The Jew Who Defeated Hitler Read online

  On August 29, the two Dutchess County patricians met and briefly discussed the revenue bill. After the president said he was now willing to accept just $10 billion in new revenue, he said to his friend, “You want to talk about Jimmy Byrnes and compulsory savings.”

  “That is just part of it. Byrnes says he can issue directives to me.”

  “That is ridiculous,” replied the president. “Byrnes can only issue directives through the President.”

  “Well, I don't think he should issue any directives to the Cabinet,” said Morgenthau. FDR agreed. Morgenthau asked him for a note saying so, but FDR declined to put it in writing. He said they would all get together and work it out.

  “The trouble is Byrnes believes what he reads in the papers, namely that he is Acting-President,” said Morgenthau as a parting shot.53

  As 1943 ended, one issue that was taking more of Morgenthau’s time was White’s plan for a stabilization fund and reconstruction bank. American and British technical committees had been trying to find common ground on the White and Keynes proposals. The American side was worried about the technical and political implications of the British plan, not the least of which was suspicion of Keynes among businessmen and congressmen. The parties concentrated on the stabilization instrument rather than the bank, and White had to convince Keynes that he was not trying to give countries with positive balances of payment (which the United States would certainly be for many years) an undue advantage. The British still preferred the Keynes plan, which would reduce the US voting power and place less emphasis on gold.54

  In March, Morgenthau asked the president if he could brief Senator Arthur Vandenberg on the talks, hoping the Republican from Michigan might become a champion of the proposal. FDR allowed it but advised Morgenthau to speak in generalities and emphasize there had been no commitments. When he heard of the president’s response, White asked Morgenthau whether the president supported the fund. “He very seldom, Harry, shows any enthusiasm these days,” answered the secretary. “It is very rare. So don't be disappointed.”55

  With a consensus developing in the administration about the proposed fund and bank, the Treasury distributed White’s plan to the Allies in April and began to brief Congress. And though details of the Keynes plan had been made public in London, Roosevelt still wouldn't let Morgenthau divulge the entire White plan.

  By September, the British realized they would have to subscribe to the White plan simply because the United States had the financial might to impose its will. Throughout that month, White and Keynes negotiated the details, a duel between Keynes’s nimble intelligence and White’s truculence. Morgenthau, with the president’s permission, presented their combined effort to Congress in early October.56 It called for the United States to commit $10 billion of the $30 billion in capital in the bank and about $2.5 billion to the stabilization fund. Representative Frederick C. Smith, Republican of Ohio, called the plan a “British plot to seize control of United States gold.”57 Wilbert Ward, vice president of the National City Bank of New York, called the World Bank proposal “defective,” though he understood the need for reconstruction.58 So the Treasury still had to win backers for the deal on Capitol Hill and Wall Street, and Morgenthau had been known throughout his career to get on people’s nerves in both locations.

  In January, ninety thousand German troops had surrendered at Stalingrad, marking the turning point of Hitler’s eastern campaign. The Allies successfully landed on Sicily on July 9, so Americans were now fighting and dying in Europe. And after the American triumph at Midway in June 1942, the Americans slowly and painfully reclaimed the Pacific. But the leaders in Washington were exhausted and fed up. “I know the President is running foreign affairs and I know the President will not let me help anymore,” Hull gloomily told Morgenthau on June 9.59 Henry Stimson was angry about the lack of a proper procurement structure and the frequent interference of the New Dealers. He confided to his diary that some of Morgenthau’s appointments in the Treasury reflected “a narrow political view.” Despite their previous alliance in preparing for the war, he and Morgenthau fought openly over the appointment of a US representative to the London-based Combined Civil Affairs Committee, which would install military governments in states recaptured by the Allies. Stimson nominated a Standard Oil executive named Jay Crane, but Morgenthau, suspicious of Crane’s business background, went behind Stimson’s back to Roosevelt, suggesting instead a bona fide New Dealer like Lauchlin Currie. Stimson was “mad as a boil.” Roosevelt eventually appointed a Treasury representative to the committee, William H. Taylor.60

  Inflation and corruption persisted in China. The Chinese printed 3.5 billion fapi a month—twice the amount of a year earlier. Randolph Paul told Morgenthau in June that the Madame Chiang camp had withdrawn but could not account for $867,000 from the $460 million the United States had deposited for the Chinese.61 Chinese Finance Minister H. H. Kung asked several times for the United States to transfer more of that money to China, but White urged Morgenthau to be tough. When General Chiang Kai-shek met Roosevelt at the Cairo conference in December 1943, he asked for a further $1 billion loan in gold. Morgenthau told the president the loan was unnecessary, especially since there was still $460 million in the Chinese account that had not been drawn down. The president and Morgenthau wanted to say as much to Chiang, but Hull warned it could only harm such a fragile administration. Morgenthau considered Hull’s caution “outrageous.” In January, Morgenthau told his staff the billion-dollar loan was definitely not in the works, adding that the Chiang clique are “just a bunch of crooks.”62

  Hull and Morgenthau also battled that autumn over the freezing of Argentine funds. A coup in that country in June had brought to power the pro-Nazi Pedro Ramirez, who wanted to create an anti-Yankee bloc in Latin America. Morgenthau wanted to freeze the country’s funds; Hull opposed it and FDR sided with Hull. When Morgenthau was out of the country in October, the Treasury and State Departments, along with the White House, agreed to leak to the media that the Treasury was considering freezing the funds, which had the lone effect of prompting the Argentines to remove funds from the country. When he returned, Morgenthau told his staff he applauded their intent but said it was handled badly.63

  As the Allied armies advanced, the pressures on the Treasury increased because it had to work on the occupation currencies for several countries—Italy, France, the Low Countries, eventually even Germany. Morgenthau was fighting for a special dollar bill with a yellow seal to be used in occupation zones, but the British and governments in exile opposed the plan. Finally the Treasury insisted the yellow seal be used at least in the early phases of recapturing Europe.64 As the Allies landed on peninsular Italy in the fall of 1943, the Treasury supplied the forces of General Mark Clark with two currencies—“Allied military currency” and “spearhead currency.” Used only by troops advancing at the front, spearhead currency could be used only by US troops so that Germans who captured or killed an American couldn't take it and use it.65 Even the wording on the currency notes caused problems, as the Treasury planned to have the words “La République Française” printed on the notes for France, but Roosevelt (who was thoroughly sick of de Gaulle) insisted on simply, “La France.”66

  The Treasury soon put together a plan for the coming tax bill that would raise the $10 billion that Roosevelt was now asking for to finance the war effort, largely through taxes on business profits and high incomes. And to further mop up inflationary liquidity, the Treasury wanted to increase Social Security payments in increments, so before long the move would raise an additional $5 billion, largely from mainstream Americans. Morgenthau believed the president had to approve the plan in its totality to have a chance before Congress.

  Morgenthau and a few staff members arrived at the White House to outline the plan on September 9, 1943, the opening day of the third bond drive. The drive opened in a cloud of confusion, which darkened the secretary’s mood. On September 8, the Allies announced publicly that they had signed an
armistice with Pietro Badoglio, Mussolini’s successor as the head of the Italian government. Immediately, Morgenthau began to field calls from bond-drive organizers, asking if they should bother with the campaign now that the war was winding down. Morgenthau had spent the day telling organizers the war was still raging and would likely do so for some time.67

  They assembled in the Oval Office, joined by Byrnes and Vinson. Before Morgenthau could present his plan, Byrnes said taxes had to be part of the stabilization program and were therefore under his jurisdiction. Randolph Paul later recounted that Byrnes was “pretty bitter and hot” and continued to talk even after the president tried to get him to stop. Morgenthau merely said it had already been decided he would present and manage the tax bill.

  “I am the boss,” Roosevelt said, adding that once they all agreed on a policy, he expected “all you fellows to go in and do the work just like soldiers.”

  But Byrnes insisted he wouldn't support the bill unless he helped to formulate it and stressed he would take no orders from the secretary of the Treasury. “I have never had any trouble getting along with people previously,” he said. “I get along with Knox. I get along with Stimson; but I can't get along with the Secretary.” Infuriated, FDR pounded the table, yelling, “I am the boss” and that he wanted the Treasury to present the tax bill.

  Morgenthau then turned to Byrnes and said, “I think you and I agree on this.”

  “I wouldn't agree with you on anything,” Byrnes shot back. FDR continued to pound the desk, yelling: “I am the boss, I am giving the orders.” The meeting soon broke up acrimoniously without Morgenthau so much as removing his proposal from his brief case. It was a problem because the Ways and Means Committee was about to begin discussing the tax bill in less than two weeks.68

  The story leaked to the Associated Press and the Wall Street Journal. The White House tried and failed to find out who had leaked the story, and FDR had to move to quell a very public tiff between two of his senior executives. He summoned all the parties a few days later and told them his plans for Social Security, which were similar to the Treasury plans. Byrnes and Vinson had both worked on Social Security in 1935 and became engaged with the discussion this time. The group worked on a plan for the next two days and seemed to be making progress on a unified policy.69 However, after Morgenthau hosted Byrnes, Vinson, and congressional leaders at his office (at which he served them Dutchess County apples), Robert Lee Doughton and Walter George told him the Social Security proposals would never win the support of their committees.70

  Roosevelt had at least gained temporary unanimity within the administration on the 1944 fiscal proposals, but Morgenthau was disillusioned that FDR let Byrnes get away with such behavior. He warned Roosevelt privately that Byrnes and Vinson may try to convince congressmen that the Treasury secretary couldn't work with them—something, he added, Roosevelt knew was not true. “I don't know how valuable I am to you, but if they keep this thing up you and nobody but you can stop them,” he told the president.71 He was also astonished that the president was beginning to support a compulsory savings program—even though the third loan drive was proving every bit as successful as the previous two.

  In deep despair, Morgenthau on October 3 once again sought guidance and solace from Eleanor Roosevelt, whom he continued to help whenever possible. He brought with him a letter he had drafted for the president, which he shared with her as it outlined his position. “In suggesting a form of compulsory saving in the face of the most amazing response to the Third War Loan, on the part of the American people, I feel that I am selling them down the river,” it read. He noted that the confidence in American securities was at an all-time low when he took over the job in 1933 and, “by my hard work, I have built up confidence in the Government security market to an all-time high.” He added: “So far, I have been able to finance the most costly war in history at the lowest rate of interest ever known.”72

  The First Lady read the letter and listened to Morgenthau say that he had begun to hear from volunteer fundraisers that they would resign if the press reports of a compulsory savings program were true. Eleanor Roosevelt advised him to send the letter to the president.

  “So I thought it over and talked it over with Mrs. Morgenthau,” he told his diary, “and we decided to do the thing by phoning rather than to send the letter.” Morgenthau tried reaching the president’s secretary Grace Tully four times before he could ask for an appointment. The only response was that FDR was willing to make a suggestion—rather than a recommendation—of compulsory savings. Privately, Morgenthau said to his press aide Herbert Gaston: “Now, just in this room, isn't that typical of the man?” Gaston agreed.73

  Morgenthau’s fortunes did not improve when he asked Congress for as much as $10.5 billion in additional revenue. Higher Social Security payments were no longer part of the plan, so Morgenthau wanted higher taxes on businesses and the wealthy. In the midst of his testimony, Morgenthau admitted that four-fifths of the “dangerous money,” meaning the inflationary oversupply of cash, was in the hands of people who earned less than $5,000 a year. In other words, the inflationary pressures were coming from the people whom Morgenthau was refusing to tax, and the administration’s budget plan would do little to ease inflation. New York Times columnist Arthur Krock called the proposal one of the “persistent New Deal tax schemes that sought to punish the prosperous and successful.”74 Added the New York Times in an editorial three days later: “It seems obvious then that the bulk of new taxes must come from those earning under $5,000 and that they are in a position to pay.”75

  With relief, Morgenthau left Washington on October 10 for a twenty-day tour of the battlefields of North Africa and Italy. In Algiers, he and General Dwight Eisenhower appealed to the American people by radio to buy more war bonds.76 The Allied forces had moved on to the Italian mainland and were fighting bloody battles as they inched their way up the boot. Morgenthau traveled as far north as the Volturno River, just above Naples. “My only interest in life is to win the war, so I spend a lot of time trying to learn about the war,” he told a reporter. “I just want to beat those bastards.”77

  What struck him was the evil of the enemy. “All day I was impressed with the evidences of the ruthlessness of the German enemy—their murder of innocent civilians, the peaceful farm buildings and crops they destroyed, and the homes they ruined. The people at home should see these things.78 Captured German prisoners told Morgenthau the führer was still in power and the losses in Russia were the fault of bad German generals. “They say their next Fuehrer will win the next great war,” he said. “So here they are—these defeated prisoners—already planning another assault on civilization.”79 The three-week tour reinforced Morgenthau’s outrage at German brutality. When he returned to the United States, he published a report by Col. Erskine Hume, head of the US government in the Naples area, on the “acts of German cruelty and wanton destruction.” It said: “Many people were beaten to make them disclose the whereabouts of supposed valuables. Women as well as men were subjected to such treatment. There were many murders, some of a sadistic nature, with mutilation of dead bodies, particularly those of women.”80

  Morgenthau soon returned to the familiar world of successful bond drives and hard-fought failure with Congress. While he was gone, Daniel Bell had revealed that the third war-loan drive raised $18.9 billion, nearly $4 billion more than planned.81 That meant there would not be another bond drive in 1943 because the country had already raised $55 billion that year.82 But the Treasury’s relationship with Congress was strained by their disagreements over big economic questions. When it was reported Morgenthau would sell his one hundred head of purebred cattle, Republicans in Congress jeered Morgenthau, a millionaire, for not being able to afford dairy farming. “If all the dairy farmers followed Morgenthau’s example, there won't be any more milk,” said Representative August H. Andresen of Minnesota.83 When the budget finally emerged from the Ways and Means Committee, it raised only $2 billion in new revenue
and did virtually nothing to mop up the “dangerous money.” The Treasury was disgusted with the breaks it preserved for corporations and the wealthy.84 Morgenthau delivered a strong statement to the Senate Finance Committee, calling for more revenue now rather than asking the returning soldiers to pay off the debt raised to pay for the war—comments the Senate Finance Committee chairman Walter George said represented “exceeding bad grace.”85

  As Morgenthau celebrated his tenth anniversary as head of the Treasury on November 15, he entered a glorious, heart-wrenching period in which he transcended his duties as the country’s chief financial officer. He did not seize the duties of other departments; rather, he understood another department was committing a grievous wrong, and he righted it with courage, determination, and efficiency. The State Department was clearly thwarting the efforts to rescue Jews. Under Secretary Sumner Welles, who had been the strongest voice in the department in favor of aiding the Jews, had been forced to resign in August after it became known he had drunkenly propositioned a Pullman porter on a train one night.86 That left Herbert Feis, the economics head, as the only senior State Department official the Treasury considered an ally.

  The State Department signaled its indifference to the tragedy of the Holocaust by telling its officers in official documents that the rescue was a Treasury project. “This file is full of State Department cables which are full of little remarks like the Treasury wants this, the Treasury desires you to do this, and the Treasury this and the Treasury that,” complained Pehle at one meeting “[Leland] Harrison, unless he is a dumbbell, can see through that…State is, in effect, saying this is [only] what the Treasury wants you to do.”87 The patience of the Treasury staff had run out. They knew French police, under orders from the Nazis, were trying to take a census of six thousand abandoned Jewish children, all of whom the United States could rescue.