America's 60 Families
By FERDINAND LUNDBERG, Author of Imperial Hearst
To FRANKLIN M. WATTS, who first saw the urgent need of a book on this phase of contemporary affairs
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.
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.
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.