HORSE FLESH flew through the air. Windows a half mile away were shattered by the blast. Flames soared into the sky twelve stories high, and a cloud of green smoke obscured the sun. Thirty people were killed instantly; ten more died from their wounds soon thereafter. Another 130 would nurse their injuries for weeks and months to come. One eyewitness reported hearing a bang “like the explosion of a volcano…followed by the most awesome shrieks and howls.” A man ran down the street with one hand holding his other arm just barely attached to his shoulder.
The target of the explosion—the House of Morgan at 23 Wall Street—was pockmarked with flying shrapnel on its facade, all the windows on its north face blown inward. Inside a bank clerk lay dead, and Junius Morgan, the son of J. P. (Jack) Morgan Jr., was painfully if not seriously hurt, a shard of metal penetrating his buttock. Morgan himself was out of the country. Trinity Church shook to its foundations. On the floor of the New York Stock Exchange, brokers scurried for cover, terrified that the building’s great glass dome would cave in on top of them. Fortuitously, the bomb had gone off that sunny September morning in 1920 just before the Street’s customary late break for lunch; otherwise, scores more would have perished or been mangled in the crush of lunchtime crowds in the narrow roadways of the financial district.
The perpetrators were never found. To this day no conclusive evidence exists showing who did it or even exactly what happened. Everyone presumed it was an anarchist plot. And that’s certainly a plausible presumption. Bomb scares and real bombs had been showing up all through the previous year amid a nationwide “red scare” fostered by the country’s attorney general, A. Mitchell Palmer. Fear of bolshevism and anarchism in the wake of the Russian Revolution, compounded by wartime xenophobia, supported government raids on left-wing political parties and newspapers and mass deportation of alien radicals. In response, bombs had been planted here and there, including one that severely damaged Palmer’s house in Washington. Thirty-six more were discovered at the New York Post Office, waiting to be delivered to Palmer, Morgan, Rockefeller, and Chief Justice Holmes, among others. Like these, the one that went off outside the Morgan bank, across the street from the New York Stock Exchange, catty-corner to the subtreasury building, could not have been more plainly addressed to the cynosures of finance capitalism. A subspecies of anarchism had always countenanced terrorism as a legitimate political tactic, so it was hardly far-fetched, especially under the circumstances, for the media and government to leap to that conclusion.
But at the crime scene confusion reigned. All anyone really remembered seeing, shortly before the blast, was an old, single-top wagon drawn by an old dark bay horse, driven by a man of indeterminate description. No one agreed on what was in the wagon, but afterward investigators found pieces of window sash, the wagon’s axels, and parts of a dismembered horse, including two hooves. Some speculated it might have been an accident caused by a Du Pont or some other explosive company’s wagon on its way to a demolition site in the area. A scrutiny of company records turned up nothing definite, however. Some deliberate act of anarcho-bolshevik terrorism remained the favored explanation, especially as bombs continued detonating in Philadelphia, Pittsburgh, Cleveland, and elsewhere in the days immediately following the disaster at Broad and Wall.
Hysteria, already at a boil thanks to Palmer’s raids, boiled over. Fifty policemen were assigned to guard Morgan’s home. The financial districts of Boston, Chicago, and Philadelphia were cordoned off. Some papers published crudely composed threats promising revenge for Palmer’s actions, signed “American Anarchist Fighters,” and allegedly found in a nearby mailbox. Verbal retaliations cried out for the death of all radicals, blaming everyone from the Wilson administration to the “blood-crazed proletariat.” The ideal composite villain, according to the papers, was a German, still suffering the agony of defeat, who also happened to have lost money on the Stock Exchange while somehow trafficking with Communists. The rector of Trinity Church denounced disloyal intellectuals. Law enforcers trawling for suspects came up with a net full of foreigners. All across the country public officials, rotary club presidents, chamber of commerce publicists, and newspaper editorialists clamored for the government to rid the country of its alien red menace.
Panic was everywhere…except at 23 Wall Street. The event transmogrified bankers, brokers, and speculators into patriotic heroes, bloodied but steadfast staring into the face of barbarism. If you walk up the shallow steps of 23 Wall Street today and peer eye level at the building’s facade you will, with little trouble, see the pitted scars, some as much as an inch deep, left there by the high-velocity airborne shrapnel of that murderous September day nearly a century ago. Those scars were left there on purpose at the orders of Morgan and all the banks’ senior partners. Like saintly stigmata they were to be the visible signs of martyrdom. More than that, however, they were intended as stony metaphors of the bank’s resolve not to be intimidated. Together with New York City officials, Morgan and Stock Exchange authorities mobilized an around-the-clock brigade to clean and repair the area at lightning speed. The bank itself was open the next day. Nor did the Morgan men vent the same high-decibel alarmist rhetoric about the country tottering on the verge of revolutionary chaos that so many businessmen and other middle-class folk seemed to take genuinely to heart. Thomas Lamont went so far as to call the event an accident, suggesting the circumstances did not point to a premeditated bombing. Morgan himself remained on holiday at his English country house, barely commenting on the event except to reassure everybody the damage was minimal.
All of this—the carefully preserved fossilized artillery, the business-as-usual sangfroid, the studied reserve of their public utterances—was a bravura piece of political theater by a circle of immensely powerful investment bankers. But it was also more than theater, more than mere show. Wall Street’s elite had emerged from the Great War out from under that dark thunderhead of moral and political opprobrium that hovered over the Street right up to the war’s outbreak. And while the war midwived upheaval and social revolution across broad stretches of eastern and central Europe, in America it was the undertaker of such aspirations. It was this underlying shift in the temper of the times and in the global balance of power that accounted for the remarkable composure and self-confidence displayed by Wall Street’s white-shoe fraternity. They sensed that the bomb that went off in their front yard was not a reveille of radicalism, not an overture but rather a finale, the desperate last act of an exhausted anticapitalist opposition.1
SINCE THE TURN of the century two schools of thought divided the ranks of Wall Street’s critics. Bull Moose progressives, Wilsonian idealists, and gimlet-eyed muckrakers could be unsparing in their undressing of Wall Street. It did yeoman service as a whipping post for all the assorted ills of an obnoxious form of trustified capitalism. But as for capitalism itself, well, that was a different matter. For most middle-class progressives the old dog had plenty of life left in it; not only plenty of life but a life of plenty for all if only it were reorganized and regulated.
An articulate minority remained unconvinced, however. “Morganization” bred legions of intransigents. They were determined to move on, to junk the system and start over. The labor and socialist movements, the radical bohemias of Greenwich Village and other cities, the “hobohemias” of self-educated rebel proletarians, the scattered redoubts of maverick intellectuals and artists all lived in a state of profound and permanent disaffection. On the one hand, people like Thorstein Veblen, Eugene Debs, and Jack London shared a lot with progressive reformers; indeed, without them their own presence in public life would have loomed less large. Like their more conciliatory allies they, too, recognized something inexorable and forward-looking in the evolution of economic enterprise of great scale and complexity. They, too, treated Wall Street’s dominion over that process as a fatal irrationality. They, too, levied an accusation of usurpation charging that a clique of finance capitalists had hijacked the political system.
Unlike many an ambitious reformer, however, these intransigents practically relished their position as outsiders, cut off from the centers of power, cut out of the system of material reward and social prestige. They didn’t want in, didn’t consider themselves stakeholders, didn’t want their money back. Their attitude was more Olympian than that. They were convinced for one reason or another that Wall Street’s days were numbered; it was fated for oblivion and good riddance. For them the “Money Trust” was not some excrescence, a cancerous growth to be surgically removed from an otherwise healthy body, but on the contrary was the essence of a way of life so diseased it was bound to die.
No social theorist of this period worked up a more original and global argument about the imminent demise of American pecuniary civilization than Thorstein Veblen. He was hardly an ideologue, even less an apparatchik of the left—his political activism was episodic and infrequent. But his intellectual vantage point from outside “the system,” so to speak, was characteristic of left-wing intellectuals in general when they turned their attention to Wall Street.
Veblen’s Theory of the Leisure Class (1899) and Absentee Ownership (1923) bookended the cultural rise, decline, and rehabilitation of the Wall Street elite. Veblen was the era’s most acerbic and quirkily original social critic, a man of daunting erudition who suffered no fools and whose personal and professional life oscillated between scandalizing the professoriate and acts of intrepid intellectual independence. He approached the contemporary American scene like an anthropologist observing the strange rites of an alien and primitive culture. At the turn of the century he was particularly struck by the acts of “conspicuous waste” and “ostentatious consumption” that typified the behavior of the country’s “upper tendom.” Memorably, he pronounced this milieu a permanent “leisure class” and scathingly picked apart its slavish mimicking of a long line of warrior and aristocratic cultures panting after all the insignia of prestige, finding in them sources of psychological self-esteem and social overlordship.
Like Brooks Adams, Veblen adopted a stance of galactic distance from the sordidness below. His tone, however, was one of dryly amused irony and detachment, nothing like Adams’s coruscating rage. Moreover, the professor was a meticulous scholar, while Adams mixed insight and research with a kind of snobbish demagoguery and raw prejudice. But both men took the long view and thought they spied in Wall Street the signs of a civilization in deep decline. For Adams it was the sacrifice of the warrior virtues for commercial and utilitarian egoism. For Veblen it was nearly the opposite. The “leisure class” was a decadent atavism, lost in a pantomime of mock heraldry, its preoccupation with “pecuniary emulation” and “invidious distinctions” cutting it off from the principles of efficiency and utility that were in the end the foundations of any healthy civilization. In a tart aperçu about habits of dress, he noted that the glistening top hat, shiny patent-leather shoes, and walking stick, that de rigueur uniform of the Wall Street nabob, not only enhanced the impression of great wealth but, in their immaculate shininess, confirmed the wearer as belonging to a privileged caste exempt from any demeaning obligation to work.
According to Veblen, “financeering operations” particularly characterized a predatory class standing in ironic contradiction to the very values of work and technical ingenuity American business supposedly embodied. Wall Street was history’s little joke, a place that boasted of its warriorlike exploits even while shadowed by a reputation for the dishonorable and unworthy. “Captains of industry” was a misnomer; members of the “leisure class” were nothing more or less than masters of the pecuniary realm living off, but otherwise in dark ignorance of, the science and technology underpinning productive work in modern industry. To the degree that Wall Street in particular embodied the essence of this pecuniary urge, it stood outside the industrial order. However undeniably powerful it was, in Veblen’s historical cosmology it was functionless, not a history maker but a relic of “barbarian culture,” sharing its primal disdain for work. Indeed, all those sanguinary qualities conventional opinion celebrated and confabulated into the Napoleonic mythos of the financial titan—fear, force, ferocity—were, in Veblen’s eyes, precisely what condemned that figure before the bar of history. His combative machismo marked him for cultural obsolescence in a world whose actual survival depended on peaceable acts of collective endeavor.
Veblen admired the engineering mentality of the “tool-makers”: it was the industrial age’s simulacrum of the old craft ethos in its devotion to the rational, to the peaceful pursuit of practical knowledge and functional efficiency. But as long as the economy remained in thrall to the “absentee owners” of the leisure class, it would be burdened by their uneconomic exactions and fail again and again to realize the social abundance latent in the sophisticated technical means at the disposal of modern industry. To escape that cul-de-sac would require, if not the “soviet of engineers” some would later advocate during the Great Depression, then at least a rupture with private property that, in Veblen’s view, arose simultaneously and not coincidentally with the first emergence of a leisure class eons ago.
Here was where Veblen parted company with other critics of the “money trust” like Brandeis, who arraigned its irrationality but were not prepared to go so far as to jettison the whole system of private accumulation of which it was the centerpiece. But as Veblen saw it, the inherent technical and social interdependence of modern economic life made such a step inescapable. In his Engineers and the Price System (1921) and even more mordantly in Absentee Ownership and Business Enterprise in Recent Times (1923), he lamented the capture of the whole of American society, even that secular sainthood of engineers, by “pecuniary culture.” The “new order” had originated at the turn of century through the coalescence of the “masters of tangible assets” with the “masters of credit and solvency,” reached its culmination after the war, and was run in the interests of the “funded power.” Wall Street’s absentee overlords had taken effective control of key industries “out of the hands of corporate managers working in severality and at cross-purposes” and lodged it instead in “the hands of that group of investment bankers who constitute in effect a General Staff of financial strategy and who between them command the general body of the country’s resources.” Veblen called it, with mocking irony, “One Big Union of the Interests.”
For most people business and industry were practically interchangeable terms in the vocabulary of everyday life. For Veblen, however, they were profoundly incompatible. Business implied pelf, patriarchy, and pecuniary emulation. Under the sway of the “morganizers,” it had lost all earlier connections to creative work and the husbandry of means. Its purely paper transactions “constitute no part of the country’s material possessions and have no creative part in the tangible performance of the country’s industrial forces. They are wholly in the nature of an absentee claim to a share in the country’s income…to which they have contributed nothing.” The principle of business, Veblen pronounced, was “ownership.” Industry, on the other hand, was the outgrowth of the impersonal scientific outlook, was agnostic, dealt in matters of fact. Its principle was “workmanship.” From the latter he expected the socialization of property and the egalitarian family to flow naturally, like water running downhill. All of this was a matter of anthropological not moral judgment, the insight of a social science clinician not a theologian.2
That finance capitalism had reached an evolutionary dead end was hardly original with Veblen. Edward Bellamy’s Looking Backward had voiced, a generation earlier, what might be called left-wing social Darwinism, a dispassionate judgment about the inexorable logic of economic development. Julian, Bellamy’s time-traveler, discovers that a hundred years hence it’s become simply inconceivable that the industry and commerce of the nation should any longer be left in the hands of capricious individuals and irresponsible corporations seeking after private profits. Instead the whole of the economy was entrusted to a single syndicate, “representing the people to be conducted in the common interest for the common profit.” All previous and lesser monopolies were to be swallowed up in a “final monopoly…in which all citizens shared. The epoch of the trusts had ended in the Great Trust.” In the estimation of people like John Dewey and Charles Beard, no book since 1885, with the exception of Das Kapital itself, counted more heavily in persuading people that finance capitalism was doomed.3
Doomsday atmospherics sometimes backlit the era’s more acidic magazine literature as well. Various muckraking journalists, including Upton Sinclair and Charles Edward Russell, flirted with socialism, migrating into the orbit of the Socialist Party when Wall Street’s most egregious behavior convinced them the world it represented was going extinct. Russell, who ran as the Socialist candidate for governor of New York in 1910 and for various other local and state offices in the years that followed, treated the trust as a phase in social and economic evolution that would inevitably give way to some form of public ownership. Sinclair’s book-length and self-published exposé of the kept press, The Brass Check, struck a harsher note, suggesting that Wall Street’s grip on all the means of mass communication was so suffocating that only the overthrow of the whole system could reoxygenate the air of public life. “System” was the operative word here since the once serviceable, now quaint-sounding and personalized “plutocracy” no longer seemed to adequately capture a more global apprehension of systemic breakdown. Of course the fact that in 1920 Sinclair could find no commercial publisher for The Brass Check seemed to confirm his argument while at the same time signaling that Wall Street had acquired immunity to its sting.4
A PREWAR BOHEMIAN disdain for the whole of capitalist culture left its imprint on Wall Street. Oscar Wilde’s bon mot—“With an evening coat and a white tie, even a stock broker can gain a reputation for being civilized”—was typical of a cultural radicalism that sometimes found common cause with socialism and other varieties of proletarian rebellion. When H. G. Wells paid a visit to America, he was particularly struck by the country’s fascination with its financial Übermensch. These men were not voluptuaries, Wells noted, nor were they “artists nor any sort of creators” and betrayed no high political aspirations, but were instead “inspired by the brute will…to have more wealth and more, to a systematic ardor.” While all other lusts suffered under the constraints of the country’s puritan heritage, only this one flourished and was “glorified.” The men themselves were hardly criminal; taken as individuals they were rather commonplace and pious enough. It was rather the game itself that was criminal, part of an “ignoble tradition,” a miscarriage of money and honor. David Graham Phillips detected an odor of cultural putrefaction that threatened to spread from Wall Street to the rest of the country: “This New York that dabbles its slime of sordidness and snobbishness on every flower in the garden of human nature. New York that destroys pride and substitutes vanity for it. New York with its petty, mischievous class-makers, the pattern for the rich and the ‘smarties’ throughout the country….”5
But it was in the very heart of New York itself, in the intellectual salons and cheap coffeehouses of Greenwich Village, where commingled the most biting political and artistic depictions of Wall Street’s death throes. Village radicalism before the war was a buoyant brew of Marxism and modernism, mixing together aspirations for artistic experimentation and sexual liberation with ecstatic visions of social revolution and proletarian emancipation. Novelists and cartoonists, painters and pamphleteers, journalists and poets formed a fraternity of the estranged. They communed with more hard-boiled partisans from the Socialist movement; in particular with those exotic renegades of the anarcho-syndicalist Industrial Workers of the World, who seemed a virile blue-collar incarnation of their own pagan defiance of bourgeois propriety. Left-wing bohemians expressed an all-consuming contempt for the whole of bourgeois life: its psychological repressiveness as well as its political chicanery; its sexual hypocrisy as well as its economic injustice. They not only wrote and sketched and rhymed, they were engaged, publishers of incendiary magazines, activists at demonstrations and picket lines, organizers of such stirring events as the 1913 “Patterson Pageant,” staged to aid the embattled silk workers of Patterson, New Jersey.
In retrospect, there seems something indelibly naïve about their political and existential exuberance. Not long after the war their union of artistic and political radicalism would fall apart in querulous acrimony. Many a bohemian revolutionary would later reappear in conventional bourgeois costume. What had once seemed genuine fraternal sentiment later soured into elitist condescension. Before the war, however, they were born aloft by an end-of-days optimism. They were convinced, along with their putative working-class comrades in the Socialist and syndicalist movements, not only that the capitalist order was nearing its day of reckoning but that some vaguely described but infinitely more egalitarian, erotic, and pacific Socialist future would take its place.
No institution, no metaphor better captured bohemia’s sense of bourgeois inhumanity and exhaustion than Wall Street. No magazine better represented that sensibility than the Masses, whose publication was subsidized by a Socialist-minded vice president of the New York Life Insurance Company—talk about social estrangement. At The Masses cartoonists like Art Young, Boardman Robinson, and Robert Minor, painters like John Sloan and George Bellows and writer-editors like Max Eastman distilled a kind of furious humor and poured it liberally over bloated, balloon-like figures of the “Master Class.” Invariably decked out in standard-issue high hat and tails, these capitalists-cum-financiers conveyed both fear and mania, bestiality mixed with weakness. Young in particular was unrelenting. His witty, scarifying send-ups of smiling, smug plutocrats mocked not only Wall Street but its puppet-mastery of “judges,” “senators,” “subsidized writers,” “college presidents,” and the “clergy.” John Dos Passos, then an apprentice writer and admirer of revolutionary journalist John Reed, spurned his patrician roots, threw himself into the struggle against class privilege, and fantasized about guillotines on Wall Street. When the war did come, it was self-evident to bohemia that America’s involvement was prompted and plotted for by its financiers, “to make the world safe for the French and British securities in the hands of the Morgan group of international bankers.” “Having Their Fling,” a Young cartoon, with a hint of the grotesque, showed the master classes having an uproarious good time, fiendishly filling the coffers of war to chants of “all for Honor,” “all for Jesus,” “all for Democracy.”6
Jack London, although by no means a charter member of the Village Left, expressed, when he felt so moved, his own idiosyncratic version of this bohemian zeitgeist. The Iron Heel (1907), his futuristic Armageddon in which the “Oligarchy” crushes its proletarian opposition with sadistic brutality, inaugurating a three-hundred-year reign of terror, was a kind of Looking Backward in reverse, staring into the abyss of the highest stage of capitalist depravity. As a novel it suffers from a nearly unbearable allegorical simple-mindedness. Its characters are utterly conventional, either impossibly pious or impossibly insensate. Its hero, Ernest Everhand, is a “natural aristocrat,” austere, chivalrous, fearless, and aflame with the highest, muscular idealism. But the book is also a perfect representation of that sentimental rationalism which so inspired the intransigents. Remorseless in his philosophical materialism, Ernest deflates every Christian and metaphysical attempt to cauterize the open wound of class exploitation. Hovering over all the action is the conviction that finance capitalism, for all the ferocity of its death agony, is not only inhumane but irrational and so must pass away. Ernest gently but firmly mocks the antitrusters as Luddites, their vain efforts to save small business powerless against the irresistible drift of “morganization.” The proletariat, or rather its more enlightened fraction, instead of resisting, welcomes the onrushing tide, recognizing the wave of the Socialist future. Society “was a lie,” but the master class believed in the lie, convinced of its own ethical and social superiority. Only the proletarian vanguard, austere, free of the gluttonous cravings of their overlords, sees the plain, unvarnished truth. In the meantime, however, the “Oligarchy” manages to rule by turning the “people of the abyss” into a maniacal, brutalized mass seduced to the work of the Iron Heel all the while feeding its ravenous lust to revenge the misery of its own life.7
Burning Daylight, published in 1910, was the sort of Nietzschean fable London specialized in. Set in Alaska and on Wall Street, it combined the novelist’s peculiar brand of frontier socialism and etherealized meta-eroticism. Its hero, the bunyanesque “Burning Daylight” (his real name is Elam Harnish), is a man of immense animal charm, good fellowship, and physical endurance. He carries on a veritable love affair with life, which he treats with unaffected impiety as a great game, a gamble of endless challenge and excitement. When he strikes it rich in the Klondike, he outwits a band of Eastern moneymen seeking to plunder the northern wilderness. He finds the experience so exhilarating he seeks greater adventure of the same sort on the “Outside,” first in San Francisco, where he becomes a multimillionaire financial operator, and then, inevitably, in New York. There the rough-hewn, but innately honest Burning Daylight tests his powers against “Gentlemen bankers/financiers” and comes up short. Unprepared for the “depths of their skullduggery,” their bald-faced prevarications and smoothtalk, he’s gulled and fleeced, although still enough a man of the frontier to take back his losings at gunpoint.
A rickety tale in many respects, Burning Daylight nonetheless incorporates much of the zesty irreligiousness and sensuality characteristic of the bohemian Socialist defiance of Wall Street. There is for instance, its Nietzschean reversal of the old genteel condemnation of Wall Street as a haven for gamblers. Instead it’s the gambling instinct itself that’s celebrated as salubrious, a sign of life at its most vigorous and daring. Wall Street doesn’t gamble, but on the contrary has made low-down theft into a fine art. What drew Burning Daylight to the Street was his embrace of the primitive (therefore natural, therefore good) urge to play, to chance. His Wall Street disillusionment makes him savage, “a veritable pirate of the financial main,” always on the move, a raider, convinced his fellows are savages as well, capable of any deceit, players in “a vast bunco game” siphoning off the real wealth produced by the world’s workers. Touted as modern supermen, his rival financiers stand there naked, a gang of “sordid banditti.” The taste for life itself curdles in his mouth, seems purposeless, random and futile. Burning Daylight grows hard-hearted, more brutal, cruder, made that way not by the Yukon wilderness but by civilization, in particular the civilization practiced on the Street.
Feminism of a peculiar inflection saves our hero in the end. Physically as well as psychically debilitated by the nastiness of his new life, he’s nearly lost his native love of horses, of nature, of the simple majesty of life. Awakened by a slowly ripening love for a chaste, athletic, and independent-minded woman working as his stenographer, Burning Daylight seemingly comes to his senses. He recognizes that he’s become a parasite, and even more perilously that he’s robbed himself of that old Klondike joy of fashioning something useful and enduring out of the primal chaos of nature. Sexuality, the generative urge, labor as procreation, trumps the purely masculine drive for dominion. Renewed he becomes a master builder and turns the unlikely, down-at-the-heels Oakland, California, into a booming entrepôt of shipping and industry, street railways and hotels, people’s parks and fancy clubs for the ritzy.
Without quite realizing it, however, Burning Daylight has made himself into a benevolent version of the Wall Street Napoleon still indulging a secret pleasure in crushing his more venomous financial rivals. Even this compromise then won’t work. The dry rot of urban dissipation and sedentary moneymaking is going to kill him in the end. Just before that happens he makes his final break with the whole capitalist dream, not excepting even the “good works” his fabulous wealth has subsidized. He returns with his heart’s love to Nature, to the life of boyish energy and simplicity that is the true secret of his remarkable power and endurance. No matter how it’s played, Burning Daylight tells us, the modern game of high finance and capitalist striving is a mortal disease.8
FAITH IN FINANCE capitalism’s imminent demise was a conviction that village radicalism shared with a broader proletarian insurgency with which modernist artists and critics identified. Vladimir Lenin’s Imperialism: The Highest Stage of Capitalism was only one version of a broader, Marxist literature purporting to demonstrate empirically that the progressive concentration of capital under the auspices of the world’s great investment banks had sharpened the system’s fatal contradiction—the one between social production and private appropriation. That system had reached the point where it was ripe for expropriation by its socialized producers. Wall Street (and its kindred centers in London, Paris, and Berlin) was to be the reluctant midwife of a new Socialist order—either that, or global carnage lay ahead as the finance capitals of rival nations warred for supremacy.
Since the turn of the century Socialists had distinguished themselves from the broader antitrust movement by welcoming the centralization of capitalist production and finance, even while denouncing trusts for their profiteering. Around the turn of the century, the Socialist faction within the American Federation of Labor managed to win a mild endorsement for the notion of nationalizing the trusts, seeing in their size, interdependencies, and latent efficiency a natural evolutionary progression toward collective production and distribution. The Socialist Party actually called for the repeal of the Sherman Anti-Trust Act. The idea was that Wall Street’s creations ought not to be broken up, but rather taken over, either purchased, according to the party’s conciliatory right wing, or confiscated as the left wing insisted. When Morgan died, left-wing publications duly noted his crimes. But they emphasized his singular triumph in consolidating the nation’s capital resources. It had paved the way for his own undoing by fostering great combinations of rebellious workers and making transparent the primal fact that society’s welfare rested on collective labor. Big Bill Haywood, charismatic leader of the syndicalist Industrial Workers of the World (IWW) and, until purged, a member of the Socialist Party’s executive committee, viewed the trusts as almost ready-made industrial governments, now headquartered in Wall Street but easily transferable to the councils of workers, which could really make them hum on behalf of the international working class.9
Bought and paid for or simply seized, the point was the same: the quintessentially selfish world as put together by J. P. Morgan was history’s antechamber to a glorious future of fraternal fellowship and general material well-being. That delicious irony was savored by more and more citizens in the years leading up to the war. The vote for Socialist Party presidential candidate, Eugene Debs, doubled between 1908 and 1912, approaching 1 million. When Morgan died, the Socialist Left greeted the news with aplomb. The official publication of the Socialist Labor Party noted that the engine of capitalist finance purred on without a hiccup despite the great man’s passing. It proved that even he, just like the “Capitalist Class,” was superfluous: “Its mission is performed…. To deliver this object lesson was J. P. Morgan’s main mission. It took his death to perform that task…. The Socialist Movement gratefully acknowledges its obligation to J. P. Morgan for having died.” The IWW concurred: “Let us praise Morgan then for having helped to create a society in which labor is united…not only for the profit of capital, but also for its own emancipation….” Socialist sentiment moreover was buoyed up and sometimes hard-to distinguish from the general atmosphere created by progressive assaults on Wall Street. Their objectives were indubitably different, but in their bill of particulars directed at the Street, Socialists and Progressives had a lot in common.10
It did make a difference, however, whether one was a warrior for the Lord or for Karl Marx. The latter discarded the vocabulary of moral judgment—words like greed, deceit, and theft—or treated such behavior as the inevitable outcome of finance capitalism’s deeper systemic logic. Proletarian Socialists could be more bloody-minded, implacable, and serene all at the same time. In the cafés of the Lower East Side circles of revolutionary workers and street intellectuals had for many years nurtured sanguine dreams of revenge that no one from the more comfortable if reform-minded middle classes could stomach. As early as the 1880s, the idea that “the best thing one can do with such fellows as Jay Gould and Vanderbilt is to hang them on the nearest lamppost” circulated through the barrios of immigrant radicalism.11
Nor did feelings of class resentment always assume overt political form. Urban working people composed the principal audience for silent movies in their formative years. The medium catered to that world not only as a cheap form of entertainment but in the content of its films. Many a silent melodrama was directed by men of radical persuasions and often featured a banker as principal villain dressed up in unmistakable likeness to the prevailing stereotype of the Wall Street financier. Pictures like The Bank Defaulter (1906) rubbed in the social moral of its story by allowing the class prejudices of the criminal justice system to acquit a bank president transparently guilty of making off with his depositors’ money. Many of these movies trafficked in predictable melodrama, tales of thwarted evil and of romance fulfilled that might have appealed to any audience. Often enough, however, they included not only a picturesque account of the financier’s personal moral failings, but allusions to his victimization of the working classes. In the remarkable Spirit of the Conqueror, or, The Napoleon of Labor, news reaches the River Styx of a great war on earth between Labor and Capital. The shade of Napoleon is dispatched, disguised as the son of a financier, Peter Morgan. Repulsed by his father’s mistreatment of the workers, he ends up leading a worldwide general strike which triumphs when the army refuses to fire on the peaceable proletariat.12
Whether nonviolent or readier to come to blows, left-wing attitudes about Wall Street were uncompromising. The Appeal to Reason, a Socialist publication with a half-million readers during the new century’s first decade, and not a particularly bellicose paper, editorialized in favor of seizing the gang of eastern financiers—“transient trash” the magazine labeled them—and putting them to “honest work.” When Big Bill Haywood, along with two other Wobbly and Western Federation of Miners leaders were effectively ambushed and kidnapped by police officials in Colorado and spirited across state lines to stand trial for the assassination of the ex-governor of Idaho, the Appeal published Deb’s minatory call to arms, “Arouse, Ye Slaves.” Holding nothing back the head of the Socialist Party accused the powers that be, including their “pals in Wall Street, New York” of plotting murder. If Haywood and his compatriots didn’t make it out of Idaho alive, Debs vowed, then the governors of Idaho and Colorado “and their masters from Wall Street, New York to the Rocky Mountains had better prepare to follow them.”
Right up to and through the outbreak of war the Socialist Party of America, despite severe internal divisions over many issues, could still muster this defiant air. Alone among the socialist parties of the West, it stood by its orthodox Marxist opposition to imperialist war. The party, meeting in emergency session, denounced America’s decision to enter the conflict, proclaiming it had been instigated especially by those “predatory capitalists” whose interests were bound up with protecting their huge investments in wartime loans to the Allied powers. This was 1917, however, much too late to make a difference. Popular as well as official attitudes had begun shifting sharply in favor of Wall Street three years earlier. Not long after the Socialist declaration, the Justice Department shut down The Masses for its purported violation of the Espionage Act. Art Young’s cartoons were under indictment. The specter of the “Money Trust” was speedily receding from view. Wall Street was winning the war at home and abroad.13
RAPPROCHEMENT BETWEEN Washington and Wall Street began soon after the conclusion of Pujo’s hearings. While legislation like the Federal Reserve Act and the Clayton Anti-Trust Act were far from toothless, they hardly met the more stringent requirements for regulating Wall Street demanded by people like Brandeis, La Follette, and even President Wilson himself. Even before war clouds began to darken the horizon, the economy slipped into worrying recession, and Wilson, like most presidents before and since, sought to quiet the anxieties of the business classes. Not only was Morgan invited to the White House, but Wilson issued public reassurances that the president was no enemy of the financial elite and opposed big business only when it used “methods which unrighteously crushed those who were smaller.” The regulation of business was “virtually complete.”14
War turned a fledgling friendship into a passionate patriotic union. Once America joined the fray, the overwhelming insistence on national solidarity shelved all thought of domestic reform for the duration. But even before that, with the first outbreak of hostilities in Europe in 1914, the Street sensed the turning of the tide. There was shock, of course, when the armies started marching. The New York Stock Exchange closed for the first time since 1873 (along with all the principal regional markets and exchanges throughout Europe) and essentially remained closed for four months, fearing, with good reason, that the liquidation of European investments in America would crush the Market and foment panic and depression.
Soon enough, however, the Exchange revived. By mid-1915 it was booming. Bethlehem Steel stock rocketed from $33 a share in 1914 to $600 in 1916. General Motors went from $78 to $750. Nine ordnance stocks averaged an increase of 311 percent in their share price over eighteen months. Regional stock and commodity markets mimicked their big brother in New York. Investors, according to one observer, rushed to get their hands on “war-stocks, semi war-stocks, possible war-stocks, stocks that beyond the range of human imagination could not by any possible metamorphosis be converted into war-stocks.” “Peace scares” that the war might be mediated to an early end passed quickly in 1916, producing only momentary deflations in war orders and stock prices. Every sector of the economy—foodstuff, war materials, basic steel, clothing, machinery, cotton—produced in unprecedented volumes.15
All of this reflected a truly tectonic shift in the foundations of international economic life. The United States had become the Allied powers’ breadbasket, its arms supplier, and, above all, its financier. This was bound to improve the self-confidence as well as the social esteem of the country’s great financiers and industrialists after a long decade living under the gun. More tangibly it confirmed the country’s emergence as the world’s premier economy, the unchallengeable leader in international trade, and creditor to the West. America’s centuries-long dependency on European sources of capital was over with. The war marked the historic transfer of capitalism’s financial center of gravity from Lombard Street to Wall Street.
Pulling the whole global economy westward, like some great locomotive, were the war loans to the Allies floated by the Street’s principal investment houses. It was these loans that made possible European purchases of American foodstuffs, raw materials, industrial necessities, and the hardware of war. It was the need to pay off these loans that caused the liquidation of foreign-owned U.S. assets and their repatriation into American hands. It was these loans that hung over a ravaged postwar Europe like the sword of Damocles and assured Wall Street’s financial dominion. And it was these loans that lubricated the to and fro between Washington and Wall Street all during the war and left the Street so remarkably composed when a bomb exploded on its doorstep in 1920.
The House of Morgan, with its extensive British and European connections, took the lead in arranging the first foreign loans. For his trouble Jack Morgan was subject to threats of assassination by German sympathizers and assorted lunatics. Strong neutrality sentiment kept public interest in these initial offerings tepid at first. Even the president implied that staying neutral meant financial abstinence as well. His secretary of state, William Jennings Bryan, announced even before the guns of August had a chance to reload that “loans by American bankers to any foreign nation which is at war are inconsistent with the true spirit of neutrality.”
When the Lusitania (the same ship that had rushed a critical supply of gold across the Atlantic to staunch the panic of 1907) was torpedoed, it took with it to the bottom Wilson’s financial circumspection. Bryan resigned, Robert Lansing took his place, and by October 1915 the administration had given its blessing to the first Morgan flotation of a $500 million loan to Britain and France. Soon enough other leading investment banks joined to underwrite these issues, which carried substantial fees and other incentives. Banks like National City, with long-standing commercial ties to the Central Powers, conducted business as usual as long as the United States remained a nonbelligerent. Only the German-Jewish houses at first abstained entirely. Henry Goldman of Goldman, Sachs retained a filial loyalty to his homeland until American engagement made that impossible: a not uncommon attitude among the haute German-Jewish bourgeoisie in America. Jacob Schiff of Kuhn, Loeb couldn’t stomach loaning money to the notoriously anti-Semitic czar, tried to get the Russians excluded from the Allied loan, and, when that inevitably failed, stood aside.
War finance underwrote a thickening collaboration between the Wilson administration and Wall Street. Foreign loans were but one element of that intimacy. Wall Street functioned as purchasing agent for the Allies, facilitated trade in key commodities, and helped stabilize exchange rates. The Morgan bank in particular took responsibility for the centralized purchase of food stuffs, munitions, and other supplies vital to the war effort. Nothing more strikingly signaled the burying of the hatchet between progressivism and the “money trust,” however, than the appointment of Bernard Baruch to run the war economy as chairman of the War Industries Board.16
An odder coupling than Wilson and Baruch is hard to imagine. It is true that the financier and notorious speculator had contributed heavily to Wilson’s 1912 presidential campaign. His reputation however shadowed him everywhere. During the Pujo hearings he’d candidly identified himself as a speculator. What else could he do? His career as an outré wheeler and dealer, a master of arbitrage, someone with whom Morgan scorned to do business, stamped him indelibly in the public mind despite all his efforts to make himself over as a financial statesman. He was a soft-spoken debonair southerner, a lover of horses and roulette, the “lone wolf of Wall Street” known far and wide for his merciless bear raids on the Market.
Baruch seemed to reaffirm that reputation when he, along with the era’s even less savory bear, Jesse Livermore, were found selling the Market short during the “peace scare” of 1916 as President Wilson seemed on the verge of brokering a peace with the belligerents and the British prime minister hinted at talks with the Germans. But the rather mild public reaction to that ephemeral scandal was itself a good indication of a shift in the wind and hardly arrested Baruch’s ascension. Indeed, when he appeared before a House investigating committee, Baruch boldly defended his chosen occupation. Wall Street was no “upper class race track,” he declared, but “the total barometer of our civilization” and speculation a specialized science of human behavior.
Wilson had already appointed Baruch to the Advisory Committee of the Council of National Defense, despite some predictable public skepticism. With the decision to enter the war, the president formed a “war cabinet” dominated by businessmen with Wall Street connections. The drift of events was unmistakable. Still, it was a singular moment in Wall Street’s rites of passage through American life when a nationally notorious Stock Market speculator, and a Jewish one at that, was given command over the whole of the country’s industrial economy in a time of national emergency. And as it turned out, Baruch exercised his power (not as great as advertised, not nearly as absolute as his unofficial title as the “czar” of industry suggested) as head of the War Industries Board to rein in the more selfish impulses of war profiteers. Sometimes he succeeded. Sometimes, when faced with the recalcitrant steel, auto, and Du Pont interests who resisted all government priorities, insisted on getting paid top dollar, and wouldn’t cut back on their civilian production, he largely failed. Nonetheless, his tenure in Washington enhanced Wall Street’s newly earned credit for social responsibility. Alvin S. Johnson, a war-planning colleague of Baruch’s, put the case hyperbolically, but with some insight into the Street’s vaulting prestige: “The old capitalism of Morgan had no adequate answer to Lenin. The new capitalism of Bernard M. Baruch has a wholly adequate answer. Democracy under Morgan’s capitalism was a dream. Under Bernard M. Baruch’s capitalism democracy became a reality.” Actually, Baruch’s version of state capitalism was an emergency expedient. It evaporated along with the poison gas on the fields of Flanders. Its halo of victory, however, lingered on, hovering benignly over the citadel of finance capitalism.17
Baruch’s statesmanship aside, it was the Street’s broader participation in what amounted to a mass campaign of financial patriotism that counted most heavily in its cultural rehabilitation. Once the United States entered the war, the government had its own enormous financing needs. It turned to the same investment houses to help underwrite and market successive issues of what became known as “Liberty Bonds.” Treasury Secretary McAdoo went to the investment banking community for advice about the size of the issues, payment terms, and methods of distribution. Each of the twelve regional Federal Reserve banks created “Liberty Loan Committees,” which in turn enlisted bankers, brokers, bond houses, businessmen, newspapers, press associations, fraternal organizations, and even the Boy and Girl Scouts in a vast nationwide solicitation. Railroad trains toured the country carrying veterans and exhibits of captured war material. All-day “liberty loan” rallies gathered in town squares exhorted by celebrity speakers. Actors pitched to their theater audiences in between acts. Caruso sang for the cause at Carnegie Hall, movie stars like Mary Pickford and Douglas Fairbanks endorsed “Liberty Loan” ads, Charlie Chaplin stood on Fairbanks’s shoulders exhorting a dense mass of thousands gathered at “the Corner” for a Liberty Loan rally. One hundred thousand clergymen delivered “Liberty Loan” sermons.
It was an outstanding success. Public debt, mainly in the form of four “Liberty Loan” issues, rose from $1.3 billion in April 1917 to $26.6 billion in August 1919. Two-thirds of the cost of the war was paid for this way (one-third by taxes). It was for 23 million Americans their initiation into the elementary rites of investment, a kind of toe-in-the-water experience that would embolden many to plunge much deeper in the decade ahead.
Swarms of underworld con artists buzzed around this enormously enlarged pool of potential investors. These “pirates of promotion,” who “Are After Your Liberty Bonds with Their Get-Rich-Quick Schemes” warned one publication, hawked dozens of fraudulent stock promotions—“Kent Holme’s anti-aircraft gun” with its twenty-four barrels capable of downing enemy planes “without the necessity of accurate aiming,” fictional arms manufacturers with fantasy foreign or domestic contracts, tapped-out gold mines and oil wells. Their obvious criminal provenance, however, was precisely the point. They defined the border of legality and respectability, the wrong side of the Street. Indeed, just before the outbreak of war, the New York Stock Exchange, conscious of its own need to do something about its public image, established a public-relations committee. The committee thought about launching an “anti-stock swindling campaign” and briefly considered hiring Ivy Lee, the public-relations guru famous for salvaging the poisonous reputation of John D. Rockefeller after the massacre of silver miners in Ludlow, Colorado. Basking in the warm glow of its service to the nation, however, the Exchange decided it could do without Lee’s special talents.18
Magazines that a few short years before had filled up their pages with a rogues gallery of “malefactors of great wealth” now resumed the deferential position with regard to the businessman as hero; not so much the Napoleonic loner but rather the managerial genius heading up a dauntingly complex organization. The Saturday Evening Post issued a wartime valedictory for Wall Street: “The first vigorous effectual response to the call to arms came precisely from Wall Street…. War, with its demand for a common purpose and a common sacrifice, makes this a good time to discard popular prejudices against Wall Street as merely stupid and demagogic.” Evidence of the Street’s patriotism indeed showed up very early on. The National Security League, a Wall Street group, formed late in 1914 to engage in war preparedness and patriotic education. Its creation so long before the nation had committed itself to either side strongly suggested that Wall Street had already made that choice.19
For the white-shoe fraternity, the Great War was more than an enticing economic opportunity, although certainly it was that. Nelson Aldrich has argued that for the world of “Old Money” it was as well a life and death struggle to defend European civilization, particularly its British incarnation, with which the world of Morgan had always been eager to affiliate. American financial and industrial elites had spent decades borrowing and buying and imitating European artifacts, customs, and rituals with which they hoped to smooth out the rough edges of their own social rawness. The war became a testing ground for acts of selfless sacrifice, feats of heroic athleticism, loyalty, and magnanimity that carried with them the promise of a kind of secular grace. It was the ordeal that would prove their worthiness to rule. They were to rule, that is, through pure acts of voluntary service that mirrored the honorific codes of conduct that presumably guided their European exemplars. Wilson’s war “to make the world safe for democracy” was, in its high idealism, congruent enough with this “Old Money” sense of calling so that its aura added to the luster of Wall Street’s wartime public esteem.20
Young men of Old Money were bred for this moment. For example, Nelson Aldrich’s relative, Winthrop Aldrich (himself the son of the famous senator from Rhode Island and Rockefeller factotum) was a devoted yachtsman who joined the Naval Reserve. Called to active duty, he was assigned command of a training regiment that left him frustrated. Finally, his repeated requests for sea duty were honored, and he served on the USS New Orleans convoying merchant ships across the treacherous North Atlantic. With the war over he returned to his career as a Wall Street lawyer and banker.
This was a telltale footprint of breeding, money, and service. Thus, as a young college student at Princeton, James Forrestal, who would later go on to become president of Dillon, Read and then secretary of the navy under FDR and the nation’s first secretary of defense, cultivated early on his social and business ties to the WASP establishment. He interrupted his fledgling career at the Wall Street investment firm of William A. Read and Company to serve as a lieutenant junior grade in the conspicuously upper-class Aviation Division in the Office of Naval Operations. Robert Lovett’s father had looked after Harriman’s railroad interests in Texas and served on the War Industries Board. His son, who would go on to become secretary of defense under Truman, graduated from Yale before serving as a navy pilot during the war. In fact, he joined a flying unit of the Naval Reserve made up of fellow “yalies” and financed by J. P. Morgan senior partner Henry Davison. Known as the “millionaires unit,” these rakish aviators trained at Davison’s Long Island estate. Lovett was the squadron’s most heroic pilot, who led nighttime dive-bombing raids on German submarines. After the war, he resumed his Wall Street career at Brown Brothers. Investment banker, diplomat, and future senator Dwight Morrow, a graduate of Columbia Law School, served as director of New Jersey’s National War Savings Committee and as a key figure in the Allied Transport Council charged with resolving inter-Allied conflicts over the allocation of scarce shipping resources. After the war he became a senior partner in the House of Morgan. Henry Louis Stimson was forty-nine when war broke out. Nonetheless, this son of a New York mugwump, graduate of Phillips Academy, member of Skull and Bones at Yale, a disciple of Elihu Root’s and a partner in his Wall Street law firm, Teddy Roosevelt Republican and future secretary of state and secretary of war, volunteered. He became an artillery officer and saw active duty in France. James Paul Warburg, offspring of the famous German-Jewish banking family, graduated Phi Beta Kappa from Harvard where, to the chagrin of his Germanophile father, he editorialized in the Harvard Crimson on behalf of the Allies. Enlisting before America’s entry, he hoped to become a pilot. His poor eyesight prevented that, but he invented a new kind of aviator’s compass that was put to immediate use in combat planes. Finally, Robert Patterson, who would later serve as Truman’s secretary of war, joined Elihu Root’s law firm just in time to leave, first to join New York’s Seventh Regiment chasing Pancho Villa along the Mexican border and then to become a captain of infantry in France where he twice received the Silver Star for “gallant and meritorious” behavior as well as the Distinguished Service Cross for leading a charge against German machine gun nests, and a Purple Heart for wounds suffered in the encounter.21
This collective biography of Wall Street wartime service and bravery was epitomized in the fabled career of New York’s “Silk-Stocking” Regiment. The 107th Infantry Regiment, made up mainly of Society boys from Manhattan, but with a sprinkling of upstate country “appleknockers,” took on the impregnable Hindenburg Line (actually in German, the Siegfried Line) in the fall of 1918. The “Line” consisted of a formidable zigzagging series of stony fortresses (each named after some Teutonic folk hero) interlaced with underground tunnels so vast they could house and conceal town-sized armies with all necessary provisions and munitions, buried so deep they were impervious to bombardment. It was like something out of Lord of the Rings, just as lethal and just as invincible. The regiment was badly mauled, but managed to punch a hole in the “Line” and in the process earned a sacred spot in its nation’s conscience.
What a remarkable turnabout. For seventy-five years the “Silk-Stocking” Regiment had served as the praetorian guard of New York’s high bourgeoisie. Its armory on Park Avenue was privately funded and included a reception parlor, library, mess hall, and gym decorated and furnished in Gilded Age splendor. New York’s luminaries could watch from a grand gallery as scions of the Vanderbilts, Belmonts, Van Rensselaers, Roosevelts, Harrimans, and Schermerhorns paraded in their military regalia in the drill hall below. The 107th’s upper-class membership and its deployment putting down risings of the lower orders from the draft riots of 1863 to the Croton Dam strike at the turn of the century earned it a large measure of social suspicion and even scorn. Maligned as a coddled and cowardly collection of class snobs, the regiment was hardly taken seriously as a fighting unit. Indeed, Robert Patterson volunteered for another assignment fearing he’d otherwise miss the war, and he wasn’t the only honor-bound blue blood in the regiment to do so. Then came its redemptive moment. Along with an Australian troop, the regiment was the first to puncture the Hindenberg Line. It suffered the highest single-day casualty rate for a regiment in U.S. history. Six months later an immense crowd, drawn partly from the city and from as far away as Pennsylvania and Connecticut, gathered along Fifth Avenue to welcome home the Twenty-seventh Division of which the 107th was a part. At its Park Avenue Armory deafening cheers of “Welcome Home Seventh” greeted the veterans. Bloodied and bemedalled, the “Silk-Stocking” Regiment stood before the country like some knighthood of the Street.22
TOGETHER WITH the honor and the glory, undergirding them, in fact, was a breathtaking new power in the world that Wall Street had long dreamed about and plotted to achieve. To be present at the creation of a new American empire was an exhilarating experience. It further helps explain the remarkable equanimity of the Morgan men when a bomb blew up on their doorstep. Lenin might view imperialism as finance capitalism’s terminal disease. Others took a more salubrious view. The outcome of the war seemed to confirm their sense of America’s coming of age.
Visions of America supplanting Britain as the globe’s imperial hegemon had excited the imaginations of people like Brooks Adams and Teddy Roosevelt for a generation. Ever since Elihu Root’s turn-of-the-century proclamation of the “open door” in China, circles of American businessmen and financiers had lusted after a position in the world’s markets more in keeping with the nation’s prodigious economic throw weight. Once upon a time, however, such grandiosity had aroused accusations of political venality and downright conspiracy.
The tale that best captured the air of popular suspicion surrounding Wall Street’s earliest foreign intrigues, the one that left behind the sourest aftertaste, had to do with the Panama Canal.
In the heat of the presidential election of 1908, Joseph Pulitzer’s World published an extraordinary exposé that threatened to derail the candidacy of William Howard Taft. It was a story of nepotism, of political intrigue at the highest levels, of financial skullduggery implicating the doyens of American banking and the law, and of a conspiracy by the executive officers of the government to foment revolution and secession. The story was set in Panama, and its featured players included J. P. Morgan and Theodore Roosevelt.
Nothing made T.R. prouder than his acquisition of the Panama Canal. It was the capstone of his strategic ambition to project American power globally, a muscular assertion that the nation intended to be a major player in world affairs. Certainly the canal’s construction would carry with it enormous geopolitical as well as economic significance, providing the country with a two-ocean presence, ending once and for all the lingering challenge to United States hegemony in the hemisphere. So it’s easy to imagine his rage when, just five years after he’d acquired this jewel, tabloid headlines screamed that the canal was the sordid outcome of presidential collusion in bribery, financial scamming, and bloody insurrection against a sovereign state. Roosevelt exploded. He pledged to “bring to justice this villifier of the American people.”
Pulitzer hated T.R., and the feeling was mutual. Nonetheless, the World, and the other papers that soon picked up the story, was not dealing entirely in fantasy. A congressional investigation followed and proved nothing but contributed to a pervasive anxiety about Wall Street’s unseemly ambitions and wire-pulling omnipotence.
Panama, according to Pulitzer and others, happened like this. William Cromwell, the head of Wall Street’s most prestigious law firm, Sullivan & Cromwell, formed a syndicate of investment bankers, especially the House of Morgan, whose most intimate business affairs were handled by Sullivan & Cromwell. In addition to a roster of Wall Street heavyweights, the syndicate allegedly invited in Taft’s brother and Roosevelt’s brother-in-law. Cromwell, an embodiment of white-shoe panache, sporting a wave of white hair, striped trousers, a silk hat and a morning coat, was on a first-name basis with every important investment banker and Washington power broker.
The syndicate’s purpose was to buy up the now-defunct French canal company that still held the original franchise to build the transoceanic water route across the Isthmus of Panama. The securities of the canal company were spread far and wide among the citizens of France. Agents of the syndicate scoured the French countryside buying up these securities cheaply, their value at a steep discount thanks to the morbid state of the old company. The plan then was for the syndicate to sell the rights to the U.S. government for $40 million, a sum somewhere in the neighborhood of three or four times what the syndicate had paid to acquire them. The problem was that the House of Representatives had earlier voted to sanction the construction of a canal at an alternative site in Nicaragua. The syndicate’s plan then became to undo that decision through the judicious exercise of political influence and high-octane hype. It worked and the Senate revoted, this time for Panama. But then the problem was that Panama was not itself a nation, but part of another nation, Colombia, and so lacked the authority to auction off a piece of its real estate to the American government. The syndicate’s plan then evolved to engage in what today what might be called “nation building.” Cromwell and his confederates, so Pulitzer claimed, financed and armed an insurrection among restive Panamanians, some with purely mercenary motives, others more genuinely driven by a desire for national independence. Roosevelt, who was most probably unaware of the syndicate’s financial hanky-panky, was more likely apprised of its political machinations. U.S. warships appeared off the coast just as the army of Cromwell made its move, discouraging any serious thought of resistance by the Colombian government.
As a military action it was a transparent charade. The “rebel” army was in part officered by Cromwellian business agents. “Troops” were paid at bargain-basement rates. Even the circumspect New York Times called the canal “stolen property” and identified the “thieves” as a gang of promoters, speculators, and lobbyists who “came into their money through the rebellion we encouraged, made safe, and effectuated.” Roosevelt himself later bragged in his inimitable way that he’d taken the isthmus—“I took the Canal Zone and let Congress debate”—but omitted any reference to the Wall Street syndicate or the choreographed uprising. Finally, all problems were solved. The syndicate got its $40 million. Panamanian nationalism, such as it was, was gratified. And Roosevelt had his waterway to world dominion.
If all or much of this was true, then it was scandalous and maybe illegal. Given his temperament, Roosevelt could do nothing less than react in outrage when the headlines appeared. He actually ordered the Justice Department to pursue a libel suit against Pulitzer, which it did. There was no Panamanian syndicate, the president maintained, and fumed that the “abominable falsehood that any American had profited from the sale of the Panama Canal is a slander.” Pulitzer “wantonly and wickedly” sought to “blacken the reputation of reputable private citizens.”23
Roosevelt lost his libel case. Pulitzer, however, could never come up with the hard evidence to back up his most serious charges. Inconclusive as a political and legal event, the Panama brouhaha nonetheless registered the prewar suspicions that shadowed Wall Street’s forays abroad and which only the white heat of world war would finally vaporize.
“Dollar diplomacy” was an epithet coined in the Taft era and aimed at scourging the nation’s foreign policy for its slavish subservience to American business interests, especially in the Caribbean. Wall Street banks in collaboration with agencies of the State Department effectively took over the running of the financial affairs and even the rickety and corrupt political systems of one Central American country after another. Such out-in-the-open financial imperialism was sometimes conducted with the greatest probity and foresight. They were often not so much rapacious raids as they were acts of rational reform albeit in the interests of capitalist stability. But at first they offended the democratic and anticolonial sensibilities of a sizable slice of public opinion.
Before the war Wall Street’s insatiable appetite for foreign booty was widely lampooned and excoriated. “The Magnet,” a cartoon appearing in the magazine Puck, showed Morgan holding a giant one sucking across the ocean the insignia of European civilization—statues, furniture, medieval armor, jewels, Egyptian antiquities, manuscripts, paintings—all headed for New York, its already world-renowned skyline dimly lit in the background. Another appearing in the Minneapolis Journal displayed a manic Morgan gleefully embracing a huge snowball-like globe imprinted with the logos of mines and mills worth $25 billion, entitled “And Growing.” When Taft sent off 2,000 Marines to Nicaragua in 1912, Bryan declaimed against the capture of foreign policy by “gold standard financiers.” Midwestern progressives like Senators William Borah and George Norris described the ensuing treaty with the Central American nation as a transparent arrangement to turn its government into a Wall Street puppet. The Nation would later call Nicaragua “the Republic of Brown Brothers.” A few years after the fact, Lieutenant General Smedley Butler recalled: “I spent thirty-three years and four months in active military service…. And during that period I spent most of my time as a high-class muscle-man for big business, for Wall Street, and the bankers…. Thus, I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of a half dozen Central American republics for the benefit of Wall Street…” Even theological imperialists like the Reverend Josiah Strong found “dollar diplomacy” embarrassing, its naked profit seeking an insult to the loftier cultural, psychological, and religious mission of Anglo-Saxon civilization.24
As in the case of the “Silk Stocking” Regiment, however, what a difference a war could make. For it was the world war that reversed an historic relationship between Europe and America which Wall Streeters had not been the only ones to resent. After all, not only the Street, but through it a great deal of American industry, in particular its railroads, were in debt to and/or owned by British capital. Powerful as he was, Morgan’s extraordinary cachet derived in part from his access to the sources of British and European money (and this was true of other Wall Street grandees like Belmont and Schiff). This dependency was widely and painfully felt, even down into the lower depths of the Populist outcry against the “English devilfish,” the latest incarnation of the Tory counterrevolution.
Every new war loan was a nail in the coffin of that “enslavement.” Assuming the imperial mantle once borne by the British would soon enough carry with it its own special conundrums for the American political and financial elite. At odds with one of the great tidal currents in the country’s political culture—both its isolationism and its distaste for the colonial bowed knee—the dawn of American global supremacy would produce a flurry of awkward fits and starts. The money seemed appealing, but no one in power was quite prepared to assume the social responsibility of empire. This in turn would contribute significantly to the traumatic crash and worldwide depression at the end of the Roaring Twenties. At first blush, however, the view from the top of the mountain was exhilarating, producing instead a triumphalist self-assurance.
In four years the United States went from being the world’s leading debtor nation to its leading creditor. Its allies, Great Britain and France, were not only its financial subordinates but had to put back together their war-ravaged economies. Germany, which along with the United States had surpassed the British at the turn of the century as an industrial superpower, now lay prostrate in defeat. All the while the American economy boomed. Overnight, the country liquidated its age-old debt to Europe. Meanwhile, from all over the world rivers of capital flowed into New York, the only place they could safely settle without fear of depreciation. America found itself in possession of nearly half the world’s gold supply.
Moreover, the timing of the war was arguably fortuitous from Wall Street’s point of view. Pools of idle capital building up over the previous decade, flooding the markets, causing periodic panics in 1901, in 1903, and most famously in 1907, had lent a haunting fragility to the whole system. This seemed the historic price of “morganization,” a massive thundercloud of fictitious values that grew and grew finding no release in the “normal” cyclic crises of the free market, hanging there ready to inundate everybody. War loans and government-subsidized war production cleared the atmosphere, providing outlets for all that built-up inert capital.25
In this atmosphere, opposition to the war and to Wall Street’s featured role in its conduct did not so much vanish as it did drown in a tidal wave of martial enthusiasm. The Left was raided, its publications closed up, its resolutions against finance capitalism and imperialist war ignored, or in the postwar red scare hysteria were used as evidence to jail Socialist Party presidential candidate Eugene Debs for his “seditious” antiwar rhetoric. Old-time fire-and-brimstone Populists like Tom Watson, who told people “where Morgan’s money went, your boys blood must go,” were treated as political freaks. They may as well have been bona fide kooks and German propagandists like the pseudonymous pamphleteer Charles A. Collman, whose “War Plotters of Wall Street” talked of “Wall Street’s British Gold Plot” designed to “ruin a country and its people in the interests of a foreign race.”
Consigning the opposition to some brick-and-mortar or cultural gulag was not confined to the always vulnerable Left, however. William Randolph Hearst—the Puck’s bad boy of the upper classes—came out early against the war loans to Britain, editorializing that war talk would only benefit Wall Street banks seeking to protect their investments. Cartoons in Hearst papers depicted top-hatted financiers glowering over scenes of horrific devastation. It didn’t even matter that once America joined the combat Hearst became a jingoist. He was widely vilified as a traitor anyway, accused of employing German spies on his staff. “Peace progressives,” including Senators William Borah, Gerald Nye, George Norris, Robert La Follette, and Henrik Shipstead carried on an increasingly lonely and isolating vigil against a war whose purposes they openly identified with Wall Street’s. Norris in particular was lambasted for his vote against a declaration of war (only five other senators joined him) in particular because he was so bold as to argue that the vast war loans to the Allies were producing irresistible pressures to ensure the value of those bonds: “The enormous profits of munitions manufacturers, stock brokers, and bond dealers must be still further increased by our entrance into the war…We are going into war upon the command of gold….” It was an old Populist refrain sung now by a rapidly shrinking minority of Americans. A rhetoric that had once electrified millions was receding to the fringes of public life, on its way to becoming a marginal subculture.26
When the war ended Bernard Baruch, Thomas Lamont, and Norman Davis, another Morgan partner, accompanied Wilson to Versailles, there as special advisers to the president on how to reconstruct the West’s economy. No one doubted that Wall Street would play a decisive role designing the new architecture. Alexander Dana Noyes, the studiously conservative if dispassionate financial journalist for the New York Times, concluded a book he wrote a few years later with a gentle admonition directed at this new mandarinate. America was in a unique position, Noyes claimed. The whole world had changed, and “the course both of political and economic history will be largely shaped by the capacity of our bankers, merchants, investors, and statesmen to meet the resultant new responsibilities.” If that were the case, it’s no wonder the explosion of 1920 left the white-shoe fraternity so remarkably unfazed.27