WASHINGTON under Roosevelt is a political dude ranch. The bevy of nice people he has brought into the federal service as his chief contribution to American government are, in the main, just so many effete vacationists luxuriating in the trappings of officialdom and playing at the bruising sport of political line-riding, while a group of calloused and professional hands go about the business of actually running the hacienda in the Old Deal tradition.
For example, take the Roosevelt Administration's performance in the twin arroyos of banking and taxation. The men who gave the New Deal rancho its eclat have had only a boon-doggler's role in that show. Roosevelt has kept booted and spurred and prominently displayed on the verandah such dainty fellows as Morgenthau, Eccles, Oliphant, Magill, and the Professors Warren and Rogers, but out behind the barn he has been doing business as usual with such saddle-galled gentry as Jesse Jones, Joe Kennedy, "Little Dandy" O'Connor, Leo Crowley, Carter Glass, and a clique of Senators who have chewed the locoweed of money magic.
There seems to be general agreement in Washington that the title of "most loyal Cabinet member" belongs to "Henry the Morgue," as Roosevelt calls his Number 2 Cabinet officer. Morgenthau, who reciprocates by calling Roosevelt the "Boss," appears to have no fixed convictions on anything beyond a resolve to keep his department honest as well as efficient and to see that his White House master's every will be done. He is painfully humble when his own abilities are touched upon and goes out of his way to make it appear that he does not understand, for example, the monetary-stabilization operations his department handles, though he was a prime mover for dollar devaluation and was largely responsible for the New Deal enlistment of Dr. George F. Warren, the Cornell farm-management professor who invented Roosevelt's gold-purchase plan. At press conferences, where he unsuccessfully tries to hide his fear of newspaper men behind a juggler's smile, Morgenthau seldom hesitates to refer any technical question to his assistants and to deprecate his own grasp of the subject involved. Similarly, under questioning by Congressional committees with respect to pending legislation, the titular chieftain of New Deal finance begs off questions on policy as Presidential matters and evades inquiries as to details by suggesting that they be addressed to experts in the Treasury's employ. He has, as a result, reduced his role in public to that of a White House errand boy.
With one or two exceptions, "Henry the Morgue" has been meticulous in selecting his subordinates. He demands of them a loyalty to himself equal to that which he, in turn, shows to the President, but his chief requirement is that they be above suspicion of using their posts to their own financial gain. The fanatical emphasis he places on the primer type of honesty has forced him to limit his selections to men who are his personal friends or friends of personal friends. Furthermore, it erased by a roundabout process what chance there was of a bona fide New Deal tax program being espoused by the Treasury Department in its own right, and it also plunged Morgenthau into one of his early embarrassments.
Its blighting effect in the tax field showed itself in Morgenthau's selection of Roswell F. Magill as his taxation expert. Magill was snatched from his law professorship at Columbia University to take the Treasury post. No Tory, he nevertheless was sufficiently conservative in his views of tax questions to have served similarly as an expert under Secretary Mellon. Chiefly a lawyer, Magill has been engaged under Morgenthau principally in building traps for tax-dodgers and inventing plugs for holes in the tax laws rather than in devising the whole new system of taxes needed to supplant the present Old Deal holdover which places at least half the burden on consumption taxes. He fills a post which would have been occupied by Harold M. Groves, a Wisconsin liberal and Brandeis protege with aggressive ideas on social taxation, had not Morgenthau, on taking office, countermanded the Groves appointment merely to make way for a man less a stranger to him.
The embarrassment to which Morgenthau subjected himself through his predilection for trusting only his friends or friends of his friends was partly the result of his own unfamiliarity with the awful mysteries of securities flotation. He was faced as soon as he donned the robes of office with a huge refunding operation and had to get help in a hurry. Accordingly, he enlisted a friend well versed in such matters--Earle Bailie, a partner in J. W. Seligman and Company. Immediately, growls began to rumble in the chests of Senators who recalled that Bailie's firm had floated in this country a series of Peruvian loans which had gone sour on investors' hands and that in the process the firm had handed young Leguia, son of Peru's President, a pourboire of $450,000. They also recalled that Bailie had been active in Wall Street's fight against the securities act, and they prepared to wreck vengeance therefor on the new Secretary with the result that, on the day Morgenthau's name came up for Senate confirmation, Mr. Bailie's resignation was announced.
His place has since been taken by T. Jefferson Coolidge, an ultra-Bostonian individual who by right of family rather than conquest has sat on the boards of most of the distinctive New England financial and industrial establishments such as the First National Bank of Boston, the Old Colony Trust Company, the Boston and Maine Railroad, and the Hamilton Woolen Company, to mention only a few. As Undersecretary, he is the Treasury's fiscal expert and efficiently fills Roosevelt's need for a man in that department who knows his way around Wall Street and yet is not a denizen of that thoroughfare.
Morgenthau would sleep better were he able to prune the political appointees out of the Internal Revenue Service, but Jim Farley got there ahead of him and is standing his ground, bowing only to Morgenthau's insistence that there be no more misuse of this tax-collecting agency as a soliciting machine for campaign contributions such as came to light at its Detroit office soon after Morgenthau became Secretary. Morgenthau also has been inclined to look with suspicion upon the banker and former Democratic Congressman from Kansas, Guy Tresilian Helvering, who is Commissioner of Internal Revenue, but that is all the good it does him, and he solaces himself by watching that young-lawyer-in-search of-a-reputation, Robert H. Jackson, slash his way past Mellon's legal bodyguard, Frank J. Hogan, in an attempt to convict Andy of tax-dodging before a Board of Tax Appeals made up largely of Mellon appointees. Jackson is the Treasury's assistant general counsel assigned to the Internal Revenue Bureau.
Its general counsel is Herman Oliphant, who had been cast adrift when the Johns Hopkins Institute of Law was closed out for lack of funds. Before enlisting in that ill-fated scholastic venture, Oliphant had been a professor of law at the University of Chicago. He is one of Morgenthau's friend-of-a-friend appointees, having been recommended to the Secretary by a lawyer friend, Edward S. Greenbaum, when Morgenthau, before joining the Treasury, was seeking a solicitor for the Farm Credit Administration, which he headed from May, 1933, until Roosevelt promoted him to the post of Undersecretary to Woodin. Morgenthau brought Oliphant with him from the FCA to the Treasury.
There is another major figure in the Treasury Department who must be mentioned, for his presence there is both an anomaly and a partial explanation of the New Deal's dilatory course in the field of banking legislation. He is James Francis Thaddeus O'Connor who, as Comptroller of the Currency, has supervision over all the national banks. Small, plump, dandified, and perfumed, though otherwise bookkeeperish in appearance, he popularly is regarded as a McAdoo protege, though the former Secretary of the Treasury and junior Senator from California privately disclaims him. They were law partners from 1925 to 1930. The only thing that fits O'Connor for a New Deal role is his egotism. He boasts of his non-New Dealish past, including the fact that as a member of the North Dakota legislature from 1915 to 1917 he fought what he calls the "state-socialist" constitution of the Non-Partisan League. He also boasts of his legal prowess, exhibiting in proof thereof A check for a vast sum which he says he once received as a fee. After running unsuccessfully as a fusion candidate for the North Dakota governorship in 1920 and for the United States Senate two years later, he moved to California where he was unable to gain a substantial political foothold until 1932. In that campaign year, young Jimmie Roosevelt visited California and O'Connor seized the opportunity to win his way into the Roosevelt graces. He attached himself to Jimmie and in that way rode into the New Deal, bringing with him his own press agent, Kenneth Hayes, who had been financial editor of the San Francisco Examiner.
O'Connor has run his office strictly in the Old Deal tradition. In fact, the actual running of it is entirely in the hands of Old Guardsmen. His chief deputy is Frank G. Awalt, who was Acting Comptroller from September, 1932, when Hoover still ruled the White House, till May, 1933, when O'Connor was named Comptroller by Roosevelt. His second deputy, Gibbs Lyons, also is an Old Dealer. The Old Guard influence, however, has not been so debilitating as might be expected, for the veterans still tremble over memories of the Hoover era and the banking crisis to which it led. In consequence, with O'Connor's support, they have insisted on enforcing the national banking laws to the letter. This has led, in turn, to a running fight between O'Connor, on one side, and, on the other, Jesse H. Jones, RFC chairman, the aforementioned Crowley, and Morgenthau, all three of whom adhere to the belief that a little laxity in bank examinations would bring about a flood of loans and, perforce, something vaguely referred to as prosperity.
O'Connor has been able to stay in the saddle chiefly through the help of Farley, tendered in appreciation of the generous manner in which the Comptroller has let the Postmaster General select receivers for defunct national banks. Farley, you may be sure, has selected Democrats who are not only deserving but appreciative; receivers' fees are big and secret. The number of receivers also is big. Approximately 1,500 national banks were in receivership or in process of reorganization under federal conservators when O'Connor made his last report. One of the receiverships went to O'Connor's brother, William, at Grand Forks. North Dakota. Through Farley's good offices, he managed to place another brother, Thomas, in the Internal Revenue Department as an examiner at Jackson, Michigan.
Michigan, which has more closed banks per square foot than any other state, naturally has been a fertile field for receivership appointments. Farley has had happy pickings there, letting Horatio J. Abbott, a former Ann Harbor postmaster and small-town financier who is Democratic national committeeman for Michigan, select the list of candidates from which Farley makes the choices that O'Connor approves. Farley had Abbott made Collector of Internal Revenue at Detroit but Abbott didn't last long in the job; his staff immediately had set about shaking down manufacturers for campaign contributions, and Morgenthau forced him to resign. Abbott continues, however, to be the accredited Democratic patronage dispenser for Michigan.
Morgenthau, who is nine years younger than Roosevelt, wanted to be his Secretary of Agriculture. He was, in fact, considered for the job and rejected as too Eastern and too Judaic. Bernard M. Baruch similarly was considered and rejected. For that matter, the only reason Woodin got the Treasury secretaryship--which Frankfurter could have had and Cordell Hull nearly got--was that he happened to fit well with the world of industry and finance without being covered with its barnacles. In addition, he was virtually the only big-business man whose enthusiasm for Roosevelt was not suspect. Roosevelt and Morgenthau, son of Wilson's Ambassador to Turkey, had been friends since 1914 when "Henry the Morgue" bought a 1,400-acre farm and went into the business of raising apples in Dutchess County, fifteen miles from the Roosevelt estate at Hyde Park.
A good administrator, Morgenthau has the Treasury Department running efficiently, if unimaginatively. He is particularly interested in his tax-collecting division, fired by a determination to enforce the tax laws to the hilt and see that no violator escapes. In that connection, he has obtained a grant from the four-billion-dollar work-relief fund to finance a check of income-tax returns on incomes under $25,000; these have gone unchecked in the past. The Administration's monetary manipulations fascinate him much as would the Illusion of Sawing a Woman in Half. On the other hand, the attacks of the budget balancers terrify him and drive him into demonstrations such as his nation-wide speech in 1934 to the effect that, despite all its spending and borrowing, the government was money ahead because of the gold profit. He professes satisfaction with the results of the Warren plan, though the "Boss" has ceased to make such professions, but he sulks when pressed for an explanation of the Administration's inexplicable operations in silver.
Part of his terror in the face of the budget balancers' assaults springs from fear that his refinancing operations are menaced thereby. Cautiously, he has been refunding millions in federal securities at unprecedentedly low interest rates and his record on this point, though vitiated somewhat by the helpless position of the bankers who must deal with him, is one deserving of praise. It is, his fact, his most tangible accomplishment and to keep the way clear for improvements on it, he has done two things that must be marked down against him. He has persuaded the Congress to boost the original tax rates in the Administration's social-security program so as to make its old-age-pensions plan a device which is completely self-sustaining, which makes savings compulsory, and which is therefore anti-social. Similarly, he has argued before Congressional committees for treatment of the tax instrument as a purely fiscal and budget-balancing, rather than social, device. In the first of these two arguments he is known to have had the backing of Roosevelt. It is unlikely that Morgenthau would have advanced the second without approval from the "Boss," though it ran counter to Roosevelt's own tax message.
It was Morgenthau who invited Marriner Stoddard Eccles to Washington, although Tugwell is the Administration stalwart who actually discovered Eccles, and such is the humility of the Treasury head that he does not mind being overshadowed in increasing degree by the new Lochinvar of American finance. Eccles, who came to Washington as a special assistant to Morgenthau and in the fall of 1934 was made Governor of the Federal Reserve Board, is ranked as a radical merely because he is a banker. In truth, he is a conservative who, despite vast wealth and great vested interests, has an inquiring mind and does not regard the present system as pluperfect merely because it has given him power and riches. Like a religious scientist, his intellectual inquiries, however, are limited in scope by certain basic superstitions. His radicalism is restricted to two things: a belief that the gold standard was not written on the reverse of the tablets from Sinai and a conviction that the way to smooth out the business curve is for the government to tax low and spend freely during depression periods and, during boom times, tighten the purse strings and tax copiously. Capitalism is not menaced by his intentions.
The press pictures Eccles as a foe of his own class, hut his own class has no such ideas. "He talks loose but he banks hard," a former banking associate, a Tory, recently said of him. Similarly, a group of Maryland bankers, horrified by the press's picture of the new Federal Reserve Board Governor, were completely reassured after listening to him for a few minutes at a private dinner that Howard Bruce, the Democratic national committeeman for their state, gave in Eccles's honor soon after his ascension. The banking bill which he has sponsored has brought powerful banking interests on his neck, thereby adding to the picture of Eccles as a bankers' enemy, but in reality the controversy is a sectional one in which Wall Street's moneychangers are arrayed against the bankers of the hinterland. Though the bill's central provisions have been presented as a gallant attempt to transfer the control of the nation's credit structure from New York to Washington where it belongs, its chief effect would be to free the West from the banking domination of the East.
The limitations of Eccles's liberalism are made further manifest in this connection by two notations. He is opposed to actual governmental control of the nation's credit machinery through public ownership of the Federal Reserve banks, and he has begun to hedge on his bill in the face of Senatorial opposition by attempting to minimize the importance of Senate amendments to the measure, though those amendments tighten instead of erasing banker control of the reserve system.
Eccles caught the attention of the New Dealers by his testimony before the Senate Finance Committee in February, 1933, when this pallid young Mormon from Utah- who continued to rate himself a Republican after he entered the Treasury--advocated a depression counter-offensive in the form of liberal federal spending for public works and relief. Eccles had got his ideas from those twin exponents of the Keynes school, Dr. William Trufant Foster, of Boston, the professor of English who became director of the Pollak Foundation for Economic Research, and Waddill Catchings, manufacturer, financier, and joint author with Foster of some five books on money, profits, and other phenomena of our industrial economy. Eccles brought to his study of the Foster-Catchings books the open mind of a notoriously tight-fisted man and a vast empirical knowledge of the world of business and finance. Except for two years dutifully spent as a Mormon missionary in Scotland, his life until he came to Washington had been devoted to managing and enlarging the estate his father left. At the time he received the New Deal call, he was president of two banks, two lumber companies, a hotel company, a construction concern, a securities firm, and one country club. He also was vice-president and treasurer of a sugar corporation and a director of coal, lumber, insurance, canned milk, railroad, and power companies.
These roots, these success badges that Eccles has, are a great solace and comfort to Roosevelt, who is drawn by the comparative novelty of Eccles's ideas and derives confidence from the fact that their source is adequate proof of their essential harmlessness. For Eccles, there is some disadvantage in that, as developments in connection with his banking bill have shown. Roosevelt's feeling that any of Eccles's ideas must be essentially harmless has made it easy for him, under opposition pressure, to conclude that the most controversial phases of the bill also are essentially unimportant, and Eccles, passionately devoted to his brainchild, has been deprived as a result of the unswerving White House backing he had expected for the measure. The Joneses, Kennedys, Crowleys, and other exponents of the politico-economic status quo ante have outweighed him. Not that it matters much.
