The Jew Who Defeated Hitler Page 7
Later that day, Roosevelt told the Treasury and military officials at a White House meeting he wanted every effort made to furnish the French with planes. Ambassador William Bullitt, also attending the meeting, said the French were particularly interested in the Douglas B-7 light bomber, even though Woodring said it had many secret elements and that it was built partly with government funds. Selling it to the French could prove embarrassing to the president, said Woodring. What he didn't need to say was that neither Congress nor the public were aware of the negotiations with the French, and news of the talks would likely excite isolationist ire. FDR made clear he wanted the French to see the B-7.63 As the meeting broke up, Morgenthau gave the president the memo recommending that the Treasury take over the procurement of aircraft.
Three days later, Johnson informed the Treasury that he would cooperate with the French requests, and General Hap Arnold signed an order for the French technical advisers to view the Douglas attack bomber in Santa Monica, California. They would have access to the plane and its secret weapons, and they would be able to go on a test flight.64
By Monday, January 23, things were proceeding as they should with minor irritants. When Collins met with Assistant Secretary of War Louis Johnson, he was required to stand at attention for two minutes before being invited to take a seat. But the French were testing the Douglas bomber in California and were meeting representatives from both Curtiss and Martin. Overall, Morgenthau seemed pleased, as he felt sure the French would sign a contract within twenty-four hours.
Then in the afternoon, the calls came in from the West Coast. The French team inspected the attack bomber, and one technician, Paul Chemidlin, went along on the test flight. In the course of the maneuvers, pilot John Cable banked the plane and went into a spin at five hundred feet. Losing control of the plane, Cable ejected, but his parachute failed to open. The bomber crashed in a parking lot near the Los Angeles Municipal Airport, demolishing nine automobiles. Ten bystanders were injured by flying pieces of wreckage. Rescue teams dragged Chemidlin from the rear cabin of the bomber before it burst into flames. He escaped with a broken leg, severe back injuries, and minor head wounds. Cable was killed instantly.
Later that day, the Associated Press ran a story on the crash, including the fact that a member of the French air ministry had been on board.65
The atmosphere was grim when Morgenthau chaired the 9:30 meeting on February 6, 1939. The secretary had been suffering migraine headaches since the plane crash in California two weeks earlier, and there was none of the jocular chitchat that often opened the meeting.
“I just want to say this for the benefit of this group,” Morgenthau began. “That what I have done for China, what I have done buying silver for Spain, what I have done to assist the French [to] get planes—I am delighted I was able to do it; if I had to do it, I would do it all over again.” Repeating himself several times, he said anyone who disagreed with him should come out and say it now. “I don't want anyone connected with me who doesn't believe in Henry Morgenthau Jr., and who doesn't believe in what he is doing,” he said. Then he closed by saying: “I see extremely difficult times ahead of us, and I don't want anyone who isn't as closely associated as these people are here with me.”1
“I'm a thousand percent with you in it,” said John Hanes. “I think you're absolutely right. I'll go down with you if it means going down; we'll all go down.”
“I've always felt we have a group here—they'll see me through thick and thin, and on that basis I can go along and not worry,” said the secretary. “I mean, as long as the Treasury gang sticks by me, I'm all right.” He had hoped to spend the previous two weeks focusing on economic recovery. But instead he had spent them fighting the White House, the military, even public opinion.
“It’s going to get dirtier and dirtier and I just want to know that I've got a team with me through thick and thin; and it’s going to get pretty damn thick,” he said. “I mean, I've never seen the weather so thick.”
It had taken a few days for the storm to erupt over the plane crash. The focus of the media in late January 1939 was not a plane crash in California but a regime collapsing in Barcelona. Franco was finally crushing the last bastions of resistance by the Spanish Republic, so a third major country in Europe would now be run by a Fascist dictatorship. Then on January 28, the New York Herald Tribune ran a front-page story with the headline, “Treasury Let French Agent Ride Bomber.” The story, which also appeared in the Washington Post, said the revelations came in closed sessions of the Senate Military Affairs Committee, and Morgenthau guessed immediately that General Hap Arnold was the source. Morgenthau’s first call was to War Secretary Woodring, who claimed he knew nothing about the matter. “I'm not going to forget it after Arnold has done this,” Morgenthau told him. When Committee Chairman Morris Sheppard called to ask Morgenthau to testify, the secretary agreed and asked immediately who had blamed the Treasury. Confidentially, said the senator, it was Arnold.2
If there was one bright spot that week, it was that the French had actually placed an order for US planes: 115 Martins, 100 pursuit planes from Curtiss, and at least 100 bombers from Douglas—all on an expedited delivery. They planned to buy the engines from Pratt and Whitney, which would now be able to rehire workers who had just been laid off. Collins told Morgenthau the total order could eventually rise to 400 bombers and 100 pursuit planes, but the French had started with a smaller order in the interests of time.3 Roosevelt, a master at handling newsmen, seized on this good news and immediately announced that the French were buying planes, creating employment for idle workers. He also said he'd ask Congress for an appropriation of $50 million so the army could buy 575 planes. The New York Times noted, however, there was a “serious conflict” between FDR and senior military officials and quoted Democratic senator Bennett Champ Clark of Missouri as saying he would fight the French sale.4
Morgenthau’s testimony before the Senate committee was intentionally bland. Apologizing for speaking quietly because of his recent illness, the secretary explained that the French mission was an accredited group representing France, and he was involved because the Procurement Division was in the Treasury. He read out Collins’s memo from his meeting with Johnson, as well as Arnold’s note that gave permission to the French team to view the attack bomber.5
Days later, Morgenthau tried to explain his side of the plane scandal to the president at a morning meeting. At first, Roosevelt pretended he didn't want to discuss it, then he berated Morgenthau for having a “terrible row” with Woodring after a recent meeting at the White House. One of the dichotomies of Roosevelt’s executive style was that he constantly created divisions in his inner circle, but he also demanded the appearance of harmony among all major players. Morgenthau explained that he had never even raised his voice with Woodring. Secretary of the Navy Charles Edison had asked him after the meeting if he was happy with the cooperation he had received from the navy, and Morgenthau replied, “Naturally so.” Johnson and Woodring were standing nearby, and Johnson had asked if he was happy with the army’s cooperation. Morgenthau simply said, “No.” FDR continued to rebuke him, but Morgenthau stood his ground, which could not have been easy because of the deep effect Roosevelt’s displeasure always had on him. Morgenthau went on to say he had merely carried out Roosevelt’s wishes and had done in a few months what would have taken the army a few years.
“Well, you know I have plans to clean up that situation,” said the president. It was an open secret within the administration that Roosevelt was planning to fire Woodring or Johnson or maybe both, but he hadn't found the nerve yet.
“Mr. President, you can take six months or a year to clean up some other situations in other departments but in the case of the War Department it is a matter of days,” replied Morgenthau, “because for your international speeches to be effective, you must be backed up with the best air fleet in the world and, if we are going to do that it is a matter of days to get things in order.”6
Just a
s the plane furor subsided, the exhausted Morgenthau was rocked again on February 5 when he was the subject of a diatribe by the demagogic radio commentator Reverend Charles Coughlin. Notably anti-Semitic and sympathetic to Hitler and Mussolini, Coughlin’s syndicated broadcasts had a following of millions. He claimed Morgenthau had attended a meeting in Paris with the half-Jewish William Bullitt, the Jewish former French prime minister Leon Blum, and the Jewish Soviet foreign commissar Maxim Litvinov during the Morgenthau family vacation in Europe the previous summer. The obvious implication was that Morgenthau was part of an international Jewish conspiracy. The truth was that Morgenthau had been on the Côte d'Azur, more than four hundred miles from Paris, when the alleged meeting took place, and he had not spoken to Litvinov since 1933. The more damaging claim by Coughlin was that Morgenthau was operating the $2 billion stabilization fund—established by Congress to prevent undue fluctuations in the dollar, franc, and pound—not for Americans but “for the benefit of British and French international bankers who reap the rewards of imperialism.” Morgenthau interpreted this as Coughlin calling him a traitor. It had particular bite because some congressmen had claimed the United States could end up subsidizing the French plane deal if it led to a depreciation of the franc, and the United States–backed stabilization fund had to come in and support the French currency.
Morgenthau sought legal advice about suing Coughlin but ended up writing the priest in protest, demanding a retraction, and copying the letter to George Cardinal Mundelein of Chicago.7 He again warned “the Treasury family” that the political atmosphere was dirty and was going to get dirtier. Anyone who was not with him completely should consider his options, he added. At noon the following day, Assistant Secretary Wayne Taylor came into the corner office and resigned. It turned out he was a closet isolationist. Although their meeting was cordial, Taylor’s resignation letter (which would have to be released publicly, as it was addressed to the president) opposed such policies as loans to China and the “secret” airplane purchases by the French. In several meetings, Morgenthau convinced him to remove the offending paragraphs before the administration accepted the resignation.8
Taylor was one of several assistant secretaries who had resigned in Morgenthau’s five years at the Treasury. It was a little black mark against the Treasury, but Morgenthau and his circle took such pride in the department that even a small black mark hurt. To Morgenthau, Hanes, Oliphant, White, Klotz, Bell, and the others who strode past Alexander Hamilton’s statue as they entered their office each morning, the Treasury was not simply a government department. The Treasury exemplified the best of government service, and in the idealism of the Roosevelt administration, there could be no higher calling than government service. The rest of Washington revered the Treasury. Even Cordell Hull admitted Morgenthau had “an excellent organization in the Treasury Department.”9 In September, Harry Dexter White had told a visiting journalist that the public would be amazed if it “really knew what the secretary had done to promote world stability, world peace, and how much he was doing, but unfortunately the things he was doing and had been doing were of such a confidential nature that nobody could know until some day possibly history would write it.”10 White also once bawled out an underling, Edward Bernstein, because he went to meet a British treasury representative at a nearby hotel. “Remember that when you are representing the Treasury, it doesn't matter who it is who wants to see you, he comes to your office, not you to his office.”11
Morgenthau’s references to the “Treasury family” underscored the familial bond among them. Though most were economists, they never saw their roles in government as the dry processes of finance but as part of a grand movement for the betterment of Americans. Many were drawn to the Treasury Department because they admired Morgenthau’s idealism, ethics, and anti-Nazi stand. One official, John Pehle, would later say he and his colleagues were attracted to the department because of its idealism. “It was an organization that went into all sorts of things that weren't the Treasury’s business primarily,” he said. “The Secretary just encouraged this.”12 Indeed, they believed their economic work was an essential part of the country’s fight against Nazism. One day during their discussions, Morgenthau mentioned all the forced labor in the Soviet Union, and Ed Foley replied that they had to make the capitalist system in the United States work or the nation could end up with a Communist system.
“That’s why in one sense, the Treasury is the greatest arm of defense,” said Harry Dexter White.
Foley agreed: “It’s the greatest weapon the United States has—the Treasury.”13
Soon Morgenthau and his staff turned their attention to the economy, the fiscal situation, and Morgenthau’s long-held ambition to balance the budget. “In his heart, he no more believes the nation can spend itself rich than he believes a man can drink himself sober,” wrote the Wall Street Journal’s Frank R. Kent, Washington’s most perceptive journalist on economic matters. Sadly, Morgenthau had never succeeded in balancing the budget. The federal deficit had reached $4 billion in 1936, and they had brought it down to $1.2 billion in 1938. Then the “Roosevelt Recession” gripped the country, and the president was convinced it was due to the decline in deficit spending.14 As a result, the federal debt, which had stood at $22.5 billion in 1933, had risen to $40 billion in 1939. It was forecast to rise almost to the legislated debt limit of $45 billion in fiscal 1940, and the administration would soon have to ask Congress to raise the debt limit.15 Behind closed doors, Morgenthau tried to impose some fiscal sanity on the government, but between the White House, the circle of New Dealers, and Congress, he had never been able to. In some circles, he had the same free-spending reputation as the rest of the administration. When he mentioned in a 1937 speech to the Academy of Political Science that he wanted balanced budgets, someone in the audience burst out laughing. Morgenthau assumed the fellow was drunk, but it still shocked him.
Now in February 1939, he and his staff were trying to push through Congress a budget they hoped would continue to lift the country out of the 1938 recession and prepare it for the global war. The cost of the pending war for all democracies weighed heavily on Morgenthau’s mind. The secretary never found out how France could afford the $65 million it planned to spend on American airplanes, and even the fiscally conservative government of Neville Chamberlain in Great Britain was doubling its defense spending to about £800 million, or almost $4 billion. The defense appropriation in the most recent budget proposed by the White House had been staggering. “Now this whole armament program is the curse of the whole world and it’s the curse of all the Treasuries,” Morgenthau told Daniel Bell on February 21. He pondered making a speech to call for disarmament talks, but Bell reminded him he might have difficulty convincing Germany and Italy.16
Morgenthau knew the most effective way to finance the war was to get the US economy out of the rut it had been in for almost a decade. The national income—a figure the government tracked closely in those days—had been $79 billion in 1929 and had fluctuated between $46 billion and $69 billion during the Roosevelt administration. It was expected to be $64 billion in 1938, which would produce government revenue of about $5.5 billion. After running a few models, the Treasury calculated it could collect $8 billion and almost balance the budget by increasing the national income to $80 billion.17 The “$80 billion national income” became a rallying cry for the administration. Hanes said the president should announce the goal publicly, saying, “I think it would engender more confidence in the business structure than anything we've done here at all. And I'm crazy about it; I think it’s real.”18
The problem, of course, was how to achieve it.
The staff formulated a plan to achieve the $80 billion income figure by removing “existing deterrents to private industry” and ensuring nothing new endangered the recovery of private business.19 It seems today like fundamental economic planning, but it is easy to forget how thoroughly the New Dealers distrusted the business community. Franklin Roosevelt came
to office disparaging “unscrupulous money changers” in his inauguration address, using a term attributed to Jesus in all four Gospels to convey the dishonesty of financiers. The relationship between the administration and the business community had never improved. When the National Association of Manufacturers drew up a list of causes for the recession of 1938–39, it included “excessive, unsound and frequently unfairly administered taxes” and “uncertainties created by frequent expressions of public officials voicing hostile attitudes toward business and investors.”20 Most of the newspapers that opposed the administration did so because of its hostility to business. “Business has been terrorized,” thundered an editorial in February 1939 in the Chicago Tribune, owned by the New Deal’s most vocal opponent, Col. Robert R. McCormick. “Bureaucrats armed with power to destroy enterprises and hamper their operations have been turned loose as if to discourage any one from making an effort to get ahead.”21 Beneath such strident hyperbole lay the belief by a broad swath of the business community that Washington was hostile to its endeavors.
Morgenthau’s efforts to convince the president to make peace with business were aided by Hopkins’s appointment as secretary of commerce in 1938. It helped that the Roosevelt favorite was now mingling with businessmen, hearing their concerns and forwarding them to the president. The other positive development was the elevation within the Treasury of John Hanes.