processed foodstuffs to Britain, Britain sending shoes to Brazil, with Brazil in turn shipping coffee to our own co-operative organizations. Delegates to the Conference on International Co-operative Reconstruction held in Washington in 1944 recommended the establishment of an International Co-operative Trading and Manufacturing Association which would facilitate the exchange of food and petroleum.

Farm supply commodities were to be added as soon as possible. Whether such an organization will actually emerge and operate is not clear at this time. American co-operatives, however, can be expected to turn increasing attention toward international co-operative exchange in the future. Bulwark for democracy and wholesome force in the American social and economic community co-operatives will contribute substantially to the redefinition of democracy in this country and its re-establishment in the world.

Saturday, October 11, 2014

God Gave Them Money?

America's 60 Families

By FERDINAND LUNDBERG, Author of Imperial Hearst
No portion of this book may be reprinted in any form without permission in writing from the  publisher, except by a reviewer who wishes to quote brief passages in connection with a review written for inclusion in a magazine or newspaper. Sixth Printing


To FRANKLIN M. WATTS, who first saw the urgent need of a book on this phase of contemporary affairs

FOREWORD

IN THIS work we are not concerned with the methods, legal or illegal, by which the great American fortunes of today were created. These fortunes exist. Their potentialities for good or evil are not altered whether we accept Gustavus Meyers' account of their formation or whether we give credence to the late John D. Rockefeller's simple statement : "God gave me money."

What this book purports to do is to furnish replies, naming names and quoting book, chapter, and verse, two blunt questions: Who owns and controls these large fortunes today, and how are these fortunes used? To answer this second question it is necessary, of course, to examine the role of great wealth in politics, industry, education, science, literature and the arts, journalism, social life and philanthropy. The reader is warned that this work is not predicated on the premise of James W. Gerard, who in August, 1930, named fifty-nine men and women that, he said, "ran" America. In Mr. Gerard's list were many persons deemed by the author of slight importance, many of them merely secondary deputies of great wealth and some of them persons whom Mr. Gerard undoubtedly flattered by including in his select list. The factor determining the inclusion of persons in this narrative has at all times been pecuniary power, directly or indirectly manifested.

This work will consider incidentally the various arguments brought forward by the apologists of great fortunes. These arguments arc to the effect that huge fortunes are necessary so that industry may be financed; that the benefactions of great wealth permit advances in science, encourage writers and artists, etc.; that the lavish expenditures of wealthy persons "give employment" to many people; and that in any case these big fortunes are dissipated within a few generations.

More and more it is becoming plain that the major political and social problem of today and of the next decade centers about the taxation of great wealth. It is hoped that this book, the first objective study of the general social role of great fortunes, will shed at least a modicum of light upon this paramount issue.

Ferdinand Lundberg


CONTENTS

I. GOLDEN DYNASTIES AND THEIR TREASURES 


The inner circle of great wealth and the government of the United States.
Unprecedented power of American multimillionaires exceeds that of Indian princes and European peers.
Democracy and plutocracy.
Control of industry and finance through dynastic interlockings.
The family the fortress of great fortunes.
Contemporary economic lords born of upper-class marriages.
Some European-American marriages.
Corporation executives related to ruling families.
Nepotism.
Women worth $25,000,000 and more. Women multimillionaires have given no contribution to society.
Rigidity of class lines making caste system inevitable.


II. THE SIXTY FAMILIES

Huge fortunes most significant when viewed on family basis.
Families have many branches.
The biggest family fortunes in U.S. named.
Basis for computing the sixty wealthiest families.
Those not included, and why. Ford, Fisher, Dorrance, Chrysler, and Odium fortunes relatively new. Others rooted in nineteenth-century grabbing.
Functions of Owen D. Young, Alfred P. Sloan, Jr., Thomas W. Lamont, and others, as deputies of gold.
Families mobilized in phalanxes behind massive banking institutions. The affiliated banking blocs of finance capital. Morgan, Rockefeller, Mellon, Du Pont, and National City Bank coalitions.
The trust companies.
Rich versus poor.
Concentration of productive property in few hands.
Why the largest fortunes multiply, and the social consequences of their continued growth.

***  

II - The Sixty Families 


As FAMILIES have grown and intertwined, as incomes have been apportioned among many dynastic heirs, the tremendous revenues accruing to the family entities have eluded proper notice. It has been assumed that the relative profusion of large individual incomes be tokens a rather wide dispersal of great wealth, at least throughout the upper class. This is not the case, however, as is disclosed both when fortunes are analyzed from a family standpoint and when a count is made of the numerous nonwealthy, relics of a more prosperous day, that clutter the Social Register.

Although the Rockefeller and Ford fortunes exceed $1,000,000,000 each, there are several families whose accumulations closely approach these in magnitude. And the Rockefeller fortune is only one large segment of the vast Standard Oil Trust, representing no more than one quarter of the original joint participation. Other great Standard Oil fortunes, to mention only the inner conclave, are those of the Harknesscs, Whitneys, Paynes, Flaglers, Rogers, Bedfords, and Pratts. In the outer conclave are the Pierces, Archbolds, Folgers, Chesebroughs, and Cutlers. The Jennings, the Benjamins, and some other families are also part of the Standard Oil alliance.

One may deduce the taxable net incomes from the 1924 tax returns, and the entire accumulation represented by such incomes at five per cent, but in so doing it must be remembered that the large fortunes have unknown reserve funds in tax-exempt securities and utilize legal loopholes, such as family corporations, to escape their full tax assessments. Estimates and appraisals from authoritative corollary sources, which will be cited, show that one can achieve a general approximation by multiplying by three the size of the fortunes and income indicated by the tax returns, providing for legal deductions up to fifteen per cent of income for noncommercial investments, for paper losses, for tax-exempt income, and for some of the deductions based upon miscellaneous technicalities.


The table (pages 26-27), assembled on the above basis (working back to income from the rate of tax indicated by each individual payment) and checked against official appraisals and declarations, some of which are cited later, sets forth the number of members of each of the sixty richest families that in 1924 paid Federal income taxes, under the family name, on the aggregate amount of taxable income shown (persons not using the family name are arbitrarily omitted or classified with the family whose name they use; there are a few omissions which will be mentioned). The reader should take special note of the names in the accompanying tabulation and should observe their recurrence throughout the narrative. These are the principal subjects of our inquiry. These, with few exceptions, constitute the living core of American capitalism.

The tax figures in the following were taken from The New York Times, September 1 to 15, 1925. Each individual income was first ascertained from each individual tax before it was added into the family group. As all these families have diversified holdings, the indicated source of income refers only to the primary source. Where evidence could not be found that large 1924 incomes recurred annually the families were excluded. Nonrecurring income is most frequently obtained from realized capital gains, i.e., profits from properties sold. Certain omissions stem from the fact that some fortunes are entirely concentrated in tax-exempt securities and portions of others are so invested. The late Senator James G. Couzens of Michigan, one of the original Ford investors, who died in 1936 leaving an estate officially appraised at more than $30,000,000, is not included in the tabulation because his holdings were almost entirely of government securities and he regularly paid only a very small income tax. Henry L. Doherty, the public utilities operator, paid no tax for 1924, nor did J. Ogden Armour, Louis F. Swift, John R. Thompson, Jr., and some others.

The composition of the investment portfolios of the families would, of course, determine the precise amount of the fortune traceable through the tax returns. Two persons with identical incomes, one derived from a fortune concentrated fifty per cent in tax-exempt securities and another from a fortune invested to the extent of twenty-five per cent in tax-exempt securities, would pay different Federal taxes. It is manifestly impossible to delve into the composition of investments, but where prominent families appear toward the end of the list, families like the Goulds, Hills, and Drexels, whose claims to great wealth are well known it is probable that large proportions of their invisible holdings are in tax-exempt securities. They may also be held in family corporations, of which there are many reporting under neutral names.

Another difficulty that interposes in attempting to spread a statistical panorama of the great fortunes is that rates of profit from investments vary. Investments bring in from three per cent to several hundred per cent, although high percentages of the latter variety are only occasional. Du Pont profits during the war were several hundred per cent; some of R. Stanley Dollars shipping investments after the war, based upon fat politically-invoked government subsidies, yielded a return of several thousand per cent. It should be remembered, of course, that in dealing with the fortunes we are concerned with entities that are in flux, that are subject to constantly changing valuations.

The inability to produce precise figures on fortunes, rather than approximations, results, then, from no fault in plan or method, but rather from the extreme secrecy with which statistics on fortunes are guarded and from the very nature of fortunes. In individual instances the multiplication by three of the net fortune upon whose income a tax was paid may result in some distortion, but this appears to be the only way in which to obtain a general approximation; and as the method gives generally accurate results, the picture as a whole is not overdrawn. Rather is it very conservative. The absence of detailed figures about these accumulations, in an age which literally flaunts a chaos of statistics about subjects of little general interest, is clearly the fault of a government that at most times has been peculiarly sensitive to the wishes of millionaires.

Apart from the omissions of revenues from tax-exempt securities, there are other omissions from the tabulation some purposeful, because, although the individual incomes were large, they did not compare at all with the vast family concentrations or with the biggest individual payments. In certain cases, on the other hand, it was impossible to allocate income to any single family. For example, income of the Hutton-Post-Woolworth-McCann-Donahue group, emanating from three distinct fortunes, could not be attributed to any single family, and the individual segments of each of these fortunes were not large enough to be included with our biggest families. The Hutton-Post-Woolworth-McCann-Donahue combination belongs, however, among our sixty leading families. Seven persons in this group (and this does not by any means include all) paid taxes on a gross indicated fortune of $165,600,000.

Certain of the less wealthy family dynasties, that resemble the richest families in every respect except the size of their accumulations, have been left out of the tabulation although they will appear now and then in our narrative. Among these are the Aldriches; the Candlers (Coca-Cola); the Cannons (textiles); the Dollars (shipping); the Huntingtons (shipping); the Swifts (packing); the Fleischmanns (yeast and distilling) ; the Pulitzers (publishing) ; the Goelets (real estate and the Chemical Bank and Trust Company); the Grays (tobacco) ; the Bradys (public utilities) ; the Harrimans (railroads) ; the Heinzes (pickles); the Kresses (retail stores); the Lewisohns (copper) ; the Hearsts (publishing and mining) ; the Manvilles (asbestos); the Elkins; the Mills-
Reids (mining and publishing); the McFaddens and McLeans, both of Philadelphia; the McClintics; the Phillipses, of Rhode Island; the Twomblys; the Weyerhaeusers (lumber and shipping); the Cudahys (packing), and quite a few others.

Some omissions have been made necessary by the studiously haphazard way in which the tax figures were issued. The legislation enabling the publication of the figures even in jumbled form was understandably very unpopular with the rich, who were able to get it repealed before the 1925 figures were issued; public opinion would be greatly embittered, to be sure, if the monotonous yearly recurrence of stupendous individual revenues could be observed. The assembling of the figures for each family was therefore not without difficulty, for they could not be presented by the newspapers in orderly fashion, even had the newspapers so desired to present them. No attempt was made to include in the tabulation the collateral descendants of the large fortune-builders; were they included (and it would be necessary to obtain the cooperation of the Bureau of Internal Revenue for this to be done) each accumulation would be projected on a greatly enlarged scale. It is well to take note of this important fact. Both the Dorrance (Campbell Soup) and Hartford (Great Atlantic and Pacific Tea) tax payments appear to have been overlooked by the journalists who combed the confused lists issued by the Bureau of Internal Revenue.

Purposely omitted from our tabulation are individual fortunes not placed on a family basis, and among these are the accumulations of George W. Eastman of the Eastman Kodak Company, Andrew Carnegie (evidently concentrated in tax-exempt securities), Charles M. Schwab (whom Clarence W. Barron appraised at $40,000,000 after examining Schwab's records), H. C. Frick, Frederick H. Prince, Harvey S. Firestone, Edward L. Doheny, Harry F. Sinclair, E. L. Cord, Walter P. Chrysler, Samuel Zemurray, Leonor F. Loree, Earl D. Babst, and Harrison Williams. These men or their heirs, however, belong in the top circle of wealth for one reason or the other, although their individual power is decidedly limited. Whether their fortunes will eventually be placed on a permanent family basis is not yet certain.

The broad picture is shown, however, in the tabulation. Only the Morgan group represents a nonfamily collection of incomes. As the Morgan incomes do not derive in a primary sense from property ownership they will be given special notice. The conservative character of the results obtained by multiplying the taxed fortunes by three, in order to obtain the size of the whole fortune, may be illustrated. The estate of Thomas Fortune Ryan, who died in 1928, was officially appraised at approximately $135,000,000, and this may be compared with $108,000,000, his indicated total fortune in 1924. Allowing for the rise in securities values between 1924 and the time of the appraisal, the figure for 1924 would seem to be almost exact. The largest individual estate ever appraised in New York was that of Payne Whitney, who died in 1927 worth $186,000,000, which may be compared with the valuation in the foregoing table of $322,000,000 on the joint fortune of four Whitneys.

Payne Whitney's share in the group of four, on the basis of a tax payment of $1,676,626, is computed at approximately $220,000,000. The fortune of six members of the Field family is given at $180,000,000 in the tabulation, which may be compared with $120,000,000 as the appraised approximate value of the estate of Marshall Field I in 1906. J. P. Morgan's Federal tax in 1924 was $574,379 on about $1,500,000 of income. This in turn was five per cent on $30,000,000 and multiplying this by three we obtain $90,000,000. The estate he inherited in 1913 was officially valued at $77,465,975.38, but about $20,000,000 of cash had to be disbursed for specific bequests to various members of the family and was replaced only by the sale of the Morgan art collection which had been lent not given, as a gullible public had fondly supposed to the Metropolitan Museum of Art; there was, of course, a futile storm of public indignation when the younger Morgan calmly repossessed himself of his father's art treasure. It is not too much to assume an appreciation of only $13,500,000 in this fortune from 1913 to 1924.

The taxable Phipps fortune is set at $29,700,000 in our tabulation and the multiplied fortune at $89,100,000. Yet Clarence W. Barron, the late editor of The Wall Street Journal, gave credence to the report that the Phippses actually represent $600,000,000. 1 If Barren's information was correct, it would indicate a tremendous nontaxable revenue accruing to the Phippses, who were among the original participants in the Carnegie Steel Company.

John T. Dorrance, head of the Campbell Soup Company, made a fine art of concealing his wealth. Until his death in 1930 it was not known that he was worth $120,000,000 and would leave the third largest estate of record outside New York until Richard B. Mellon left $200,000,000. The estate consisted of $80,000,000 of Campbell Soup Company stock and $35,000,000 of United States government bonds. As the Campbell Soup Company was privately owned, revenues of stockholders could be concealed; they could be disbursed in part as nontaxable stock dividends or could simply be transferred into surplus, enhancing the value of the shares but involving no taxable money transfer.

But even by surveying estates that have been made public one does not gain precise knowledge of the greatest fortunes. The former holdings of John D. Rockefeller, Sr., were transferred privately to his son, who will presumably pass them on with similar discreetness to his own children. And even the recorded estates often represent merely residuary fragments. Huge sums have been transferred to relatives, to privately controlled foundations, and to family corporations in very many cases before the death of the owner. This accounts for the relatively modest size of estates left by men like Otto H. Kahn, who was popularly said to be "broke."

One special factor that makes the fortunes seem unduly small when projected from the 1924 tax figures and contrasted with official appraisals was the amazing administration of the Treasury Department by Andrew W. Mellon. Under this very wealthy man the widest latitude in the interpretation of tax laws was allowed people of wealth, as was subsequently revealed in a Senate investigation. It may therefore be that a closer approximation to the actual fortunes would be obtained by multiplying the taxed fortunes of 1924 by four.

For contemporary purposes, moreover, it would be best to regard most of the 1924 fortunes as enhanced by 25 per cent, for it is the opinion of conservative economists that the secular rate of increase in wealth in the United States is 2 per cent annually; and the fortunes grow with the country. Certain of the individuals in the 1924 Federal tax list are now dead, but this does not alter significantly the status of the fortunes which, in almost all cases, were passed on to children or other relatives. To discuss the details of transfer would unnecessarily complicate the exposition.

Very few persons of great wealth classify as newly rich. The only comparatively recent fortune of the first magnitude is that of Henry Ford, and its formidable proportions were discernible as long ago as 1917. The Dorrance fortune was created between 1910 and 1920, and the only other large, relatively recent accumulation appears to be that of the five Fisher brothers of Detroit, who were worth $196,500,000 on the basis of 1924 tax figures and were reported by Barron to represent $1,000,000,000. Walter P. Chrysler, motorcar manufacturer, has survived the intense competition in the automotive industry furnished by the Morgans, Du Fonts, Fishers, and Fords; but it is not yet entirely clear whether he will emerge with his holdings intact and whether they will be large. The Hartford and Woolworth fortunes are of prewar vintage.

The only noteworthy postwar fortune belongs to Floyd B. Odium, a Morgan corporation executive formerly with the Electric Bond and Share Company, and it is probably not very large. Odium formed the Atlas Corporation, an investment trust, on the basis of a $40,000 investment in 1924. This enterprise now participates in nearly every industry, having acquired its equities at extreme depression lows. The New York Times of April 23, 1933, reported that Atlas Corporation then owned assets aggregating $100,000,000. Atlas assets are valued now at more than double this sum; the corporation is probably the biggest investment trust in the world. Odium has been designated, with some truth, the sole newcomer to win in the great postwar boom and collapse.

It is a common popular error to suppose that men like Owen D. Young, of the General Electric Company; Walter S. Gifford, of the American Telephone and Telegraph Company; Thomas W. Lamont, of J. P. Morgan and Company; Albert H. Wiggin, until recently head of the Chase National Bank; Alfred P. Sloan, Jr., of General Motors; and Walter C. Teagle, of the Standard Oil Company of New Jersey, are leaders in the entourage of great wealth. Such figures, carefully publicized, are merely executives for the main groups of banking capital that represent the golden dynasties. These men have no independent power; they do not speak for themselves any more than do actors on a stage.

The importance of men like Lamont, Wiggin, and Sloan should not, however, be underestimated. Each has considerable wealth in his own right and before the World War would, perhaps, have been considered on his way to becoming a nabob of the first degree; but the power of each has been vastly greater than his personal wealth would indicate simply because it is concentrated power individually delegated to them by many wealthier men. Only the vastness of other accumulations has thrown their personal accumulations into second and third place. These men, however, cannot be judged on a quantitative basis; they must be approached from the qualitative standpoint. They are the virtuosi of capitalism, who do the work while beneficiaries of trust funds gamble at Biarritz or chase elephants through Africa.

An extraordinarily complex and resourceful personality like Thomas W. Lament, who has been the brains of J. P. Morgan and Company throughout the postwar period and was a mentor of Woodrow Wilson in Wilson's second administration as well as of President Herbert Hoover throughout his fateful single term in the White House, has exercised more power for twenty years in the western hemisphere, has put into effect more final decisions from which there has been no appeal, than any other person. Lamont, in short, has been the First Consul de facto in the invisible Directory of postwar high finance and politics, a man consulted by presidents, prime ministers, governors of central banks, the directing intelligence behind the Dawes and Young Plans. Lamont is Protean; he is a diplomat, an editor, a writer, a publisher, a politician, a statesman an international presence as well as a financier. He will be given more attention later.

Just as few new fortunes have been brought to port in the past twenty years, so have few foundered, despite economic storms. In the depression of 1920-21 the Armour fortune shrank seriously, but $25,000,000 was recouped through the accidental medium of a once worthless oil company stock into which the late Ogden Armour had placed a small sum on speculation. In the more recent collapse of 1929-33 the inherited fortune of Clarence W. Mackay underwent considerable downward revision. The Nash fortune appears to have been reduced also. The Lees and Higginsons of Boston, secondary figures, were seriously involved in the debacle of Ivar Kreuger, international adventurer who was himself never wealthy but was merely striving in time-sanctioned ways to achieve riches. Samuel Insull was only a corporation promoter for a Chicago group headed by the Fields; he had no independent status, as was shown when the Morgan banks foreclosed on the Insull properties. The Van Sweringens were mere bubbles inflated by J. P. Morgan and Company.

These partial casualties aside, no great private accumulations have been more than passingly embarrassed for many decades. It is a far cry to the days of Daniel Drew and John W. Gates when the quotations of the stock market could pronounce doom on a multimillionaire, although they can still embarrass a mere millionaire. Conversely, few who were poor in 1921 are not still in the same harsh circumstances. The rigid state of affairs lends point to the conclusions of Professor Sorokin that may have seemed premature in 1925.

Thursday, September 4, 2014

About Sir John Robison and the Essex Junto


ANTON CHAITKIN (1984), Treason in America -- From Aaron Burr to Averell Harriman
PART II - The True History of the Civil War
Chapter 7 - How Boston's Brahmins Sought to Destroy the United States, pps. 95-108

In the spring of 1808, the future President of the United States, Senator John Quincy Adams of Massachusetts, held an urgent and confidential meeting with President Thomas Jefferson. Adams's message was that members of his own party the New England Federalists, were engaged in a plot to bring about a secession of the states of New England from the United States.(1)

Reduced to the most essential points, what Senator Adams revealed to President Jefferson was the following: A group of leading merchant and banking families of the Federalist Party in New England called the Essex Junto, was working in close collaboration with agents of the British Secret Intelligence Service (SIS) operating out of Boston. in their effort to bring about an early secession these treasonous plotters were playing upon the discontent caused by the President's total embargo against all foreign trade.

Adams advised the President to change the terms of the foreign-trade embargo, to limit the prohibition on foreign trade only to trade with Britain and France. It had been the naval forces of Britain and France which had been preying among U. S. shipping. Jefferson accepted Adams's advice. The advice successfully weakened the secessionists' organizing efforts for the moment.

This incident leads us directly to the true causes of the great civil war which destroyed a half-million American lives during 1861-1865, equal to the combined total U.S. deaths in World Wars I and II.

In the series of chapters composing the present, second section of our report on Treason in America, we focus our attention on those leading New England families which gave us such institutions as the Bank of Boston and such notable figures as William and McGeorge Bundy today. We document the leading features of their plot to destroy the United States, a plot which we trace here from their effort to elect the traitor Aaron Burr President of the United States, in 1800, into their role in creating the Confederacy from the inside during the 1850s, in close collaboration with Britain's Lord Palmerston and the British Secret Intelligence Service. The general flavor of the New England plotters' outlook is shown by examining sections of the correspondence among some of the leading members of the plot during the years 1803-1804, four years before Senator Adams's report to President Jefferson.

At the time Senator Adams delivered that report, leading members of the Essex Junto were known to have included the following prominent personalities:
  • Massachusetts Senator George Cabot; 
  • the recently deceased Judge John Lowell (ancestor of the Bundys) and his son, John ("The Rebel") Lowell; 
  • former Secretary of State Timothy Pickering; 
  • merchant Stephen Higginson;
  • Massachusetts Supreme Court Justice Theophilus Parsons; and 
  • Aaron Burr's brother-in-law, Judge Tapping Reeve of Litchfield, Connecticut. 
The name "Essex Junto"was derived from the fact that all of the leading plotters,except Judge Reeve, were born north of Boston, in Essex County, Massachusetts. It is from the correspondence of George Cabot, Timothy Pickering, and Judge Reeve, that the following self-damning statements of the
plotters are taken.

George Cabot to Timothy Pickering, February 14, 1804:
At the same time that I do not desire a separation at this moment, I add that it is not practicable without intervention of some cause which should be very generally felt and distinctly understood as chargeable to the misconduct of our southern masters . . . the essential alteration which may in the future be made to amend our form of government will be the consequences of only a great suffering, or the immediate effects of violence.... Separation will be unavoidable, when our loyalty to the union is generally perceived to be the instrument of debasement and impoverishment. If a separation should, by and by, be produced by suffering, I think it might be accompanied by important ameliorations of our theories.(2)
A picture of the fellow-plotter to whom George Cabot wrote those observations is provided by excerpts from two items Timothy Pickering's correspondence. The first is addressed one Richard Peters, and is dated December 24, 1803:
Although the end of all our Revolutionary labors and expectations is disappointment, and all our fond hopes of republican happiness are vanity, and the real patriots of '76 are overwhelmed by modern pretenders to that character, I will not yet despair: I would rather anticipate a new confederacy, exempt from the corrupt and corrupting influence of the aristocratic Democrats of the South. There will be-- and our children at farthest will see it--a separation. The white and the black population will mark the boundary. The British Provinces, even with the assent of Britain, will become members of the Northern confederacy. . . "(3)
and, the second, to George Cabot, dated January 29, 1804:
I do not believe in the practicability of a long-continued union. A Northern confederacy would unite congenial characters, and present a fairer prospect of public happiness; while the Southern States, having similarity of habits, might be left "to manage their affairs in their own way." . . . I greatly doubt whether prudence should suffer the connection to continue much longer.... But when and how is a separation to be effected? ... If ... Federalism is crumbling away in New England, there is not time to be lost ... Its last refuge is New England; and immediate exertion, perhaps, its only hope. It must begin in Massachusetts. The proposition would be welcomed in Connecticut; and could we doubt of New Hampshire? But New York must be associated; and how is her concurrence to be obtained? She must be made the centre of the confederacy. Vermont and New Jersey would follow of course, and Rhode Island of necessity. Who can be consulted, and who will take the lead?(4)
From the correspondence of plotter Tapping Reeve, to Connecticut Senator Uriah Tracy, on February 7, 1804:
I have seen many of our friends; and all that I have seen, and most that I have heard from, believe that we must separate, and that this is the most favorable moment. The difficulty is, How is this to be accomplished?(5)
The immediate origin of this conspiracy, the Essex Junto, had been the organizing activities of a topmost British SIS intelligence operative, Sir John Robison, during the years 1796-1797. Robison, long a British spy and diplomat in the Russian part of SIS's service, had been promoted to high rank
at the Edinburgh office of SIS, from whence he had been deployed to conduct operations on the ground inside the United States.

Although, as we shall see, the kernel of the conspiracy had been New England partners of the Aaron Burr network dating from the outbreak of the War of 1776- 1783--New England families closely tied to the pro-British Tories during that war--it was Robison's activities which aided most in crystallizing such treasonous potentialities into the plot concocted during 1796-1797. From then, to the present day, the family traditions and financial connections of those circles have been intimately associated with the British Secret Intelligence Service (SIS), and to the British East India Company and its spin-offs. Every step taken by the traitors was taken in concert with Britain, and frequently also in collaboration with powerful financier families of Venice, as well as such Swiss families as the Mallet, de Neuflize, and Schlumberger.

The Eastern Establishment

Apart from these families whose names are still well-known today, the terrible war of 1861-1865 was brought into being by other traitors, whose names are generally unknown today, but who include nonetheless prominent national figures of the United States in their time. These included men such as John Slidell, the political boss of Louisiana, who was an important but clandestine architect of the war.

Although this report is based on primary documents from the pens of the principal figures of each part of the period covered, the truth of this matter is systematically avoided in popular and university accounts of our nation's history. What we are reporting is the actual history of the United States during these periods, not the forgeries bought and paid for after the fact by later generations of the guilty families, nor the fraudulent history of the United States manufactured by such as Charles A. Beard, Walter Lippmann, and Arthur Schlesinger.

We wish to stress once again, at this point, that what we are reporting is not merely the truth about decisive aspects of the past history of our nation. The same general philosophical world-out-look expressed by the traitorous plotters of the 1776-1861 period, is the ruling philosophy of such institutions as the famous New York Council on Foreign Relations today. The plottings and projects today may be different than those of more than a hundred years ago, but the philosophy governing the choice of such policies and objectives remains, in all essentials, the same. The important fact is not purely and simply that the families of those traitors of then are dominant in the ranks of ruling families of our Eastern Establishment today. The connection is not merely biological; in the greater part, these families have transmitted the philosophical outlook under the treasonous projects of the past into the mental life of their heirs of the present.

Not only is our Eastern Establishment of today a continuation of the philosophical outlook of the traitors Burr and the "Essex Junto" of then, by and large. These families and the new families, such as the Morgans and Harrimans, recruited to enlarge their ranks since, have had a persistently erosive influence upon our national institutions over the entire period since the War of 1776-1783. Our government, our political parties, prevailing policies in matters of law, our educational system, our news-media, our public entertainments, and in general prevailing currents of popular opinion, have all been cumulatively influenced by such erosive influence of this powerful grouping within our national life. To understand what we as a nation so often do to damage ourselves, we must understand this powerful grouping, its origins, its philosophical outlook, its traditions, and its history.

The account we give is therefore shocking, but true, and also necessary and long overdue.

We resume the account, picking up the thread in Boston, in the year 1800. In the presidential election of that year, the Essex Junto, as part of the British plots centered around Aaron Burr, had witnessed near-success of the effort to make Aaron Burr President of the United States. Although Burr was the vice-presidential running-mate of the Republican (Democratic-Republican predecessor of the Democratic Party) Thomas Jefferson, the plotters had rigged the election to the purpose of making Burr, not Jefferson, the elected President. The plot had been foiled almost single-handedly by Alexander Hamilton. Hamilton deplored Jefferson's policies, but regarded him as no traitor, and vowed it a matter of the national security of the republic that Jefferson, not Burr, be awarded the victory.

This defeat of Burr's ambition led into the events of 18031804, concerning which John Quincy Adams wrote of "the design of certain leaders of the Federal Party to effect a dissolution of the Union, and the establishment of a Northern confederacy. This design had been formed in the winter of 1803-1804.... That project . . . had gone to the length of fixing upon a military leader for its execution.... "(6) The central feature of the plotting referenced in cited correspondence of the plotters themselves, was to secure Burr's election as the Governor of the State of New York. Burr would then set up a breakaway Northern confederacy of New York, New Jersey, the New England states, and, if possible, also Pennsylvania. Hamilton again intervened, by wrecking Burr's reputation, and pamphleteering to expose the threat to the Union. When Burr lost the election, he challenged Hamilton to the famous duel, and killed him.

The new plottings of the Essex Junto in 1807-1808 were dampened when John Quincy Adams exposed his fellow-Federalists to President Jefferson.. It was only a delay. More treason was soon to come.

Britain escalated its war on U.S. commerce, seizing U.S. ships and taking thousands of U.S. sailors as virtual British slaves. The election of the "warhawks," Kentucky's Henry Clay and South Carolina's John Calhoun, in 1812, enabled the patriots of the nation to force a war against Britain upon the most-reluctant administration of President Madison. The powerful, Jacobin figure of the Swiss, Albert Gallatin, within the administration, was de facto a British Secret Intelligence agent, as he showed himself at many points during the war itself. President Madison's wife, Dolly, had been a hand-picked selection of Aaron Burr, himself. It was the newly elected Henry Clay, promptly made Speaker of the House of Representatives, who forced the prosecution of the war on a most-reluctant administration, and the small, but able U. S. Navy which swept the mammoth British sea power from much of the Atlantic Ocean, securing the Malvinas Islands to the future nation of Argentina, and forcing the British to make peace in 1815.

For about two years, beginning with the Declaration of War on June 12, 1812, the Essex Junto shamelessly, publicly sabotaged the war-effort of the United States. They blocked recruitment and deployment of troops, they threatened those who purchased U. S. government bonds, while raising funds for, and smuggling money and war-materiel to the enemy forces operating in Canada. President Madison alluded to the treasonous antics of the Boston gang in his Second Inaugural Address of March 4, 1813. In this address, he attacked the intrigues of "British commanders": "Now we find them, in further contempt of the modes of honorable warfare, supplying the place of a conquering force by attempts to disorganize our political society, to dismember our confederated Republic."(7)

The Essex Junto was busily engaged with its British masters once again. They corroborated the President's cautious allusion during the course of 1814. The Junto called for a convention to be held at Hartford, Connecticut, where the "grievances" of the New England states might be crystallized into forceful anti-governrnent acts on a region-wide, or "sectional" basis.

Before this Hartford Convention could be convened, Philadelphia's Mathew Carey dropped a political bomb on the Junto, with the first publication of a book entitled The Olive Branch. Carey was a leading figure of the early history of our republic. An Irish republican fleeing British dogs, he arrived in Paris during the War of 1776-1783 to enter into a close collaboration with Dr. Benjamin Franklin. He settled in Philadelphia, promoting Franklin's scientific and technological projects there, and becoming a leading figure of the U.S. secret-intelligence service, as well as the leading U. S. economist of the post-1815 period. Carey's The Olive Branch proposed bipartisan action by the patriots of both parties, and detailed with cruel and elaborated accuracy the treasonous activities of the Boston crowd, among others.

For the moment, Carey's book sent the traitors scuttling into quiet corners. The Hartford Convention occurred, in December 1814, but the northern secessionist movement was thoroughly discredited. The Convention, chaired by George Cabot, held only secret sessions. The inconsequential resolutions published by the Convention were disregarded, as the war ended weeks later. Thereafter, popular opinion of the United States everywhere equated the Hartford Convention with treason, until the 1830s Nullification Movement in South Carolina revived the Hartford Convention as a source of precedent for new efforts to destroy the Union.

The letters referenced above were later published by John Quincy Adams's grandson, Henry Adams, during the 1870s, in his Documents Relating to New England Federalism. Although this collection was edited by a Henry Adams who was himself a notorious anglophile, at political odds with his famous grandfather, that editing does not conceal what is most essential. The documentation shows the persistence of the disunion project, over the span of a decade. It shouts also that this treason was not caused by any sectional special interest of some part of the nation, nor for any reason of domestic issues at all. The inspiration and guidance of the plot was not American in origin. The plotters were determined to stop the American experiment in constitutional federal government.

What were the plotters' motives?
Why did they commit themselves to so blatantly treasonous an enterprise?

We shall come to that matter in due course within the report. George Cabot provides a hint in his cited letter to Timothy Pickering of February 14, 1804:
All the evils you describe and many more are to be apprehended; but I greatly fear that a separation would beno remedy, because *the source of them is in the political theories of our country and in ourselves*.... *We are democratic altogether;* and I hold democracy, in its natural operation, to be the *government of the worst*. . . . At the same time that I do not desire a separation at this moment, I add that *it is not practicable* without intervention of some cause which should be very generally felt and distinctly understood as chargeable to the misconduct of our southern masters.... If no man in New England could vote for legislators who was not possessed in his own right of two thousand dollars value in land, we could do something better; but neither this nor other material improvement can be made by fair consent of the people. I incline to the opinion that the essential alterations which may in future be made to amend our form of government will be the consequences only of great suffering, or the immediate effects of violence....(8)
To round out the state of mind of the plotters of 1803-1804, the following passage of a letter from Stephen Higginson to Timothy Pickering on March 17, 1804 suffices:
It would be imprudent even to discuss the question, we must wait the effects of still greater outrage and insult from those in power before we prepare for the only measure which can save the New England States from the snares of Virginia . . . without some favorable events, the democrats will succeed another year, and we shall be revolutionized, and the other States will follow.(9)
The state of mind reflected in this correspondence, most notably the features of the George Cabot item whose key passages are noted above, for that reason, is best appreciated by reference to Sir [sic] John Robison's Proofs of a Conspiracy, 1797, [the author was Professor Robison, the father of the knight.] later republished with enthusiastic endorsement by the John Birch Society (10) in the 1960s. In modern language, Robison "brainwashed" President John Adams and many others, into believing that the French government of Lazare Carnot, which had crushed the Jacobins, was complicit in conduiting the Jacobin insurrections of Albert Gallatin et al. into the United States. In fact, the British, together with the suppressed Jesuits and the Swiss bankers allied to London, had created and directed the Jacobins. By aid of the lying information as to the foreign source of the Jacobin insurrections inside the U.S.A., Robison et al. were able to crystallize the anti-democratic tendencies among the New England crowd, to the effect which Cabot's letter above echoes most clearly. In consequence, the Essex Junto became the foremost backers of the same Gallatin as a member of the Jefferson and Madison cabinets! Sic transit gloria Boston.

Over the interval between those letters of 1804 and the 1813-1814 period, the process leading toward the Newburyport plotting of the 1861 breakup of the Union took clearer form in the correspondence of the plotters. The plan which was to emerge during the 1840s and 1850s was only a hint by 1813-1814, but the hint is there. Consider these passages from a letter of Timothy Pickering, dated July 4, 1813, to George Logan:
If the Southern States should ever open their eyes to see that their real interest is closely connected with that of the other Atlantic States, and, by a union with them in apportioning the public burdens, lay an equitable share of them on the Western States, that moment the latter will declare off, take to themselves the Western lands, and leave the enormous war debt they have occasioned on the shoulders of the Atlantic States.... if I should reach fourscore years, I may survive the present Union. Entertaining that opinion, I cannot think, of course, that a separation at this time would be an evil.
On the contrary, I believe an immediate separation would be a real blessing to the "good old thirteen states." . . . I throw out this idea for the consideration of yourself and [name edited out], to whom I request you to mention it. "(11)
The idea of conspiring with elements of the "Southern States" to arrange a dissolution of the Union out of common, if skewed self-interests in such an outcome, was beginning to emerge in the thinking of the plotters at this point in their search for a dissolution of the republic. It would not be until the Scottish Rite Freemasonry, which had taken over Boston, in opposition to Franklin's Free and Accepted Freemasonry, spread deeply throughout the southern states, that the working basis for such a plot could emerge as a well-defined proposition. The impulse in that direction was, however, already there.

The last in this sampling of treasonous plotters' correspondence is something shaken out of McGeorge Bundy's family tree. It is a passage from a letter, dated December 3, 1814, from John Lowell, nicknamed "The Rebel," to Timothy Pickering. The writer of the following passage was the son of Judge John Lowell, and the chief public spokesman of the Essex Junto's anti-war movement of the 1812-1814 war with Britain, the "Peace Party," and the author of the pamphlets issued on behalf of that "Peace Party"--the Tom Hayden of 1814, so to speak. He was also the leading spokesman for disunion ideology at Harvard University, and performed the same specialized role in that curious Boston concoction called the Unitarian Church:
. . . On the subject of the Convention at Hartford . . . my feelings ... I perceive, are very similar to yours.... I gave great offense during the sitting of our legislature by openly opposing the calling [of] a convention. . . until I explained my reasons, which were that I was convinced that the convention would not go far enough, and that the first measure ought to be to recommend to the States to pass laws to prevent our resources in men and money to be withdrawn.
In short, to prohibit support from the States for conduct of an openly declared war of the United States against a mortal adversary! The letter-writer continues:
. . .The people en masse will act in six or twelve months more.... People . . . pretend to fear a civil war, if we assert our rights.... The wrath of the Southern States ... is too ludicrous to require an answer. Under the best circumstances, it would be a pretty arduous undertaking for all the Southern states to attempt the conquest of New England; but reduced as they now are to indigence, it would be more than Quixotic. What a satire it is that the moment the British take possession of any part of our country, and relieve it from the yoke of its own government, its inhabitants are happy and grow rich! Its lands rise in value, every species of property is enhanced in price, and the people deprecate the prospect of being relieved by their own government. Yet such is the fact in the two lower counties of this State. Let no man fear the discontents of our own people. They will hail such events as blessings. (12)
Before tracing the relevant events which were to follow the abortive Hartford Convention, we review some of the principal characters of the treasonous circle we have now broadly defined. We shall review summarily the matter of the curiously gothic community called Newburyport and the quality of that fabled species known around the world as the "Boston Brahmins."

Endnotes:

1. Documents Relating to New England Federalism. See also Young, Andrew M., The American Statesman: A Political History, published by N.C. Miller, New York, 1862; pp. 431-458. Young demonstrates (p. 431-439) that a forgery of Thomas Jefferson's views was produced after his death, to injure John Quincy Adams' reputation,. to protect the Boston traitors, and perhaps most important, to falsely impute to Jefferson anti-Union views.
2. Documents Relating to New England Federalism, pp. 346-349.
3. ibid. D. 338.
4. ibid, pp. 338-342.
5. ibid, pp. 342-343.
6. ibid, pp. 52, 56.
7. Inaugural Addresses of the Presidents of the United States, House Document 91-142; United States Government Printing Office, Washington, D. C. 1969. n.27.
8. See footnote 2.
9. Documents Relating to New England Federalism, p. 361.
10. Robison, John, Proofs of a Conspiracy, 1798 edition printed by George Forman, New York, reprinted by Western Islands, Belmont Massachusetts. Thomas Jefferson, in his retirement, roundly contradicted the Robison thesis by saying that the British ran the ("left-wing") anarchists in the French Revolution, and were running the Boston ("right-wing") insurrectionists in the period of the War of 1812: "The foreigner gained time to anarchise by gold the government he could not overthrow by arms, to crush in their own councils the genuine republicans, by the fraternal embraces of exaggerated and hired pretenders, and to turn the machine of Jacobinism from the change to the destruction of order; and in the end, the limited monarchy [the republicans] had secured was exchanged for the unprincipled and bloody tyranny of Robespierre.... "  The British have hoped more in their Hartford Convention. Their fears of republican France being now done away, they are directed to republican America, and they are playing the same game for disorganization here which they played in your country. The Marats, the Dantons, and Robespierres of Massachusetts are in the same pay, under the same orders, and making the same efforts to anarchise us, that their prototypes in France did there."--Jefferson to the Marquis de Lafayette, Feb. 14, 1815, The Writings of Thomas Jefferson, Vol. X1V. pp. 246-251.
11. Documents Relating to New England Federalism, p. 391.
12. ibid, p 410 ff.

Wednesday, August 27, 2014

What About Those Kreuger & Toll Gold Debentures?

Chapter 17 of Mellon's Millions by Harvey O'Conner (New York, NY: Blue Ribbon Books, 1933)

Exile in England


 CHARLEY DAWES was impatient with the unending formalities, the flunkeyism, the polite palaver of the Court of St. James'. Dukes and duchesses found his efforts at drollery not amusing. Out of his own pocket he spent thousands of dollars to hire, among others, leading Broadway comedians to spill liquor down the necks of the British nobility, and their only response was annoyance. Charley was fed up. He longed to end his exile, to be back in the rough fray of American politics and finance, to be talking business with the hog butchers of Chicago, the lamb butchers of Wall Street. He quit cold on January 8, 1932.

To the White House, his resignation was heaven-sent. At last a post was open that was not beneath the dignity of the Secretary of the Treasury. He was sticking tenaciously to the Treasury, Hoover discovered, in lieu of anything else to do. Return to Pittsburgh he would not. There was emptiness, a barren waste of idle steel mills, of dead machinery and of men who were better dead.

There had been hints and snubs sufficient to indicate that he was no longer needed in the Administration. But Pittsburgh training was not calculated to produce sensitivity. Or perhaps if he were embarrassing the President, the Secretary got some satisfaction from that negative achievement.

The delicate task of inducing Mellon to transfer the seat of his activities from the Exchequer to the London Embassy was entrusted to Dave Reed, whose affection for the Pittsburgh banker was balanced by his solicitude for the Administration, soon to face a trying Presidential election. He had a difficult job.

Mellon did not care to be budged from the acceptable routine or Washington, to be precipitated into the social whirl of diplomatic life in London. More important, he regarded Reed's suggestion as Hoover's capitulation before cheap and demagogic politicians. How despicable the man's attitude! When Mellon had faced far more serious attacks, the imperturbable Coolidge had ignored them, or risen to the occasion with a stinging message to Congress. But this President cowered before a Texarkana Congressman and an unstable California Senator.

There was nothing left but to accept the London post, Mellon could see. Otherwise he might be sacrificed on the Patman-Johnson altar. On February 2, 1932, Dave Reed was able to report success to the White House. Most important problems of unusual gravity awaited his coming to London, the Secretary had been told. Only a public servant with his acumen could grapple with those problems. He agreed. The White House lost not a moment. The announcement said:
"The critical situation facing all countries in their international relations, the manifold economic and other problems demanding wise solution in our national interests calls for experience and judgment of the highest order. The importance to our country of the sound determination of these world-wide difficulties needs no emphasis.

"I have decided therefore to call upon one of our wisest and most experienced public servants to accept a position which will enable him after many years of distinguished public service at home to render equal service to his country in the foreign field.

"I have asked Mr. Mellon to undertake the Ambassadorship to Great Britain. I am happy to say he has now expressed his willingness to serve."
The issue of the Secretary's acceptance had been so doubtful up to the last minute that the State Department was not given opportunity to inquire of the British Government if the appointment were acceptable. That however was a mere formality. The Secretary, wealthy and distinguished, soothingly conventional, was doubly welcome.

The impatient Mills was almost immediately vested with the Secretary's robes, marking the satisfaction of desires which had been poorly concealed since he announced himself for Hoover before the 1928 convention. The new Secretary, also wealthy estimates of his possessions ran up toward $100,000,000 --brought into the Treasury the open and unabashed Wall Street leadership from which Harding had shrunk in naming a Pittsburgh banker.

Whatever the mixed emotions of Pittsburghers might be, the Pittsburgh newspapers, loyal to the local Croesus, were indignant over the unceremonious dismissal of Mellon. The Sun-Telegraph's political editor wrote that "the effort of President Hoover to camouflage the split between the White House and Secretary of the Treasury A. W. Mellon has failed completely. Mr. Mellon's effort to cooperate in this political deception, his sense of party loyalty stronger than his personal feelings and disgust with the trend of affairs in Washington, has proved equally futile. Mr. Mellon accepted appointment as Ambassador to Great Britain as an alternative to a complete severance of his participation in public life and a return to his private business affairs in Pittsburgh. The episode," he concluded, "has created a tremendous stir in Pittsburgh among Mr. Mellon's associates in finance and will have widespread repercussions in Pennsylvania politics. It is positively known that many financial leaders here affiliated with the Mellon enterprises feel that the former Secretary has been shabbily treated by the President. They are highly resentful, and political sentiment in this group, never warm toward Mr. Hoover, has cooled perceptibly in the past two days."

The Washington correspondent for the Pittsburgh Press wrote of Mellon that "now there are few to do him homage. President Hoover also has concluded that Secretary Mellon should have retired sooner, because on the eve of his campaign for reelection Hoover finds another job for him. Hoover has left the impression that whereas Mellon was an asset to him four years ago, he will be a liability this year. Many in Washington feel today that Mellon's passing is a tragedy--a tragedy of a broken and disillusioned man."

The New York Times was polite. "The list of our Ministers and Ambassadors there [in London] is starred with brilliant names," that journal remarked. "It is difficult to think of Mr. Mellon as easily taking his place in that distinguished company. He is not a literary man like Lowell. He is not a speaker like Choate. He is not a great lawyer like Phelps. But, after all, he has a distinction of his own, a great reputation which he has honestly won ... "

"If Mr. Mellon," commented the Times' financial editor, "had suddenly decided in 1927, 1928 or 1929, to give up the portfolio of Secretary of the Treasury, the Stock Exchange would have been jarred to its foundations, it was remarked by persons who recalled the sharp reactions that were once produced by mere rumors that he might resign. The news . . . of his impending transfer to the Court of St. James's caused not even a ripple in the stock market--a fact that did not escape the attention of Wall Street. Obviously, it was pointed out, the market's sensibilities have been dulled and, furthermore, the idols of yesterday are no longer worshiped as in the halcyon days."

The former Secretary slipped quietly out of Washington to take a vacation in Georgia, leaving few behind to mourn, save perhaps Congressman Patman, who had been cheated of his quarry. The fiery Texan asserted that Mellon's transfer to London had "saved the Republican Party from a scandalous exposure that would have rocked the pillars of our Government." The appointment he regarded as a "presidential pardon." The Teapot Dome scandal was a "molehill compared with the Mellon-acquired Barco concession in Colombia." "Mr. Mellon," he summed up, "has violated more laws, caused more human suffering and illegally acquired more property to satisfy his personal greed than any other person on earth without fear of punishment and with the sanction and approval of three chief executives of a civilized nation." The nation paid scant attention to Patman and seemed glad to forget about the alleged scandals, without bothering to inquire into details.

The House judiciary committee took advantage of Mellon's confirmation to withdraw gracefully from the impeachment proceedings which Patman demanded. It was impossible to impeach a Secretary who had resigned, and idle to investigate him. Nevertheless for two heated hours the committee wrangled over an insurgent effort to insert in the resolution a statement that Mellon had held office illegally. The final vote was 17 to 4.

Senator Norris took a parting shot at his old political enemy. "Poor old Andy," he said. "Our Ambassadors, when you take their social activities away from them, are only stool pigeons. One of these bright page boys, taking away their social perquisites, could perform the duties equally as well as the greatest Secretary of the Treasury since Alexander Hamilton.
"I understand Ambassador Dawes left his knee-breeches over there in London. Picture Andy, on his diminutive pipe stems in Dawes' knee breeches in the presence of aristocracy. It does seem that the President has not treated Mr. Mellon with the respect due one of such long service."
The new ambassador was not without a quip, flecked with bitterness, when he was sworn in. "This isn't a marriage ceremony," he said, "it's a divorce." He accepted his new position with as much grace as his philosophic nature permitted. He was an old man now, a pawn in the hands of politicians, too
symbolic of might to be tossed aside, too well disciplined in upholding the established order to revolt, too old to reenter the hurly-burly of trade and finance in Pittsburgh, too disinterested in life to care to.

London and Paris speculated endlessly. Mellon's earlier statement that the British war debt to the United States should perhaps be scaled down in view of the decline of the pound had roused hopefulness. His intimate acquaintanceship with problems of international finance was another good point. His custom for many years before becoming Secretary of spending the summers in England had given him a sentimental attachment to the land, the political writers believed. They attached to him a vast power. As a multi-millionaire, he gave orders to the American politicians, his whim was law and his word could reduce or wipe out the debt.

Why, the man and his family were worth $1,600,000,000! A French paper cut the fortune into bricks of gold and found there were 160,000 bricks worth 1,000,000 francs each. Three thousand bricks would build a house, and the Mellon fortune in golden bricks would construct 52 such houses of gold.
Magnifique!

But when the reporters clustered about the envoy in the Ambassador's room at 14 Prince's Gate, overlooking Grosvenor Gardens, they were disappointed if they expected the biggest story of the year--reduction in the debt to America--to break there. "They say, Mr. Mellon," ventured one, "that your appointment to London has a special significance in view of the European debt situation."

The Ambassador's deft reply was worthy of his position. "Who says this?" he asked blandly. The question died on the lips of its propounder.

While the populace in London gaped in awe at tales of the imperial fortune of the new Ambassador, the American press titillated the fancies of its readers with the consideration, from every angle, of the engrossing problem, would Mellon wear knee breeches? War debts faded into secondary importance. At first he was inclined to be good-natured about inquiries. Later, under the provocation of repeated questions, he became annoyed about the attention paid an "unimportant matter." Breeches won. Would the Embassy serve liquor? the curious American public next demanded to know. It would. The new envoy had never been ranked with the prohibitionists.

And the social question. Ailsa, now the 29-year-old Mrs. D. K. E. Bruce, once again shone in the bright lights of the social columns. The "Dollar Princess," herself presented first to the Court, in turn introduced 21 American women culled from a mass of hundreds. The Ambassador, on presenting his credentials to the King, was tendered the unusual honor of being invited to stay for luncheon at Windsor. Later there were dinners with the Prince of Wales and other dignitaries. Socially at least, the son of an Ulster immigrant could aspire no higher.

Andrew W. Mellon was not the "broken and disillusioned" old man he was pictured when he left Washington. The Mellon fiber was tougher than that; a graceless dismissal was disgusting but it did not break his spirit. As for disillusionment, the family made it a point to cherish no illusions, so there were none to be shattered.

The Ambassador's fall from the heights was well cushioned. He was not a vain or overly ambitious man. Praise and scorn were subject to the same discount in the hard Mellon philosophy. At the height of his prestige he had been able to jest at the Alexander Hamilton comparisons and now, shunted to one side by Hoover, he could smile bitterly at the unseemly haste in which he had been pitched into the Court of St. James'. A man of Hoover's caliber could not wound the financier deeply; he had only contempt for the fretting and petulant figure who paced his study in the White House, wrestling with ogres of panic.

The tragedy of Andrew Mellon ran deeper than that. It was the tragedy of a man who had come to the end of his world, and now looked forth into a void space which harbored no warmth for an old man's declining years, no assurance that the "wen doing" of his grandparents would march on to new, victories and high triumphs. All about him lay the wreckage caused by the impact of modern technique upon ancient principles and prejudices. The one an irresistible force, the other an immovable body: in the crash both had been pitiably shattered. The triumphs of science in enriching the world counted for naught to starving millions who benefited not at all from the embarrassing abundance of food and goods; the stem old principles of rugged individualism, free competition, dog-eat-dog, were palpably anachronistic but the owners of machinery could devise no other to suit the facts of private ownership.

The world seemed crazily out of joint. The Mellon banks enjoined the virtue of thrift, while Secretary Mellon urged free spending to set the wheels going again. In one breath, he counseled that hard work would pull the nation through, and then closed his mills and factories so that none could work. Wages were to be maintained, he advised, but costs of production in Mellon industries must be cut. Government must get out of business, but his Government lent billions to banks and railroads. There must be stringent federal economy, he insisted, but it was found necessary to appropriate millions to keep people from rioting for bread and shaking the pillars of the social order.

The Mellon philosophy tottered. In its cherished individualism, every money-eager man was to have equality of opportunity in amassing wealth; but an ambitious Haskell or Uihlein was beaten or bribed from breaking Aluminum's monopoly. The Government was to keep its hands strictly out of business; but it must aid oil concessionaires in Mexico, Venezuela, Colombia and Iraq, even to the point of armed intervention. Honesty is the best policy, Judge Mellon had said. So his son had sent Union Trust tellers to prison for defalcations, while he himself maintained intimate relations with the Magees, the Flinns, the Quays and Penroses. Prudent investment was the very bulwark of independence; but hundreds of customers of Union Trust and Mellon National Bank bought Kreuger & Toll debentures at the solicitation of those institutions.

     Nowhere was the break-up of the old order of values more, painfully evident than in international relations. Tariffs were the keystone of Pennsylvania's industrial supremacy; now they were held partly responsible for the slow paralysis which gripped international trade. A true son of judge Mellon, the new Ambassador was insistent that intergovernmental war debts must be paid, in part at least. Yet these very payments were blamed for the stagnation of world commerce, and finally they bogged down under the contradictions they inspired. And if Governments could practically repudiate debts owed each other, why could not individuals adopt the same easy code of morals? It was a mortal blow at the basis of the Mellon fortune.

The new Ambassador had plenty of opportunity to study these contradictions in his system. He had wrestled with the vexatious problem of war debts before, as head of the War Debts Commission. His assistant, Garrard Winston, and a corps of Treasury and State Department officials had worked out the terms for debt settlements with Britain, France, Italy and the smaller debtors. After they had finished their work Mellon found himself under two fires. On one side the cancellationists, international bankers, traders and academicians echoed the European cry of Uncle Shylock. On the other the Hearst newspapers and Senators Hiram Johnson and James A. Reed of Missouri asserted that American taxpayers were being burdened to pay debts the clever Europeans had evaded.

It all depended on how you calculated the rate of interest. At 5 per cent, the amount agreed upon at the time the loans were made to Europe, 60 per cent of the French war debt had been canceled; 80 per cent of the Italian; and 30 per cent of the British. Figured at 4.25 per cent, the amount it cost the United States Government to raise the money through Liberty Bond issues, the French cancellation was 53 per cent; the Italian 75 per cent; the British 20 per cent. But at 3 per cent, Mellon's estimate of interest rates during the next 62 years of debt collection, Italian cancellation covered but 36 per cent of her debt; French 35 per cent; and Britain was actually paying 4.4 per cent more than her actual borrowings, with interest.

In answer to the cancellationists, Mellon said that the pre-armistice debts of France, Italy and Belgium had virtually been wiped out. He had little patience with the argument that the loans were really contributions to a common cause in the emergency of war. It was clearly stated in the bond that they were to be repaid, he pointed out. If it were true that American money had been used instead of American blood, at least, he urged, the post-armistice borrowings of the Allies must be repaid. As for the allegation that Uncle Sam was rich and Europe was poor, he retorted that a creditor is never popular, but a debtor without access to credit is in an unenviable position. He sympathized with Europe but felt that "recognition of their external obligations, and undertaking bravely to meet them within their capacity, is a moral force of great service to permanent prosperity of the world."

The controversies in which Secretary Mellon had been embroiled six years earlier in regard to the British war debt settlement gave some piquancy to his appointment as Ambassador in 1932. He had stated then that the British post-armistice loans were largely to bolster the Indian rupee and to meet obligations in the United States to buy food. Winston Churchill and Philip Snowden, alternate guardians of the British Exchequer, arose to give the lie direct. Every penny borrowed was for war purposes and the U. S. Treasury had so certified, retorted Churchill. Snowden assailed the "richest country in the world which entered the war last," and declared it would be paid for the whole of the war, even at the cost of mulcting $320,000,000 a year from Europe. Mellon, arriving in Cherbourg a bit later, said that his statement on the British debt had been for domestic consumption only.

Professors at Columbia and Princeton entered the lists, protesting that world trade and world recovery were being imperiled by war debts. Mellon answered their strictures about loss of transoceanic good will with a statement that "affection is not a purchasable commodity, neither in international relations any more than in private life." Of that he was well qualified to speak. He told the professors that England would receive more in debt payments from her Allies than she would pay the United States. Chancellor Churchill dispatched a denial to Secretary Kellogg. Kellogg replied that the new  controversy was purely domestic. The professors found Mellon a difficult antagonist; if his statements left them confused between conflicting interpretations that America had been generous in cancellation, or had stuck doggedly to the principle of recognition of debts, he had no further explanation to offer. The Times was obliged to confess that Mellon had tried to discourage discussion of the war debt issue, but had actually provoked it by confusing figures and shifting grounds. In view of the unfortunate echoes from London every time he spoke, the State Department apparently counseled that silence was golden.

The golden silence continued when he crossed the ocean as envoy. It was believed in the capital that the Administration had sent up a trial balloon when the Washington Post announced, in an inspired story, that Ambassador Mellon would find adjustment of the war debt question his most immediate and pressing problem. The response in Congress was so sharp that the President, facing a desperate campaign for reelection, decided not to broach the subject at all, even going to the length of barring the war debts question from the agenda of an international economic conference, called to set the shattered world on the road to recovery.

Tenacious in his convictions, the new Ambassador would not admit, before the Pilgrims Society of Great Britain, that his system of production was doomed. He maintained his faith in "capitalism, or whatever name may be applied to the system." We have had depressions before and have always recovered, to press on toward new heights, he said. Yet be seemed to contradict himself by asserting that the crisis beginning in 1929 was different from preceding smash-ups.

"Part of our difficulty," he told the Anglo-Americans, "arises because we look on the present industrial economic crisis as merely a sporadic illness of the body politic due to conditions in some particular country or section of the world which can be cured by application of some magic formula. Greater difficulty arises because we who are left over from the last century continue to look on the last decade as merely a prolongation of all that has gone before. We insist upon trying to make life flow in the same channels as before the war whereas the years since the war ended are in reality the beginning of a new era, not the end of the old."

It was an intriguing idea, but unfortunately the Ambassador did not expand its significance or point the path to the new era. He reverted to the explanation that industrial crises were caused by war, that deflation must open the way for recovery. "We still have much to learn," be conceded, "in the maintenance of a stabler equilibrium in production and consumption and the better distribution of labor so we shall not always have the painful spectacle of men willing to work but unable to exchange their services for the food and clothing they need which the world now produces in such abundance." But the financial-industrial genius of Union Trust, Aluminum, Gulf Oil and Standard Steel Car offered no indication that any course but reliance on immutable economic laws would help any. "Just now," he concluded, "all of us are hoping for signs of improving conditions as evidence that the world will soon be on the mend."

The events following his address to the Pilgrims did not suggest that Mellon's hopes were securely based. Bank failures and insolvencies, receiverships and financial scandals followed each other in the United States with monotonous regularity. European correspondents in New York, gloating at the strange course of events which had plunged the one-time Eldorado into an abyss of despair, picked up the most tempting morsels of news and cabled at length. In Washington, their brothers were able to tell a story of a deficit that daily mounted by millions, of an unhappy Treasury Department unable to forecast from one week to the next what any given tax would bring in, of a Congress which raced in circles in an effort to pin the increased tax burdens on the most desirable victim, from the political viewpoint. These malicious cables, had they merely tended to amuse the victims of "Uncle Shylock," would have caused no concern in Washington or Wall Street. Unfortunately, they, and the events they portrayed, shook the confidence of Europe in America, caused American securities to be dumped on the market, caused gold to flow out of Wall Street, and most alarming of all, tended to undermine that majestic symbol of solidity--the United States dollar.

Hoover, hardly less panicky than the business classes he served, appealed to the Ambassador to reassure the City. He responded ably at a luncheon given May 6, 1932, in his honor by the Lord Mayor at the Mansion House. His hundred auditors represented the top ranks of British finance and industry. "Whenever I come to the City," he told them, "and find myself once more in the congenial, familiar surroundings of the business world, my new, unaccustomed role of Ambassador seems to leave me and, reverting to type, I think and talk again as a business man with the outlook and anxieties which weigh so heavily just now on all those charged with carrying forward the business of the world. And it is as a former business man and banker, therefore, that I would like to say a word here, so close to the heart of the City, about conditions in my own country and the progress of events there in recent months."

Reporters, he reminded his audience, gave highlights on foreign affairs that were apt to mislead the unwary. Britain, if the cables were to be credited, had tottered on the brink in the autumn of 1931 when it went off gold and faced the need for a National Government. He, though, never doubted England's capacity. just so in America. The commotion in Congress did not betray an unwillingness to balance the budget, but merely an earnest inspection of the various ways to do it. If many banks were failing, that was confined to "smaller, weaker institutions." Organized labor, the farmers and every section of the populace, he added, had accepted wage cuts.

"A great patriotic American," he concluded, "who lived much in England and loved this country, once said to a compatriot, 'Never sell America short.' I would reiterate now, what Mr. Morgan said then, and would apply it to England no less than to my own country. None of us has any means of knowing when and how we shall emerge from the valley of depression in which the world is now traveling. But I do know that, as in the past, the day will come when we shall find ourselves on a more solid economic foundation and the onward march of progress will be resumed."

Despite the Times' plaudits for "this exhibition of cheerful optimism over our institutions," matters mended not at all, and on May 31 the Ambassador was obliged to make another effort to calm European fears about America going off the gold standard. Before the English-speaking Union he asked Britain to remember that "America is a young country in outlook as well as in years. Many of our faults are the faults of youth, but we have also the energy and under ordinary circumstances the boundless optimism that goes with youth, and a belief in our capacity to achieve that which we set out to do. Today, like other nations, America is bewildered in the face of forces which have overwhelmed the world. We have found that the machine civilization which has been evolved in recent years cannot be made to function with ever-increasing speed, and that new inventions and over-production have necessitated a period of slowing down until the world adjusts itself to the conditions that have arisen since the war.

"At such a time it is well to remind ourselves that the principles upon which our English-speaking civilization was founded have not changed, and that, being true to those principles, we should weather this storm as we have weathered our other storms before."

Such words apparently offered little palpable evidence to indicate that the men who owned the machinery which had broken down knew how to repair the damage or set the wheels in motion. Nevertheless they had a comforting, sedative effect on those who listened and read, and so perhaps served an humble purpose. Said one English editor, after listening intently: "It was like trying to catch the whisperings of a ghost, and when you caught what he had said, he had said nothing particular." Commented another: "In an almost inaudible voice he carefully read platitudes to the assembled company."

The crisis deepened.

The eminence of his position and the might of his millions raised to a higher tragic level the spare shrunken form of Andrew Mellon as he wandered through the economic blizzard hugging to his breast his cherished beliefs in the best of all possible social systems. In much the same words he used before the Pilgrims (for Mellon believed in economizing on speeches, with the result that favorite snatches of his composition were heard over and over) he told the International Chamber of Commerce of his faith.

"I do not believe," he said, "in any quick or spectacular remedies for the ills from which the world is suffering, nor do I share the belief that there is anything fundamentally wrong with the social system under which we have achieved, in this and other industrialized countries, a degree of economic well-being unprecedented in the history of the world. Capitalism, or whatever name may be applied to the system which has been evolved in adapting individual initiative to the machine age, has its defects, of course, and may be, as has been suggested, still in its infancy, but there is no disputing the fact that it has produced an abundance of food and clothing and all the necessities of life, so that our basic problem is not one involving a basic inability to produce goods needed to satisfy human wants. We still have much to learn in the maintenance of production on an even keel and the achievement of a process of orderly and broad distribution of products and services. These defects in the present system we shall overcome as we find some way to achieve greater equilibrium between production and consumption, and a better distribution of labor, so that we shall not always have the painful spectacle of men willing to work but unable to find a market for the only commodity which they can exchange for food and clothing which they need and which the world can produce in such abundance.

"We shall succeed in time in working out our economic salvation in accordance with the special needs of our own people, and the social and industrial system which has been built up. But it will be done in the future as in the past by individual initiative, and not by the surrendering of business and industry to the Government or to any board or group of men temporarily entrusted with overhead authority. Conditions today are neither so critical nor so unprecedented as to justify a lack of faith in our capacity for dealing with them in our accustomed way." The assembled international bankers applauded appreciatively.

"Our present experience," he continued, "indicates that the machine cannot be made to function at full speed at all times. Some day, perhaps, we shall have mastered our economic machine so as to have it under better control." In conclusion he confessed that "I have no means of knowing when or how we shall emerge from the valley in which we are now traveling." But he was sure that eventually "the onward march would be resumed." Undaunted by the avalanche of disaster that gathered force in the early. months of 1933, the Ambassador, in his farewell address to the Pilgrims on February 21 reiterated his confidence in the scheme of things. "The economic system in America," he gravely assured his listeners, "is in no danger of breaking down, but on the contrary has such inherent strength that it continues to function efficiently in the face of the greatest maladjustment the world has ever seen. There is no lack of production and the processes of distribution continue to operate as usual, notwithstanding unemployment and reduced buying power." It was an extraordinary statement, in face of the want of 50,000,000 Americans, and the imminent collapse of the banking structure, but the Mellons had faced economic crises in America for more than a hundred years and had come forth from each greatly refreshed in fortune and confidence.

It cannot be said that the Secretary-Ambassador enlightened his listeners by presenting new ideas to them or indeed any concepts not hallowed by time. Adam Smith's economics and Herbert Spencer's sociology were good enough for Thomas Mellon and they were good enough for his son. He dabbled little in the fields of pure speculation that had occupied his father's active mind in his declining years. Being a practical man, he was interested not in theories but in deeds. Confronted in 1924 by "political quackery" in his opponents' taxation proposals, he called to mind, in rebuttal, Italy's experiences. That country, he warned in his main speech of the 1924 campaign, had been threatened with the same evils after the war. Socialism became a power. There were strikes. There was unemployment. Workers seized factories. "A strong hand has since come in to reestablish the Italian Government upon sound principles and Government by party and not by bargaining," he said. "Steps have been taken to abandon Government operation of the railroads and to cut taxes, and the budget this year will be practically balanced." Two years later he had not changed his opinion. "Mussolini," he said, "is making a new nation out of Italy. He is one of the world's most vigorous personalities. Many of his measures are unique indeed, but they are effective."

Confronted by that other experiment in new forms of government, Soviet Russia, Mellon lost his patience. His opinion of Russia, unlike that of Italy, was not based on personal observation. Warning of the evils of taxation in the higher brackets, he declared that "in Russia the experiment [of Socialism] has brought destruction, final and complete. There is no trade, no industry, no agriculture, no religion--a return to barbarism," he explained. "The millennium was promised to the Russian peasant; he has received tyranny, starvation and death." Curiously enough, within a few years of this observation, his Koppers Company was supervising--in the land of final and complete destruction--the erection of the largest coke and gas plant in all Europe; his Massachusetts utilities were accused in Congress of importing Soviet coal; his Canadian aluminum company was bartering aluminum wire for Soviet oil; and he himself was obliged as Secretary to embargo the importation of Soviet matches as likely to injure the American industry.

Bolshevism was no danger in Germany, he felt sure, because it was "incompatible with the German temperament." The doles in England, he reported, militated against the unemployed voluntarily going to work. Worse, it had played a part in strikes, he had been told, because strikers receiving the dole found that a more agreeable way of making a living than working honestly.

If working men would save, a large part of the so-called labor problem would disappear, Mellon believed. By thrift they could accumulate enough to climb out of the mills and factories and assure themselves a modest living and a competence against indigence in old age. Congratulating a trade union bank on its second anniversary--it went under in 1931--he wrote: "Institutions such as the Federation Bank of New York bear reassuring testimony that the average man and woman is learning the necessity of saving and accumulating capital if they would get the comforts of life for themselves and their families."

He expanded these ideas in an address before the National Electric Light Association. "Both labor and capital," Mellon asserted, "are beginning to realize that they have common interests in building up great industries which are sources of wealth for all, and that in America with the opportunities it offers and the constant transition from poverty to wealth, there is no Place for class antagonisms or class warfare. Labor in this country, unlike labor in some of the European countries, long ago learned that no man can lift himself by his bootstraps, that industry cannot pay high wages even under the threats of strikes unless that industry is prosperous. Labor as well as capital must think in constant terms and must act in harmony with and not in antagonism to those great economic laws which work so inexorably whether we like them or not. Labor in America is not only maintaining a high standard of living but it is also banking a part of its wages, as evidenced by the steady growth of savings deposits. It is organizing  its own banks and buying shares in corporations in which it works, and in this way workers are acquiring a real partnership in the business in which they are employed."

While Mellon's servants packed up the choice bits of furniture and art treasures which were to grace the Embassy building in London given the United States Government by J. Pierpont Morgan, his successor in the Treasury wrestled with fiscal problems still unsolved. The Greatest Secretary since Hamilton had achieved another distinction, that of leaving the greatest peace time deficit in the history of the country. Ogden Mills estimated it at nearly $2,500,000,000 for 1931-32, and for 1932-33 at somewhat under $2,000,000,000. The deficit for the year ending June -31, 1931, was $902,000,000 against Mellon's estimate of a $30,000,000 surplus.

What followed now was the bitterest blow of all. Mellon had not been away from the Treasury four months when all the results of his ten-year struggle for easier burdens on wealth had been wiped out. In one stroke, Congress, searching desperately to balance the budget, jerked up rates to the levels which existed when the Pittsburgh banker first went to Washington. Gone was the 20 per cent maximum surtax on incomes of $100,000 and more for which he had fought with all his prestige and resourcefulness from 1921 to 1926. In its place was imposed a 55 per cent levy on incomes above $1,000,000. The inheritance tax was lifted from 25 to 45 per cent. The corporation tax, which had been pared down to 12 per cent, went up to 13.75 per cent and an added impost was piled on consolidated returns, to make it 14.5 per cent.

The bare millionaire with an income of $50,000 a year now would pay $8,600 a year, against the Mellon Plan levy of $4,588,75. The plutocrat with his $1,000,000 yearly income, would Pay $571,100 to the Treasury, against a former $240,768.75

Nor could a man give away his fortune, scatheless of Government tax, as in the halcyon days of Mellon rule. The Government now insisted on $140,000 from a $1,000,000 gift and $3,333,333 of a $10,000,000 gift.

The immediate exactions of the law did not worry the financier so much as its implications. Fortunately the Mellons would not have to pay much of a tax in these hard times. But there was always a lag in Congressional action; once the country emerged from the "valley," it might take another few years' fight by another sturdy champion of fiscal normalcy to restore the easier rates.

By December, 1931, Mellon saw the inevitability of the tax rise and agreed that the surtax maximum would have to go up to 40 per cent, and the corporation tax to 12.5 per cent. After he quit office however it became apparent that even the doubling of the surtax was not enough. In common with other Administration leaders, Mellon favored the sales tax rather than increased income taxes. The superiority of the sales tax was immediately apparent: people were still buying food and clothing, and some could still afford the necessary luxuries of the machine age. Such a tax was certain to return substantial income. Its psychological effects would be even better. People would realize that they were paying directly for Governmental expenditures and would demand a drastic curtailment in general social expenditures. That would curb extravagance and a too open-handed dispensing of federal charity which hither-to the populace supposed was coming from the pockets of the rich. It was uncertain however whether such a general tax would react favorably upon the electorate in the coming 1932 Presidential election, and Mellon made no overt recommendation.

While the Mellon Plan of taxation was being discarded overnight, the Mellon political machine creaked on, rebuffed by Pittsburgh voters but still maintaining control of the Pennsylvania legislature by virtue of alliance with Joe Grundy's Manufacturers Association. The defeat late in 1931 of Joe Armstrong and James J. Coyne, the Mellon candidates for county commissioner, plumbed the depths of the Mellons' fall from popular favor in their own home city. A few months later Mayor Charley Kline, Mellon henchman, was convicted of graft and saved from a six-month sentence in prison only by grace of the court, which heeded physicians' counsel. He was ousted from office and fined $5,000.

The Mellon machine made a quick comeback. Coyne, a state senator, acknowledged leader of the Mellon forces in western Pennsylvania, dissolved the Kline apparatus and took charge of the city. In the state legislative session called in the desperate winter of 1932-33, the Mellon-Grundy machine scored brilliant victories in defeating old age pension, minimum wage and child labor bills demanded by widespread public agitation. When Roosevelt's election roused the Pittsburgh Democratic party from its somnolence, it was discovered that the local Democratic leader and the engineer of the Mellon machine were political bedfellows. Postmaster-General Farley, advising his cohorts in the Iron City, exhorted them to assert their independence of entangling alliances. The cynical, however, maintained confidence in the ability of the Mellon machine to cope with the resurrected local opposition party through adroit manipulation of its leaders, long content with crumbs from the machine's generous table.

Among the commonalty of Pittsburgh, the Mellon name had never excited that glow of local pride which an outsider might have expected. Perhaps, as the Secretary remarked in the field of international affairs, a creditor is never popular; certainly in the course of sixty years a family of money lenders can arouse its fun share of distrust and animosity in a city dependent upon its local dei Medici for ready cash.

A variety of reasons conspired to raise the mob against its magnificos. Perhaps the failure of the Bank of Pittsburgh aroused the liveliest resentment, uniting those of high and low degree, outside the Mellon hierarchy, into a solid ring of bitter criticism against the family.

The Bank of Pittsburgh was the pride of the city's better classes, a token of Pittsburgh's solidity, a tie that bound the great industrial center at the head of the Ohio with its early days when it was little more than a trading post on the western frontier. Established in 1810 it was the oldest bank west of the Alleghenies. The building which it occupied in 1831 was the first bank building to be erected in the United States outside New York and Philadelphia. In a glow of patriotic pride, the Pittsburgh Chamber of Commerce in 1931 asserted that "it is the rare and most enviable distinction of the Bank of Pittsburgh that among other banks of the country, it is one of the very few which never suspended specie payments. In the devastation of the panics of 1837 and 18574 it not only excited astonishment of banks all over the country by maintaining regular dividends, but met every obligation with dollar for dollar in coin." When T. Mellon & Sons suspended payments in 1873, the Bank of Pittsburgh was doing business as usual.

Its president in 1931 was Harrison Nesbit. By some he was considered an aggressive banker who was pushing the Mellons hard by his liberal credit policy. Others held him to be a plunger. In any event the catastrophes of 1931, complicated by boom time realty purchases in downtown Pittsburgh, shoved his bank into an insolvent position.

The shoguns of finance in the Iron City, the Mellons and the Hillmans, considered the plight of their city's oldest bank. It was unthinkable that it should be allowed to stagger to ruin. The collapse of the Bank of Pittsburgh would bring crashing down about it a score of smaller banks which deposited with it. Examiners for the two banking chains surveyed the institution's assets and submitted offers for its consolidation with theirs. The Hillman interests finally withdrew when it seemed that the Mellons were the more eager.

Richard B. Mellon, W. L. Mellon and H. C. McEldowney conducted the negotiations. True, there would be some loss involved, but the good will of the many thousands of depositors in the Bank of Pittsburgh and the dozen or more little banks which clustered about it was a tangible thing, to be appraised in dollars and cents and in the Mellon family's prestige. An agreement was made to protect the insolvent bank's depositors within the shelter of the Mellon financial structure. Only A. W. Mellon's approval was needed now to complete the deal.

The Secretary turned thumbs down. The bank was not a good investment. And anyway, its depositors would have to turn to the Mellon National Bank. "We'll get their money anyway," was a paraphrase of the Secretary's logic.

The Bank of Pittsburgh was allowed to fail. Within a month a score of smaller banks closed their doors. Tens of thousands of Pittsburghers, most of them workers and small business people, found their savings and reserve funds tied up in the bitterest winter in the city's memory.

In one regard Andrew Mellon was right. The Mellon National Bank had to hire extra clerks and open extra windows to take care of new accounts. Terror-stricken people took their savings out of still solvent banks to entrust them with the institution whose proprietor was Secretary of the Treasury.

Fury swept through the ranks of Pittsburgh business and industrial leaders. President Crawford of the McKeesport Tinplate Company, a few days after the failure of the Bank of Pittsburgh, switched his company's huge account from the Mellons to the Hillmans, and others followed. When the bank statements were filed at the end of 1931, it was found that the Mellon National Bank's deposits -- despite the influx of small accounts -- had dropped from $181,000,000 to $153,000,000. On the other hand, the Hillmans' First National Bank had held its deposits practically intact in that trying period.

Opposition bankers, finding the Mellon charm broken, became openly critical of the workings of the National Credit Corporation in Pittsburgh. President Chaplin of the Colonial Trust Company, in the Hillman orbit, spoke bitterly of the Mellon control of the federal agency which had been erected hastily by Hoover and the Treasury to save certain banks. A. E. Braun, president of the Farmers Deposit National Bank, generally regarded as a Mellon bank, was director for the Pittsburgh area, and with two Mellon bankers comprised a majority on the board of five members. Pittsburgh banks had subscribed $3,300,000 to the National Credit Corporation, only to see the Mellon-controlled board send much of it to the Pacific Coast while banks languished and expired at home. President Chaplin was fearful that the new Reconstruction Finance Corporation would work no better in the Pittsburgh area if the ruthlessly deflationary Mellon policy were to be followed. In the winter of 1932 Pittsburgh depositors suffered a second major shock when the Diamond and the Monongahela, old-established banks, went under.

Whatever Richard B. Mellon may have thought of the wisdom of his brother's course in the Bank of Pittsburgh debacle, it was safe to assume that the Secretary himself was unperturbed, as usual. The weak and the failures would always hate the strong and the successful. In trying times like these each man and each institution must stand on its own legs. The strong owed little to the weak in such an emergency; indeed it was the result of immutable economic laws that the strong became stronger after such cataclysms.

When Union Trust in 1929 joined the banking syndicate which sold to American investors $50,000,000 in Kreuger & Toll debentures, it added no luster to the name of the most distinguished financier of his time. Old judge Mellon, had he known that his sons' bank was peddling a pig in a poke to trusting investors, would most certainly have marched out of his grave to give them a lesson in a banker's responsibility to his clients.

Times had changed though since judge Mellon confessed that his inability to meet his obligations in 1873 was the most humiliating experience in his life. So far as the public knew, neither Andrew Mellon nor his brother felt the slightest compunction about Union Trust having sold over its counter at 98 debentures which later were quoted at 1/32 on the New York Stock Exchange. In any event Union Trust did not bother to apologize to investors for its carelessness in helping Ivar Kreuger swindle American investors out of $250,000,000.

The banking syndicate which passed off the so-called Secured Gold Debentures of Kreuger & Toll lacked nothing in reputability. Its members were Lee, Higginson & Company, Guaranty Company, National City Company, Brown Brothers & Company, Dillon, Read & Company and Union Trust Company of Pittsburgh. Securities worth $60,000,000 were pledged for the loan. It was provided however that other securities could be substituted. It was astonishing that financial gentlemen of such justly high rating as the partners of Lee, Higginson and the proprietors of Union Trust, together with their legal advisers, could have permitted such an extraordinary choice of eligible substitute securities. Even the German Forced Loan of 1922--worth $5 on the million--was acceptable. Kreuger, hard-pressed, took advantage of this feature and substituted $22,000,000 in Jugoslav and $23,848,000 in Hungarian Cooperative Society issues, along with similar treasures, for the original solid Belgian, French and Prussian securities.

At the bottom of the advertisement in the Pittsburgh newspapers inviting investors to share in Union Trust's offering of these precious debentures appeared, in small type, the following words: "The statements contained in this advertisement while not guaranteed, are based upon information and advice which we believe accurate and reliable."

After Ivar Kreuger turned his pistol on himself, it was found that very few of his statements were either accurate or reliable. The hard-headed American bankers who passed his securities along to the investing public had never bothered to inquire. Their gullibility was amazing. Kreuger had told them that his Swedish bank would resent foreign accountants prying into its books. The American bankers agreed that such inquisitiveness would be sheer impertinence.

Guardians of the people's faith in investment bankers were properly shocked. Bertie C. Forbes, financial columnist for the Hearst papers, wrote: "Any crook who issues spurious money is sent to jail for a long term of years. But any Tom, Dick or Harry can issue spurious bonds or stocks without fear of punishment. . . . They do these things better in Britain. There security buyers are protected by law. There the issuers of prospectuses must swear that every fact and figure is strictly true. If events prove that any factor figure was not true, the offenders are slapped into prison."

Forbes was not specific, and no one ventured to suggest that the Mellons be held personally responsible for their small type assurances to investors. Indeed had it not been specifically stated that their information about Kreuger & Toll and its debentures was "not guaranteed"?

Union Trust, in its own investments, was more prudent. When in conjunction with National City, Bankers Trust and Continental Illinois, it lent $4,000,000 to another Kreuger creation, the International Match Company, it very wisely insisted on cold security of 350,000 shares of Diamond Match Company stock, for which nothing else could be substituted. When International Match was thrown into receivership, Union Trust and its associates proceeded to sell the pledged stock in satisfaction of their loan. It was noted, too, that when the list of principal holders of Kreuger & Toll debentures was made public, the name of Union Trust was absent. It was a tribute to the business judgment of the Mellons that their bank declined to share in the feast which it spread for Pittsburgh investors.

Apparently it required no superhuman penetration to ascertain the real status of Ivar Kreuger's ventures. As far back as 1929 Maehler's Bank in Amsterdam had been requested to lend the match king 20,000,000 kroner. The Dutch bankers investigated, turned thumbs down, and quietly disposed of whatever Kreuger holdings they already had. In America however the billion-dollar promoter hobnobbed with the elite of Wall Street and was the honored guest of Herbert Hoover until within a few weeks of his death.

The possibility that Union Trust and its fellow syndicate members might have unpleasantness ahead was seen when Bainbridge Colby and Samuel Untermyer formed an independent protective committee for Kreuger & Toll debentures holders. "Our Counsel," they said, "advise that if Kreuger & Toll debentures were purchased in reliance upon material representations which on investigation are found to have been false, a purchaser on discovering the falsity thereof may rescind or cancel his purchase and recover back the purchase price paid by him." According to judicial decisions, it was not even necessary to prove that the bankers knew their representations to be false when they made them. The simple fact that the goods were not as represented was held sufficient to void the contract. Such an action was begun by an International Match debenture holder against Lee, Higginson & Company and Guaranty Company in New York.

Kreuger & Toll debentures were merely one of a list of choice offerings laid before the Pittsburgh investors by the Mellon banks. There was also stock in the Alleghany Corporation, a Morgan tidbit, sold at 24 and quoted three years later at .375. Or Lone Star Gas, sold at 98.75, quoted at 7.625.

Not even the securities of Mellon corporations, in which the Pittsburgh banks specialized, escaped the deflation. Those who bought Aluminum stock in 1925 at 97.5 saw its market value shrink to 22 in 1932. Koppers Gas & Coke issues, sold at 96, withered to half that market value. Solvay American Investors Corporation declined from 100 its sales price, to nearly half. The 1929 issue of $20,000,000 in Pittsburgh Coal bonds, sold at 100, was quoted in 1932 at 68.