Three floors below James True Associates and many steps closer to the center of the political spectrum and the top of the economic pyramid, a powerful organization fought Roosevelt's New Deal even more ferociously, and far more effectively, than True. The American Liberty League pioneered many of the practices that characterize American politics today: secretive funding of “grassroots” political groups with extreme agendas, massive expenditures on political campaigns by shadowy groups that are ostensibly independent of the candidates they support, and worship of interpretations of the Constitution that align with the financial interests of the wealthiest Americans while disregarding passages intended to check the powers of the privileged.

The Liberty League was also at the heart of a murky plot to replace FDR with a pro-business dictator.

The League was the direct descendent of an organization that fought for the right of Americans to drink legally, the Association Against the Prohibition Amendment (AAPA). Both the AAPA and Liberty League claimed to be dedicated to promoting liberty, and both were funded by a group of plutocrats who believed that the most important freedom was the freedom to avoid paying taxes. The AAPA was a decade-old in 1928 when Pierre du Pont took over its leadership.1 He recruited John J. Raskob, a vice president at E. I. du Pont de Nemours and former Treasurer of General Motors, to lead the organization. At the time, Raskob had his hands full with two very different projects: building and managing the Empire State Building in New York and modernizing the Democratic Party in Washington.

Raskob provided more than $100,000 from his personal funds in 1930 to establish a permanent Democratic National Committee (DNC) headquarters with offices in the National Press Building. Previously, both political parties had operated temporary national offices only for about four months prior to presidential elections. Raskob, who had been chairman of the DNC since 1928, remained in New York, dedicating himself to marketing the world's tallest, and for years one of New York's emptiest, buildings. He left day-to-day operations at DNC headquarters in the hands of a savvy operator named Jouett Shouse, a man with two passions: politics and ponies. His bets about the former were far more often on the money.

Trying to match Raskob, the Republican National Committee also created a permanent headquarters office. Naturally, it was also located in the Press Building. This marked the start of the modern era of permanent campaigns waged by full-time professional political operatives.

Raskob fought bitterly to deny Roosevelt the presidential nomination, and having lost was forced to resign his DNC position in 1932. He turned his attention to the repeal of Prohibition, opening an AAPA office in the Press Building and putting Shouse in charge. The operation was funded by Pierre du Pont and his younger brothers, Irénée and Lammot; Raskob; Grayson Mallet Prevost Murphy, a banker who served on the boards of Anaconda Copper, Bethlehem Steel, and New York Trust; and other industrialists.2

The wealthiest men in America weren't investing their time and money to repeal Prohibition because they longed to order cocktails at the Plaza Hotel bar. While Prohibition offended the spirit of individualism they considered a hallmark of American society, and promoted lawlessness exemplified by thugs like Al Capone, these were minor inconveniences to the Robber Barons who backed the AAPA. If these had been the only drawbacks to banning alcohol, the du Ponts and their confederates could have waited for legislated temperance to die a natural death.

Raskob, the du Ponts, and their comrades detested and went to war against Prohibition because they blamed it for the one threat that kept them awake at night, a scourge that they feared would—and that ultimately did—destroy their way of life: income taxes.3

To keep the government afloat during World War I, Congress established a tax on the incomes of the wealthiest Americans. The du Ponts expected the affliction, like a similar tax imposed during the Civil War, to be temporary. Those hopes were dashed in January 1919 by ratification of the Eighteenth Amendment, which made Prohibition the law of the land. Revenue from taxes on alcohol sales evaporated, blowing a huge hole in the federal budget. This led Congress to expand rather than rescind the income tax.

Raskob and Shouse attracted donations to the AAPA with promises that the income tax would be washed away in a flood of beer if the saloon taps were reopened. The largest, most sophisticated American lobbying campaign up to that time was launched to support the unspoken proposition that government should be funded by taxing the drinking habits of millions of Americans rather than the incomes of a tiny elite.⁴

Working from his Press Building office, Shouse created front organizations and funded the campaigns of “wet” candidates for state legislatures and Congress. The AAPA intervened in fifty congressional races, winning 90 percent of them. It was so effective that even Utah, home to the teetotaling Mormon Church, approved the Twenty-First Amendment repealing Prohibition on December 3, 1933, sloshing the repeal movement over the threshold of the two-thirds of states needed to change the Constitution. Roosevelt tried to take credit for the deed, sending the first legal shipment of beer in Washington to the thirsty hacks at the Press Club, but Arthur Krock of the New York Times correctly attributed the success to Shouse and the AAPA. The association's efforts had shaved two years from the life of Prohibition, Krock estimated.⁵

Even as he raised a glass at a celebratory banquet held a few hours after Utah pounded the final nail into Prohibition's coffin, Shouse realized that the New Deal meant that he and his patrons had won a battle but not the war. Although Prohibition had been repealed, the income tax wasn't going away—and, even more than the tax, the Roosevelt administration's fiscal, regulatory, and social policies posed an existential threat to the lifestyles of the ultrarich. Three days after the celebration, the directors of the AAPA, in a more sober mood, passed a resolution calling on the board to consider forming a new group dedicated to defending “the principles of the Constitution.”6

A letter to Raskob from Robert Ruliph Morgan Carpenter, a retired du Pont vice president and member of the company's board of directors, encapsulated the mindset of the AAPA's directors and the kinds of threats they were organizing to oppose. Writing in March 1934, Carpenter complained, “Five negroes on my place in South Carolina refused work this spring…saying they had easy jobs with the government. A cook on my houseboat at Fort Myers quit because the government was paying him a dollar an hour as a painter.”⁷ Carpenter asked Raskob to present his travails to Roosevelt as evidence of the need to scrap the New Deal before the country was ruined. Raskob wrote back without a hint of irony to suggest that Carpenter, who was married to Pierre du Pont's sister, “take the lead in trying to induce the du Pont and General Motors groups, followed by other big industries, to definitely organize to protect society from the sufferings which it is bound to endure if we allow communistic elements to lead the people to believe that all businessmen are crooks.”

Realizing that no one else was going to do it, Raskob took the initiative, calling on his peers to join him to form an organization dedicated to unraveling the New Deal. When it came to organizing a massive effort to influence government and public opinion, Raskob had both a precedent and an energetic operative to run it. He recruited Shouse to crank up the apparatus he'd created to fight Prohibition. This time the goal wouldn't be amending the Constitution, it would be preserving the liberty—and fortunes—of the men who invented the modern corporation, men who had a great deal to lose if Roosevelt succeeded in creating a New Deal for American workers. Raskob and his comrades humbly envisioned the American Liberty League's mission as annihilating the “imported, autocratic, Asiatic Socialist party of Karl Marx and Franklin Delano Roosevelt.”8

The roster of American Liberty League directors and funders read like a Who's Who of the American plutocracy. The men who ran US Steel, General Motors, the Chase Manhattan and JP Morgan banks, Standard Oil, and, until FDR's presidential nomination, the Democratic Party joined the du Pont brothers and Raskob in a crusade against what they viewed as populist tyranny.

On August 22, 1934, Shouse ushered a group of reporters into his office, suite 781 of the National Press Building—next door to the Democratic National Committee, where he'd been executive director—to announce formation of the American Liberty League. Sitting in his shirt sleeves, he said the League would “defend and protect the Constitution of the United States,” and “teach respect for the rights of persons and property as fundamental to every successful form of government.”⁹

At first its intended victim treated the Liberty League as a joke. President Roosevelt told reporters he'd “laughed for ten minutes” after reading in that morning's New York Times that “talk in Wall Street indicated that the announcement of the new American Liberty League was little short of an answer to a prayer.” FDR criticized the League as a tool of the superrich, quipping that one of its tenets was “love thy God but forget thy neighbor,” and adding that its God was property.¹⁰

While FDR had shown amusement, news of the League's formation and of its powerful backers stunned and alarmed a retired Marine general named Smedley Darlington Butler. Reading newspaper stories about the organization persuaded Butler that attempts by a group of bankers and industrialists to recruit him to lead a coup that would take power from FDR had been real—and that the plotters must be stopped.

Butler was a strange candidate for right-wing generalissimo. As the most-admired soldier in America and a tireless advocate for veterans, it was plausible that Butler could recruit a mob of superannuated soldiers. On the other hand, vilifying bankers and capitalists was his favorite pastime.

Butler had spent much of the first three decades of the twentieth century commanding Marines from China to the Philippines, and especially in Central America. He came to believe that America's muscular foreign policy benefited big business, hurt the people who found themselves on the wrong side of Yankee bayonets, and did nothing for regular Americans. Summing up his career in an August 1933 speech to the nation's largest veterans organization, the American Legion, Butler said he'd been a “high-class muscle man for Big Business.”11 He recounted that he'd “helped purify Nicaragua for the international banking house of Brown Brothers,” had helped make Mexico “safe for American oil interests,” and had flexed military muscle to help American business interests in the Dominican Republic, Haiti, and Cuba: “I helped the rape of half a dozen Central American republics for the benefit of Wall Street.” Having spent fifty years in uniform and twice been awarded the Congressional Medal of Honor, Butler was drummed out of the service in October 1931 after causing a diplomatic incident by falsely accusing Benito Mussolini of running down and killing a child.

The same individuals who had financed the AAPA and later created the Liberty League tried to convince Butler to take over the American Legion and use it to mount a coup against President Roosevelt. Their models were the black-shirted veterans who put Mussolini in power and the Croix de Feu (Cross of Fire), a fascist paramilitary group recruited from French veterans. The idea was to keep FDR in office as a figurehead, much as King Victor Emmanuel III had stayed on when Mussolini took control of Italy.

Butler played along with the plotters, gathering evidence that he intended to use to disrupt the scheme. At one point, one of the conspirators told Butler that a new organization was being formed to support the putsch: “You watch; in two or three weeks you will see it come out in the papers. There will be big fellows in it. This is to be the background of it. These are to be the villagers in the opera.” It would, Butler was told, be presented to the public as a society to maintain the Constitution. Butler later told congressional investigators that about two weeks later the “American Liberty League appeared, which was just about what he described it to be.”12

Not only did the Liberty League appear when Butler had been told to expect it, spouting the kind of slogans about the Constitution and liberty that he'd been told to expect, but its principal officers included the men who had been pressing him to take over the American Legion. Butler became convinced that the plan to raise an army of veterans and wrest control of the country from Roosevelt wasn't just chatter from con men.

Determined to thwart the plot, and realizing that in the absence of evidence or witnesses he would be dismissed as a crank, Butler turned for help to a journalist at the Philadelphia Record, Paul Comly French, who had worked in the past as his personal secretary. Presenting himself as Butler's assistant, French visited Gerald MacGuire, an oleaginous bond salesman who had been the intermediary between the Liberty League and Butler. French rushed from the two-hour meeting to a nearby office where he typed a memo recording the bond salesman's remarks: “We need a Fascist government in this country to save the Nation from the communists who want to tear it down and wreck all that we have built in America. The only men who have the patriotism to do it are the soldiers and Smedley Butler is the ideal leader. He could organize a million men overnight.”¹³ MacGuire also suggested that arms and equipment could be obtained from the Remington Arms Co. on credit through one of the du Pont brothers who owned a controlling interest in Remington—and who were among the most enthusiastic backers of the Liberty League.

French broke the story of what came to be known as the Business Plot in identical articles published in the Philadelphia Record and the New York Post on November 30, 1934. The story quoted Butler as saying he had been asked by a group of “wealthy New York brokers to lead a Fascist movement to set up a dictatorship in the United States.”¹⁴ Other newspapers reported French's revelations with a combination of skepticism, incredulity, and scorn.

Editors were reluctant to give credence to the tale, but it piqued the interest of two members of Congress, John W. McCormack of Massachusetts and Samuel Dickstein of New York, publicity hounds who headed the House Special Committee on Un-American Activities Authorized to Investigate Nazi Propaganda and Certain Other Propaganda Activities. They deemed Butler's allegations credible enough—and the drama of uncovering a potential coup plot sufficiently likely to generate headlines—to merit an investigation. Butler, French, and MacGuire all testified to the committee in executive sessions.

In a report released in February 1935, the committee concluded: “Evidence was obtained showing that certain persons had made an attempt to establish a fascist organization in this country. There is no question that these attempts were discussed, were planned, and might have been placed in execution when and if the financial backers deemed it expedient.”15

The report astounded Butler, not because of its revelations, but rather because of what wasn't revealed. There wasn't even a hint of the most explosive information he'd given the committee. The American Liberty League, the du Ponts and other powerful men Butler believed were behind the plot, weren't mentioned.

John Spivak, the crusading New Masses reporter and Soviet spy, got wind of the cover-up and traveled to Washington to investigate. A committee staffer inadvertently gave him unexpurgated transcripts of all of the testimony the committee had received in executive session. For Spivak, the suppressed testimony was irrefutable proof that the conspiracies he'd been writing about for decades were real: Wall Street bankers were plotting to destroy democracy; the threat of fascism wasn't a fantasy. He became intoxicated by the prospect of bringing down the nation's most powerful capitalists. Instead of simply reporting the facts, in two articles published in New Masses in January and February 1935, Spivak buried an accurate account of “Wall Street's fascist conspiracy” in a feverish, baroque, anti-Semitic conspiracy theory so complex that he had to publish a chart showing how the various players were allegedly connected. The stories were ignored or ridiculed.

Historians have shrugged off the Business Plot, but at the time it seemed real to many. FDR's secretary of Interior, Harold Ickes, believed the story was suppressed as a result of secret agreements between the American Liberty League and the country's major newspapers, which were owned by individuals who were members, or closely associated with members of the League. These connections, Ickes claimed, led publishers to ensure that their papers distorted and covered up the episode “in the interest of their advertisers and in defense of the capitalist class.”16 Four decades later, McCormack said he believed a dangerous plot had been disrupted: “If General Butler had not been the patriot he was, and if they had been able to maintain secrecy, the plot certainly might well have succeeded.”

The Liberty League can be considered the Dr. Jekyll of the pro-business Far Right, which would make the Sentinels of the Republic, a spin-off from an older organization originally created to oppose women's suffrage, the Mr. Hyde. Operating with funding from the League—which at one time contemplated merging with the Sentinels—and from the same members of the du Pont, Pew, and Pitcairn families who funded the League, the Sentinels worked from an office on the Press Building's thirteenth floor. The group sent editorials on a regular basis to 1,300 newspapers denouncing as un-American progressive initiatives that put the interests of ordinary people above those of the rich. Child-labor laws, maternity benefits, unemployment insurance, and the distribution of birth-control information, were, according to the Sentinels, steps down the path to godless communism.

The tycoons who funded the Sentinels felt compelled to distance themselves from it in 1936 after an investigation by Senator Hugo Black revealed both their funding of the organization and its hateful nature. Black released a letter in which Sentinel representatives referred to FDR's policies as “Jewish Communism” and asserted both that middle-class Americans longed for an American Hitler and that the “fight for western Christian civilization can be won: but only if we recognize that the enemy is world-wide and that it is Jewish in origin.”17

In addition to funding the Sentinels, the Liberty League and its leaders funneled money to another anti-Semitic group with a National Press Building Office, the Southern Committee to Uphold the Constitution, which shared members and goals with the Ku Klux Klan. This connection didn't faze the League. In fact, when it was being formed, the Liberty League's founders had contemplated aligning their organization with the KKK.

Starting in October 1934, Irénée du Pont and Shouse corresponded and held a series of meetings with KKK leaders, including Imperial Wizard Hiram Evans, about merging the two groups. The merger didn't happen because the businessmen believed the KKK's membership had dwindled to the point that it wouldn't be of much value; they weren't opposed to collaborating with hooded men who killed and terrorized African Americans. Even after the idea of a merger had been dropped, Pierre du Pont tried to enlist the KKK in the Liberty League's work. He wrote to Evans suggesting that the KKK emulate “vigilance committees” that had been formed on the West Coast to prevent government seizures of property, and argued that the time had come to reorient the KKK toward the protection of property.¹⁸

Although the Liberty League/KKK alliance was not consummated, the fact that some of the wealthiest men in America considered working with thugs who celebrated the lynching and terrorizing of innocent men, women, and children provides insight into their character and lends credence to the notion that the League backed the Business Plot.

Public disclosure of the Liberty League's ties to the Business Plot didn't diminish the enthusiasm of the organization's backers. The League poured over a million dollars, an unprecedented sum at the time, into defeating Roosevelt in the 1936 election. Its staff was three times larger than the Republican National Party's Press Building headquarters operation. Much of this money was spent creating one of the largest publishing enterprises in Washington, certainly the largest headquartered in the Press Building, where it had expanded from Shouse's desk to take up an entire floor. William C. Murphy Jr., quit his job as Washington correspondent for the Philadelphia Evening Public Ledger and resigned as president of the National Press Club to take on the task of running the League's publicity operation.

The League printed and distributed over five million pamphlets and leaflets during the campaign, and it bombarded newspapers with copy that generated thousands of anti-Roosevelt news stories and editorials.

Roosevelt branded the League a band of “economic royalists,” but the recipients of its largesse were anything but aristocrats. The League's Southern strategy included secretly financing Gene Talmadge, the white-supremacist governor of Georgia. When Talmadge asked for help financing a national convention to offer himself as an alternative to Roosevelt, Raskob and Pierre du Pont each contributed $5,000 and General Motors president Sloan threw $1,000 into the pot. Their money helped Talmadge print a phony magazine, Georgia Women's World, and have it distributed at the convention.19 The magazine featured a photo of Eleanor Roosevelt with two African American Howard University students above a caption describing the occasion as the first lady's “going to some nigger meeting, with two escorts, niggers, on each arm.”²⁰

Undisguised proselytizing for the rights of the rich, not reports of its role in the Business Plot or support for racist propaganda, led to the League's downfall. A dinner the League held at Washington's Mayflower Hotel in January 1936 was the beginning of the organization's end. The event was billed as a celebration of Al Smith, the Democratic Party's 1928 presidential candidate and a leader of the movement against FDR. Smith's contention that the New Deal was an attempt to replace the “clean clear air of America” with the “foul breath of Soviet Russia”²¹ didn't disturb ordinary Americans nearly as much as the atmosphere in the room where he made these remarks. Newspapers described a saturnalian debauch at which two thousand raucous men in evening dress and soused women flashing diamond jewelry cavorted under crystal chandeliers. They were jammed “tailcoat to tailcoat, fluttery bouffant dress to sleek black velvet dress,” the Washington Post informed those among its readers who were not fortunate enough to have secured an invitation. Coming at a time when millions of Americans were hungry, the detailed descriptions of the sumptuous food and drink were almost pornographic.22

“Al Smith chewed his cigar, discovered it was unlit, and unmindful of Arnold Bennett's maxim that ‘Cigars and love affairs cannot be relit,’ struck a match scratchily before the microphone for it,” the Post reported.²³ The reporter didn't reveal whether Smith managed to reignite the butt; in any case the League's flame sputtered on that night and continued to dim until it was finally extinguished in 1940, when its Press Building office was closed.