The Jew Who Defeated Hitler Read online

  The tension between Roosevelt and Morgenthau heightened when details of the Treasury plan were reported in several papers in early May. Morgenthau warned his staff he was “in one of the most delicate positions I have been with the White House on this tax matter.”46 The essence of the plan was contained in a single sentence in the draft speech: “We are all familiar with the fact that our National Income and the employment of our people are dependent upon the prosperity of private enterprise.”47 On May 3, Morgenthau spent one hour and forty-five minutes going over each word with the president. FDR demanded changes but accepted 95 percent of it, and the central message was left intact. The final twenty-five-page draft said taxes had to be discussed in the broader framework of the country’s fiscal ambitions and laid out four priorities for the economy: (1) to promote private enterprise and investment, (2) to attain full business recovery, (3) to sustain sound private finances, and (4) to ensure equitable tax distribution. “Full attainment of these objectives is made more difficult by a new and ominous development in world affairs—the armament race now gripping the important nations of the world,” said the text. “Great Britain in the coming fiscal year is spending $3 billion on armaments, or almost 50 percent of its national budget; France is devoting over 40 percent of its national government expenditures to the same purpose; Italy, 50 percent; Germany probably 60 percent; Japan over 70 percent.”48 Hanes and Morgenthau were feeling confident they could reform the tax system.

  Then came Morgenthau’s Monday luncheon at the White House on May 8, at which the president “went at me” for two hours and twenty-five minutes, according to the secretary’s diary submission. “Henry, supposing this country is a $67 billion country, and that’s all it’s ever going to be,” Roosevelt said at one point. “What’s your recommendation?” Morgenthau said he had never approached the economy that way, so he didn't have a recommendation. They went back and forth, and finally FDR said: “Well, how about going after balancing the budget and raising $2,000,000,000. Have you such a program?” The secretary responded, “Yes, we showed it to you in October, 1938. It’s all done. Hanes, Bell and I were over there in October, 1938, and presented it to you.” Roosevelt struck down his tax reforms one by one, and at the end Morgenthau told him it would be best if he did not go up to the Hill at all.49 All of Washington found out about it a few days later, when the press reported that Roosevelt had changed his mind. Kent wrote that Morgenthau and Hanes no doubt felt betrayed and humiliated. “In effect, after having been privately patted on the back they now have publicly been kicked in the pants,” he wrote.50

  Morgenthau and Hanes retreated and regrouped—but they did not surrender. They met May 9 with North Carolina congressman Robert Lee Doughton, longstanding chairman of the House Ways and Means Committee, and committee member Jere Cooper of Tennessee. The two Dixie Democrats were sympathetic to tax revision and were mystified by the president’s about-face. Usually a stoic fellow, Henry Morgenthau Jr. poured out his heart to his visitors, revealing his passionate patriotism as the reason for the tax fight. Often repeating himself in rambling sentences, he made clear he was fighting to bring back prosperity to the United States. “All I am interested in is to really see this country prosperous and this form of government continue, because after eight years if we can't make a success somebody else is going to claim the right to make it and he’s got the right to make the trial,” he said. “I say after eight years of this administration we have just as much unemployment as when we started.”

  His guests agreed, adding the country had built up an enormous debt as well.

  “I want it for my people, for my children and your children,” continued Morgenthau. “I want to see some daylight and I don't see it. And that’s why Hanes and I are making this fight, and if we are successful he and I will contribute more out of our pockets than others because it will hit us the hardest. If they take our suggestion, to take our money or leave it to them after we die, it hits Hanes and me relatively more than anybody in this administration. Nobody can be more unselfish than we are.”51

  On May 12, there was a White House meeting that Hanes was conspicuously not invited to. Soon, the Chicago Tribune reported that Roosevelt and Morgenthau had “sharp words” about the tax plans at a White House conference on May 15. Morgenthau, it said, was still trying to push the plan, but the president didn't want to see it. When the secretary tried to back up his arguments with statistics, FDR replied that he didn't want the figures because they were not honest. “Morgenthau reddened, according to observers, and in a choked voice said he didn't like to be accused of dishonesty by his chief,” said the report, adding that the incident may have had Morgenthau considering resignation.52

  Resignation rumors had been aired in the media throughout Morgenthau’s career, but this time there was some truth in them. He continued to discuss the tax reforms with his staff, Doughton and Cooper, and even Harry Hopkins, who said some people in government simply didn't want a private-sector recovery. Hopkins over lunch one day added the two of them had been sandbagged by the hard-core New Dealers. Smiling, Morgenthau responded that Hopkins had often been the one in the past stabbing him in the back over relief funding. “Harry, you did a good job on me yourself,” said Morgenthau, brushing aside Hopkins’s protests to the contrary. When he detailed the exchange in his diary, Morgenthau added: “When I tell that to my wife she will say, ‘Henry, I am proud of you.’”53

  Soon Hanes and Morgenthau began to argue in private, and Hanes said angrily one day he knew of about forty elected politicians on the Hill who “will stand with me on a fight on the tax program.” He then added, “I do not like Mr. Roosevelt.”54 On another day, Morgenthau asked Hanes to take his place at a cabinet meeting while he was out of town. Hanes refused.55

  Finally, Morgenthau turned for advice to one member of the Roosevelt circle he trusted unconditionally: Eleanor Roosevelt. Washington insiders knew the Roosevelt marriage was more practical than passionate and that there were two circles of influence within the White House, one orbiting around Franklin Roosevelt and the other around his wife. They had almost divorced in 1918 when she found his love letters from his mistress Lucy Mercer (later Lucy Rutherford). Therefore the men who were close to the president often ignored his wife, believing she was of no political value to them. But Henry Morgenthau understood that the president, who could simultaneously agree with and disregard any adviser, took what his wife said to heart and that one way to influence the president was first to influence his wife. What’s more, he genuinely adored the First Lady and helped her whenever possible.

  Eleanor Roosevelt enjoyed the prestige of her position but also strove to use it to benefit all Americans. She was, in essence, the agony aunt to a troubled nation, fielding thousands of letters from desperate people during the Depression. She would ask friends—including the Treasury secretary—to aid her downtrodden pen pals. Each week, her letters poured into the Treasury. She forwarded Morgenthau a fifty-two-page, single-spaced handwritten letter from Hazel N. Worl of Alhambra, California, an arthritis victim who wanted Mrs. Roosevelt’s help in getting $300 she had in the shuttered Union Trust Bank of Cleveland. W. W. Borm of San Francisco wrote in 1935 to say she had in desperation spent her stepmother’s collection of one hundred dimes from 1894, and now her happiness depended on replacing them before her stepmother returned from a trip. Often Eleanor Roosevelt asked Morgenthau to help correspondents find work, such as M. I. Raphael, of Cambridge, Massachusetts, who in 1936 wanted to get into the diplomatic service but was too old at thirty-seven. Many letters were remarkably personal. “Dear Henry, I have advised these young people to get married at once,” Eleanor wrote Morgenthau in response to a request from Miss Geraldine Horton of Hopewell Junction, New York. “Nobody needs to know when they actually were married. I wonder if it would be possible to get the boy a job with a salary on which they could get along after the baby is born.”56 Morgenthau helped out where he could.

  Though other Washington insiders resen
ted Morgenthau’s intimate relationship with the president, few realized that he nurtured his ties to the First Lady just as effectively. In fact, the entire Morgenthau family showered Eleanor Roosevelt with affection, especially Henry’s parents. The First Lady’s voluminous correspondence is replete with thank-you letters to “Uncle Henry” and Josie Morgenthau for the gifts they sent for Christmas, Easter, birthdays, anniversaries, and just when they felt like it. In 1935 alone, in a display of genuine affection no doubt tempered with self-interest, the senior Morgenthaus sent their son’s boss’s wife a hat in a hat bag in January, buns for Easter, a birthday present in early October, a scarf shortly afterward, flowers in the third week of November, candy a week later, and a dressing gown for Christmas.57 Throughout the years, they had inundated the First Lady with boxes of fruit, a necklace, pewter, and flowers. In December 1941, Uncle Henry told her he didn't know what to get her for Christmas, so he wrote her a check for $100 ($1,538 in 2012 US dollars). More checks followed in subsequent years, and Eleanor always donated them to worthy causes.58

  These two families were linked across the generations. They hosted one another for Christmas and Thanksgiving dinners, had watched each other’s children grow up, and reveled in the young people’s success. As a prank and proof of their families’ close ties, Henry Morgenthau III had shown up with a friend at the White House the past New Year’s Eve to prove to a friend he could get the president’s autograph. When Henry Morgenthau told Eleanor Roosevelt in May 1939 that he was thinking of resigning, that in fact Franklin might want him to go, he was talking of a possible schism between two houses that would have rocked both.

  “Told her how Franklin had been bullying me, brow-beating me and being thoroughly unpleasant,” he told his diary after their meeting on May 18. She made excuses for the president, saying he had not been feeling well lately and was taking it out on people he knew could take it. “I said I was beginning to think that the President was trying to get rid of me and as far as I was concerned I would be tickled to death to go home,” he dictated, adding that she understood how he felt.

  During their hour-long meeting, Morgenthau ended up reading her the tax statement, which she heartily endorsed. In fact, she agreed to “lend her name to it.” He departed, leaving the paper with her. As he left, she said, “I am sure, Henry, that the President is not trying to force you out.”59

  Morgenthau, of course, did not resign. He decided, as he had a year earlier, that his future was with Roosevelt and that he was determined to help the president defeat the Nazis. As Frank R. Kent wrote: “The general feeling is that his devotion is so doglike that it is not in him to break with the President, even over a matter in which principle is involved.”60 Arthur Krock later wrote that John Hanes was also considering resignation but was dissuaded by two people, one of them Morgenthau.61

  Morgenthau kept meeting with Doughton and Cooper and in late May announced that he and congressional leaders agreed on a tax program that would “definitely” contribute to recovery. Asked the reason for the progress, he replied: “The answer is that there is good will all around.”62 By early June, Kent was writing about Roosevelt’s “surrender” as the president reversed his decision and allowed tax reform to proceed. It simplified the tax system and even scrapped what was left of the excess-profits tax. It did not, however, lower tax rates significantly.63 The matter was settled by the time George VI and Queen Elizabeth landed in the United States in early June. It was the first time a reigning British monarch had set foot in America, and the British government hoped it would strengthen ties with the richest country in the world on the eve of war. Yet Great Britain worried about the traditional republican resentment of the Crown and also that Americans believed that the real queen was Wallis Simpson, the American divorcee who had caused the abdication of Edward VIII three years earlier. The trip proceeded flawlessly. Henry and Elinor Morgenthau attended a state dinner at the White House and sailed up the Potomac to Mount Vernon in a yacht with the royal couple. They also enjoyed a barbeque in Hyde Park, at which the king tried a hot dog and delighted his guest by asking for another.64 Morgenthau had a full-color film of the king and queen’s visit to Hyde Park made and even had Eastman Kodak make five duplicates, one of which he sent to the royal couple in London via Joseph Kennedy.65

  As the Treasury finalized the tax-revision plans, Morgenthau immediately set about rebuilding relations within the Roosevelt circle. On June 4, he called Harry Dexter White to his house and asked him to prepare a spending program featuring “self-liquidating projects,” which meant those that would finance themselves through user fees. They included housing programs, toll roads, bridges, tunnels, and the extension of foreign loans to increase trade—the sorts of projects Morgenthau had campaigned against through the spring when he was urging the country to move toward a balanced budget. “Mrs. Morgenthau later joined the discussion and expressed herself as being strongly in favor of the Secretary’s ideas,” wrote White, indicating Elinor was likely the prime motivator in this plan.66 The Treasury team went along with the $250 million program. Even Hanes accepted the secretary’s rationale that it was better to propose a modest program before a larger one was foisted on them.67 The conservative press, which had hailed Morgenthau during the tax-revision battle, mocked him for suddenly adopting a relief program. But this storm was tepid compared to that of May. It was now the summer of 1939, and the Morgenthaus were planning their traditional summer vacation in Europe, which would carry on into September.

  Henry Morgenthau was in Finland, the official segment of his Nordic sojourn, when the news came that rocked the world. He and his family had crossed the Atlantic aboard the great French liner Normandie, landing in London. They vacationed in Norway and Sweden before traveling to Helsinki to thank the Finns for being the only country to repay their World War I debts. During their stay in the country bordering the Soviet Union, Soviet foreign minister Vyacheslav Molotov and his German counterpart Joachim von Ribbentrop signed a nonaggression pact in Moscow. Keen Soviet watchers might have noticed that Molotov had replaced Maxim Litvinov in May, and now the reason was obvious: Stalin could not have sent a Jew to negotiate with the Nazis. Now that the threat of an attack from the East was stifled, Hitler signaled his intention to seize Poland.

  With the world in crisis, Roosevelt summoned his cabinet to Washington, and Hanes attended in lieu of Morgenthau. He even had a private lunch with the president on August 31 and had never seen FDR so worried about anything as he was about the situation in Europe. When the discussion turned to financing the war, FDR cautioned that he did not want to ask Congress to raise the $45 billion debt limit and tossed about various ways to avoid doing so.1 The next day, Hanes attended a somber cabinet meeting, at which they tried to digest the news that German tanks had rolled into Poland. “There is no use talking facts with you because you're as familiar with them as I am,” Roosevelt told his cabinet.2 He added he believed the State, Treasury, and War Departments were as prepared as they could be. Hanes had already outlined the steps the Treasury was taking to respond to the crisis and said publicly that the Treasury would not issue bonds or notes in September.3 “The President was obviously much impressed by Mr. Hanes’s outline and his manner of stating it,” said Arthur Krock, citing a cabinet member who witnessed the presentation.4 FDR told Morgenthau he was pleased with Hanes’s performance in the crisis, though he added that Hanes took too many notes at the meetings—a faux pas in the Roosevelt cabinet.

  Once the news of the Soviet-German pact broke, Morgenthau dashed to Bergen, Norway, where he and son Robert left the family and boarded the coast guard cutter George W. Campbell. The ship made twenty knots through choppy seas and sailed directly into a hurricane. It was thrown about so wildly that the coast guard aide assigned to the secretary broke his arm. Robert Morgenthau would later say his father was “utterly fearless” during the four-day crossing to St. John's, Newfoundland, where a coast guard flying boat was waiting to carry him to Salem, Massachusetts.5 Morgent
hau finally landed in Washington worn out but ready to work on September 4.

  The German attack on Poland was the most devastating display of military power the world had ever seen. The term blitzkrieg, or “lighting war,” immediately entered the English language to describe the Germans’ coordinated offensive of air bombardment, motorized units, and infantry. Britain and France declared war on Germany, but the immediate conflict was concentrated entirely in Poland. Shortly after the German invasion, the Soviet Union attacked Poland from the east, grabbing as much of the country as it could before it was consumed entirely by the Germans. Reports were surfacing of the atrocities by both the Germans and the Soviets in Poland, including the bombing of harmless villages and the murder of civilians. The bestiality of the Germans was beginning to harden the Roosevelt cabinet in its determination to oppose the Nazis. At an October 5 cabinet meeting, Attorney General Frank Murphy passed Morgenthau a little note saying: “For the first time in my life, at my age, I am hating. I hate the Nazis, I never hated anybody before in my life.”6

  Morgenthau immediately took charge and turned his attention to a dizzying number of problems. Within a day, he announced that he was bringing in three executives—Earle Bailie, Randolph Burgess, and Tom Smith—from Wall Street to serve as dollar-a-year advisers. The next day he forced out a few men on the customs side and appointed another New Yorker, Basil Harris, as his principal adviser on emergency shipping issues. Herbert Gaston was promoted to oversee all of the Treasury’s enforcement agencies—the Secret Service, the coast guard and the Bureau of Narcotics. Roosevelt, meanwhile, appointed Edward Stettinius, chairman of the J. P. Morgan–controlled United States Steel Corporation, to the head of the War Resources Board, which was to oversee industry through the coming war. He had opposed a Stettinius appointment months earlier, but something had to be done to overcome the feuding between Woodring and Johnson. The board now comprised all businessmen, including three affiliated with Morgan interests, and no labor representatives. Speculation grew that FDR was abandoning the New Deal in the interest of fighting the war. Morgenthau even broached the possibility of bringing in Nelson Rockefeller, the grandson of Standard Oil founder John. D. Rockefeller and a prominent Republican, to be assistant secretary in charge of the Procurement Division. “You don't want to get too many of those kinds of people in,” replied the president, saying it might work if it was balanced with the appointment of a liberal. “You know, there has even been some criticism of the people you brought in.”7 He added they had to be careful that J. P. Morgan and Company, which acted as agent for British and French purchases during World War I, did not end up controlling the war purchasing. At one point, the president had Sumner Welles call Morgenthau and tell him to advise the Finns that the best way to get a loan would be to avoid J. P. Morgan and use Dillon Reed, another Wall Street firm.8 In October, the president announced that the War Resources Board would file a single report and then disband. “We are not setting up any war boards or war machinery and, as far as I am concerned, I hope we never will,” Woodring told reporters.9