July 4, 1994, The American Almanac, Franklin Delano Roosevelt vs. the Banks: Morgan's Fascist Plot, and How It Was Defeated, Part II, by L. Wolfe,
July 11, 1994, The American Almanac, Franklin Delano Roosevelt vs. the Banks: Morgan's Fascist Plot, and How It Was Defeated, Part III, by L. Wolfe,
July 25, 1994, The American Almanac, Franklin Delano Roosevelt vs. the Banks: Morgan's Fascist Plot, and How It Was Defeated, Part IV, by L. Wolfe,
June 27, 1994, The American Almanac, Franklin Delano Roosevelt vs. the Banks: Morgan's Fascist Plot, and How It Was Defeated, Part I, by L. Wolfe,
The early summer of 1994 finds the American presidency under attack from British-directed forces on both sides of the Atlantic. The objective of the attack is not simply to remove the American President, Bill Clinton, from office, but to destroy the effective functioning of the institution of the presidency, the most powerful potential force for good in the world. At the same moment, we sit on the edge of the greatest financial collapse in history. We have been treated to a parade of bankers and financial speculators, such as George Soros, individuals who are operatives of these same London financial interests, appearing before Congressional committees to beg for expansion of their looting policies and privileges. In the deepening crisis ahead, the American presidency is the only institution powerful enough to carry out the policies that might reverse humanity's plunge into a barbaric New Dark Age that will slaughter billions of human beings as we enter the new millennium.
Those who doubt that this is true need only look back to the time some 60 years ago, when the forebears of those British-linked forces now attempting to destroy our nation sought to plunge the depression-wracked United States into chaos, and to impose a fascist bankers' dictatorship. The story of this plot, and how the institution of the presidency in the hands of Franklin Roosevelt defeated it--a story which was told in the daily Establishment press while it was unfolding--has today been wiped from our history. It is a story that must be told, for its lessons have great bearing on the events unfolding before us today.
It is the winter of 1932-33, the darkest days of the Great Depression. In Germany, the London and New York axis, the banking houses of the City and Wall Street, are about to put Nazi leader Adolf Hitler, the banker Hjalmar Schacht's protégé, into power and to set a certain course for a new world war, one that would destroy both Germany and Russia, they hoped, for all time. In Italy, the fascist Mussolini has been in power since 1921, placed in Rome by these same oligarchical interests.
In the United States, with unemployment rising and bread lines growing, with factories shut and banks collapsing at a record pace, the bankers' own candidate, the man who had helped deliberately destroy the U.S. economy on behalf of this cabal, Herbert Hoover, has been sent to a crushing defeat in the November presidential elections by Franklin Delano Roosevelt, the former governor of New York.
Roosevelt, the cousin of the Anglophile agent and arch-racist who helped set the stage for the World War I, the evil Teddy Roosevelt, is, like the Morgans, or the Warburgs, or the Rockefellers, a member of the patrician class. But because he was a patrician, Roosevelt knew one of the secrets of political life known only to handful of truly powerful elites: He knew that policy was not made or controlled by the power brokers in the political parties. Policy, in fact, was dictated by this Anglo-American oligarchy, an international elite of powerful families that ruled above kings and above elected governments.
Since the 1876 Species Resumption Act, U.S. economic and credit policy had essentially been dictated from London. Since 1913, the main vehicle for the implementation of that policy had been the Federal Reserve, a private bank, established by British policy interests. Overseeing its operations was a club of private bankers: the Warburgs, the Meyers of Lazard Freres, Otto Kahn of Kuhn Loeb, the Harrimans of Brown Brothers, Harriman and J.P. Morgan, Jr. of the House of Morgan.
In this "secret government" which defined the parameters and often the details of critical policies, the House of Morgan held the most important portfolio, as the most important agent of Anglo-Venetian interests in the United States. The Morgan partners held directorships in 167 industrial concerns, banks, railroads, and utilities, and they controlled, through their banking relationships, the most important media in the United States, including The New York Times. And most importantly, the Morgans, along with the other merchant banks, controlled the public debt of the United States, in concert with the Federal Reserve.
This cabal was confident that there would be no effective counter-reaction, no organized defense of the principles of the American republic: The United States was to emerge from the depression a British-controlled police state, to be effectively brought back into the British Empire.
Roosevelt Becomes a Problem
There were four months between the November election and Roosevelt's inauguration in March of 1933. London tried to find out whether Roosevelt would follow their script, as Hoover had done. Various bankers' emissaries were sent to talk to him, including Eugene Meyer, chief of the Federal Reserve. Roosevelt was cordial, but made no promises.
Meanwhile, word began to leak out that the President-elect was considering a bold plan of action against the economic crisis, including a massive public works program. That was not what London had in mind, but as long as it were financed through the normal means, through dollar-denominated securities, backed by gold, there was a limit to the credit that was available.
Then, as 1932 passed into 1933, some other features of Roosevelt's "thinking" were leaked. He was thinking of "doing something about gold," which was not yet elaborated. Early in January, Roosevelt allowed it to be leaked that he was thinking about having the Treasury take control of the Federal Reserve and operate it as a "national bank."
It was decided to deliver Roosevelt a message. It came in the form of a hail of bullets, fired at the President-elect as he concluded a short speech before a crowd of 10,000 at a Miami waterfront rally on Feb. 15. Five people on or near the bandstand were hit, although Roosevelt, miraculously, was not.
The man firing the shots, Giuseppe Zingara, a member of a Masonic lodge from New Jersey, was at first branded an "anarchist." An FBI investigation concluded that he had acted alone, as a lone assassin. When Chicago Mayor Anton Cermak, who was wounded in the gunfire, died three weeks after the attack, it fed press speculation that he, not Roosevelt, had been the target. The press soon began reporting that various mob sources claimed, including Frank Nitti, then-boss of the Chicago mob, that Cermak was on a hit list. The popular television series, "The Untouchables," recently presented the story of the attack as a mob hit on Cermak. Most U.S. history books do not talk of the assassination attempt, nor do most Americans know that it happened.
However, 1933 news accounts speak of the assassin's arm being deflected by a woman in the crowd. Her report was that the gun was aimed directly for Roosevelt, who was speaking from the seat of an open car. Had she not deflected his arm, Roosevelt would have been hit and likely killed.
It was reported at first that Zingara was a "brick mason;" still later, it was revealed that the would-be presidential assassin was a Freemason. The Scottish Rite of Freemasonry felt compelled to issue a pledge of loyalty to the new President and a condemnation of the assassination. Meanwhile, after Cermak's unexpected death in March, Zingara was swiftly sent to the electric chair and the story faded from the press.
Had the assassination been successful, the history of this century would have been dramatically different.
War With the "Money Changers"
With Hoover still in office and able to cover for their plans, the secret government initiated massive currency warfare against the U.S. with the aim of transferring as much of the U.S. gold reserves to the Bank of England and other allied central banks, including Schacht's Reichsbank, as possible. The dollar went into free fall, and huge amounts of gold were exported.
As this occurred, there developed an accelerating banking panic, with runs on deposits and demand for gold, in part manipulated by the New York bankers and the sympathetic press. In mid-February, the bankers demanded that Roosevelt issue a statement saying that the United States would under no circumstances depart from the gold standard. Roosevelt refused and the bankers fumed. It was now becoming obvious that Roosevelt was indeed going to do something about gold. Hoover was reported to have remarked, "My God! He is going off gold."
The New York bankers made new demands: Massive new credits to guarantee bank deposits to be handled through the Fed and huge infusions of monies from the Reconstruction Finance Corporation. This would have required major new government debt financing, from which the bankers would reap profit, while giving them the ability to restrict and direct the credit available to Roosevelt even before the new Administration took power. Roosevelt refused to do anything until he took office, and he repeated that he would not give any guarantees about the gold standard.
On Wednesday, March 1, 1933, fifteen states and the District of Columbia suspended or restricted banking operations. On that day alone, the Federal Reserve Bank of New York lost $36 million of its gold reserves. The London-led assault on the dollar continued. As more states closed their banks, the Fed reported in its March 2 report a loss of more than $226 million in gold.
Roosevelt was meanwhile planning radical action. He dusted off a statute enacted during the war, the Trading with the Enemy Act, and was prepared to use it to both close all banks, including the Federal Reserve, while blocking the export of U.S. gold reserves. Word leaked out and he received calls from Hoover, and then from Morgan partner Thomas Lamont, urging that Roosevelt, along with Hoover, back the bankers-dictated program. As they spoke, another more than $116 million in gold was readied for shipment to London from the New York Fed.
On March 4, with the U.S. economy and financial system in a state of free fall, Franklin Roosevelt was inaugurated as President of the United States. He delivered his famous speech telling the American people "we have nothing to fear but fear itself."
While most people remember these lines, few remember what came immediately after them. The President of United States launched into a blistering attack on the "money changers" who composed the secret government.
Denying that the depression and its continuation was a natural calamity, Roosevelt stated:
"Plenty is at our doorstep, but a generous use of it languishes in the very sight of supply. Primarily this is because the rulers of the exchange of mankind's goods have failed through their own stubborness and their own incompetence, have admitted their own failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.Roosevelt pledged to act to reverse the crisis and the policies that had caused it as swiftly as statutes could be invoked and needed legislation drafted.
"True, they have tried, but their efforts have been cast in a pattern of an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and where there is no vision, the people perish.
"The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
"Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase for evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow man.
"Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing...."
There was polite, public acknowledgement of the speech from the "money changers" on Wall Street. Some bankers, mostly in the commercial banks such Chase and National City, hoped that Roosevelt was simply making impolite statements for rhetorical effect, to appeal to the populist anti-Wall Street element in the population. Others among this ilk, knew different. In private, especially in the House of Morgan, and across the Atlantic in London, there was outrage. "Insolent bastard," Montagu Norman, the head of the Bank of England is said to have snarled.
On March 6, invoking the powers of the Trading with the Enemy Act, Roosevelt proclaimed a four-day bank holiday and placed an embargo on the withdrawal or transfer for export or domestic use of gold or silver. Violators were threatened with ten years' imprisonment and/or stiff fines. While reluctantly willing to support the bank holiday, Morgan and his ilk were furious about the gold embargo. They demanded that Roosevelt immediately repledge U.S. fealty to the gold standard. Roosevelt told them directly and had his spokesman tell the media: Of course, we are still on the gold standard, only you can't convert anything to gold!
There were some hasty discussions between Wall Street and their key man at the Fed, Eugene Meyer. He told Roosevelt and his Treasury Secretary William Woodin, himself close friends with Morgan partners, that the Fed was still of the opinion that the President had no power to close it down or to tell it what to do. In fact, even he, as a Federal Reserve governor, had no power to tell Fed branches such as in New York what to do. Roosevelt's direct reply is unrecorded, but it is said that he told Meyer that the Fed could stay open if it chose, but that he would have the governors arrested under the terms of the Trading with the Enemy Act. There was some back and forth between Meyer, New York, and Chicago. Meyer returned to the White House to tell Roosevelt that the Fed would be closed, by its own decision.
At this point, Roosevelt appeared on the edge of overturning entirely the secret government's control over the nation's banking system and credit. A group of advisers urged him to effectively abolish the Federal Reserve, nationalizing it and throwing out the private bankers. He could have taken back the power from the private bankers to print money in their Federal Reserve, placing it back in the hands of the U.S. Treasury, as the Constitution called for.
However, other advisers called for caution. They claimed that a total war against the bankers would leave the country in a shambles. These snakes within his administration, concentrated in the Treasury Department, called for a truce with Wall Street.
Behind this fight was the question of the control of public credit. The government, under the Constitution, has the power to create credit, and to issue that created credit through the banking system, to finance projects as it sees fit. This is a cornerstone of the American System of economics, established by our first Treasury Secretary Alexander Hamilton. Those credits can be converted to currency, through the use of the "discount window" of a national bank, of the type Hamilton created.
The British, in their subversion of the American System, sought to eliminate the power of government to create and direct credit, substituting instead the creation of indebtedness, through government borrowing, from the banking system, in the open market. In so doing, the bankers added usurious interest costs to the borrowing, further limiting the amounts that might be raised in this way. Acting through their private banker cabal, the British had reified this "open market" system of selling government securities, at great profit, through their creation of the private Federal Reserve Bank. By controlling the Fed, as a private bank, the British and their agents, like Morgan, were able to manipulate the creation of credit in the banking system by setting the effective rates between banks and for the price of government debt.
To the extent that Roosevelt and his closest and most trusted advisers understood this, they saw only that the power over U.S. credit was in the hands of a cabal of bankers headed by Morgan. And though they threatened several times to nationalize the Fed, this was mostly as a threat to pry loose credit. If they refused to "loosen up," Roosevelt and his advisers threatened to take more drastic actions, including the issuing of direct government credits; but they backed off, partly under pressure of agents but also because of their own imperfect understanding of the basics of American System economics.
In this first confrontation, Roosevelt backed off a direct showdown with Wall Street, heeding the advice of Treasury Secretary Woodin. He chose to fight a more limited war, to restore confidence in a collapsed banking system, and to weaken the hold of Morgan on the nation's credit. Thus, he made a fatal mistake, from whose results we still suffer today.
The First Skirmishes
Roosevelt's plan for reopening the banks, incorporated into an emergency banking bill to be sent to Congress, called for the creation of a new currency--still issued through the Federal Reserve--but not backed by gold. The Fed would then advance its member banks up to 100 percent of the value of all government bonds and 90 percent of all other rediscounted securities, including financial paper and mortgages not previously available for Fed rediscounting. Banks were to reopen under license from the Treasury; banks in good shape, according to federal examiners, would reopen at once; any bank less than hopelessly insolvent, would be placed under a conservatorship, and operated under restrictions until it could be put in shape; hopelessly insolvent banks were to be liquidated and kept shut.
On March 8, the measure passed both Houses of Congress.
That same night, Roosevelt introduced and demanded passage of legislation that would cut salaries of government employees by $100 million and revise the entire federal and veterans pension system to save $400 million.
In a clever maneuver to help pass this latter package, which was called the "Economy Reform Package," Roosevelt decided that it was time to modify the 1920 Volstead Act which had created the Prohibition Amendment. He called for the effective end of prohibition by allowing the sale of "3.2" beer. The House voted for it almost immediately; the Senate passed the economy package the next day and voted the day after for 3.2 beer, breaking the back of the so-called "dry lobby" that had helped keep the nation in Prohibition for 13 years, during the which the "secret government" sanctioned the creation of the vast armies of criminal syndicates.
Morgan and his fellow bankers stayed on the sidelines during the debate on the economy reform package. To salvage what they could, they used as their point person Sen. Carter Glass of Virginia, the Scottish Rite Freemason who had been the putative author of the Warburg-drafted Federal Reserve Act. Glass tried without success to tack on amendments strengthening the power of the Fed and forcing more banks to join. In the end, he pushed for the administration's banking bill, thinking that it would help in the shutting of state chartered banks, which he attacked as being run "by little corner grocerymen."
After the banks began reopening, Roosevelt realized that Glass and the New York banks were indeed going to use the banking bill to shut state-chartered banks, giving the New York banks greater control over the system. He ordered his troops in Congress to push through a bill that relaxed standards being applied to state chartered banks; it was passed through both houses and signed on March 13.
Some within the Morgan cabal still blamed Roosevelt's actions on his advisers, the so-called "brain trust" of university professors from Columbia and Cornell. But ultimately it was Roosevelt who made the policy decisions.
Said J.P. Morgan, Jr. to an associate, "I believe we have underestimated this man."
The Larger Battle
Roosevelt now prepared for the next phase of battle, one that would go directly after the bankers' cabal and Morgan.
Earlier, Roosevelt had seen to it that allies in the Senate, working through its Banking Committee, had launched a highly publicized investigation of the practices and power of the New York commercial banks. In February, he used it to force the resignation of National City Bank's Charles Mitchell and the president of the bank's holding company, Hugh Baker. These two were leading allies of Morgan among commercial bankers. Mitchell's successor, James Perkins, immediately moved to separate the commercial deposit bank operations from its investment banking, to emphasize the banks' return to "commercial banking."
The Rockefellers' Chase National bank was next for the Senate probers. Its new head, Rockefeller brother-in-law, Winthrop Aldrich, announced the day following Perkins's action that Chase too was going to divorce its securities affiliate. While arguing for an increase in the power of the Fed, and calling for all commercial banks to be members, he demanded a legal divorce of all commercial and investment banking.
The bankers lobbied that the hearings be called off. But Roosevelt personally demanded that they continue. He asked his troops to turn their fire directly onto Morgan and his allies in Kuhn, Loeb and Dillon, Read.
Roosevelt had approved the committee's hiring as its special counsel Ferdinand Pecora, a former district attorney from New York with a reputation for fearlessness. Born in Sicily, Pecora grew up as a devout Catholic, who hated corruption of all kinds and stated that it was his belief that usury was a sin. While an assistant district attorney, Pecora had earned the wrath of both Tammany Hall and Wall Street for his probes of bank corruption and rackets, which resulted in his being passed over for promotion. In 1930, he was told that his services were no longer needed, and he went into private practice.
Pecora planned to place the most powerful people in Wall Street in "the dock," and try them in a way that would have been impossible in court, given their ability to "purchase" justice.
"The presentation of this case," he told The New York Times May 21, as the Morgan hearings got underway, "may involve a great many details, but no case is so complicated that there are more than two or three high spots. By emphasizing these in the presentation and subordinating the details, a true picture of the situation is given. This means that the counsel must proceed from conclusions which he has drawn from the investigation, but it is the duty of the jury to scrutinize those conclusions and weigh their adequacy. In this investigation, my jury is the senatorial committee and the final jury on the subject is public opinion." Pecora said he was not "hunting heads," but "seeking the truth."
In the opening hearings on the commercial banks, Pecora had established that some of the most powerful bank officers, such as Mitchell of National City, and Albert Wiggin of Chase, had lied to their shareholders, manipulated stocks for their own benefits, and had made and taken profits beyond anything reasonable, without the least bit of concern for the national interest. Pecora had refused to allow them to be vague or evasive, and with his questioning, often made them look ridiculous. Public sentiment, aroused by Roosevelt's speech on "the money changers" who had destroyed the nation for their profit, now was further aroused with concrete evidence.
In early March, Pecora fired off a series of detailed and embarrassing questions about the operations of the House of Morgan and its relationship to other banks, corporations and clients. Morgan counsel, former Democratic Party 1924 presidential candidate and former ambassador to Great Britain, John W. Davis, declared the questions to be outrageous. But Morgan was forced ultimately to answer them, and then to submit to hearings in May and June that shook the foundations of the "secret government."
Pecora and his staff spent most of the months of February, March and April 1933 in New York, working from early morning until 6 p.m. in the offices of J.P. Morgan and Company, pouring over its records of financial dealings since the war. He told no one, with the possible exception of the White House, what he was looking for and what tack he would take, fearing that that information would be leaked back to Morgan through their agents on the Banking Committee like Glass.
On March 29, President Roosevelt sent to Congress his bill for the regulation of the sale of investment securities. In his message to Congress, Roosevelt continued his attack on the corrupt financial practices of the private banking houses and securities brokerages, as well as the commercial banks, which dealt in securities. The bill, he said, "adds to the ancient rule of caveat emptor [let the buyer beware], the further doctrine, 'Let the seller also beware.' It puts the burden of telling the whole truth on the seller."
Wall Street led an energetic campaign in Congress to defeat this legislation, and what was finally enacted was a diluted version of the British Companies Act, drafted by British operative and later Supreme Court Justice Felix Frankfurter, that hardly threatened the private bankers.
On April 10, Roosevelt submitted the first of his massive public works programs: The legislation to create the Tennessee Valley Authority. It broke the 13-year deadlock over the Muscle Shoals development on the Tennessee River, but went much farther than any proposal previously submitted to Congress.
The utilities in most of the United States were controlled by Morgan-related interests; through the Depression they had kept rates high, to give returns to their investors and had thus, de facto, limited the supply of power available to the whole economy. No major new power facilities had been built since World War I.
Now Roosevelt proposed the massive distribution of cheap electric power, to be administered by the TVA. He further proposed that the TVA plan and direct the development of more than 640,000 square miles, providing for a complete system of flood control, reclamation of river lands and creation of decentralized agro-industrial communities, as well as the production of cheap fertilizer from nitrate plants to be powered by cheap TVA power. In his speech introducing the bill, he said that he planned to recommend similar development plans for the Columbia and Missouri River valleys.
Roosevelt's adversaries in the financial community viewed the President's huge infrastructural development projects as a life-and-death challenge to their own selfish interests.
The British Counterattack
Acting through Morgan interests in Europe and the private U.S. banks, including Brown Brothers, Harriman, the Bank of England launched an all-out assault on the dollar. Since the break with gold now appeared inevitable, the bankers' plan was to create the maximum amount of chaos and to organize a counterreaction that could ultimately reverse the policy, and hand Roosevelt a defeat.
On April 11, the first waves of the attack broke against the dollar. They grew in intensity over the next three days. The New York bankers asked through the Fed for a lifting of the gold embargo, to allow them to ship $10 million in gold to Holland and England. The New York agents of the British upped the ante: They asked for an additional $15 million in gold-shipment licenses. Roosevelt ordered part of the request granted. But the requests kept escalating.
At first, Roosevelt, sensing a British and Morgan operation, decided to defend the dollar. The White House received reports that speculators operating in Amsterdam were prepared to dump $125 million to depress the dollar. In the same six days, more than $100 million in U.S. gold supplies was sent abroad.
Roosevelt was forced to relent and accelerate his timetable: On April 19, he reinstituted the gold embargo, renouncing the gold standard, as well as accepting an amendment to the farm bill by Sen. Thomas of Oklahoma that gave the President certain powers to inflate the currency.
The domestic reaction was precisely what the Anglo-Venetian crowd had hoped for: Hysteria from the partisans of hard-money policies, backed by a mobilization of the "sound money" lobby against the administration. To soothe those who would listen, Roosevelt had pronouncements made that the gold standard had been renounced for "domestic" reasons. But for the most part, this fell on deaf ears. There was also the expected reaction from within the administration itself, with members of Roosevelt's cabinet arguing to keep the U.S. bound to gold and to the "international system." Roosevelt was polite, but he would not be swayed.
When it became obvious what the decision would be, Budget Director Louis Douglas, another Morgan mole and a leading spokesman for "sound money" who would later be fired by Roosevelt, declared: "This will be the end of western civilization."
There had been no statement made about repayment of existing gold-backed government securities and notes. To make that announcement and formulate his actual policy on gold, Roosevelt was to await the start of the Morgan hearings by the subcommittee on banking and currency of the Senate Banking Committee.
Morgan Under Oath
The hearings opened on May 24, with the chambers packed. J.P. Morgan, Jr. was the first witness. In his opening statement, printed dutifully in the next day's editions of The New York Times, Morgan heaped praise on himself and on the "honorable tradition" of private banking in the United States, which he claimed performed an essential function.
As was to become clear in the Senate testimony of the days following, what Morgan meant by "private banking" were the unregulated financial manipulations of an oligarchical club, in which the rich and powerful were allowed to make enormous profits, and through which the House of Morgan was able to buy and sell not just securities, but to gain control of most of U.S. industry, was able to buy politicians and diplomats, and effectively controlled the most powerful banks in the U.S..
Wrote Pecora five years later in his book, Wall Street Under Oath, "Undoubtedly, this small group of highly placed financiers, controlling the very springs of economic activity, holds more real power than any similar group in the United States."
The meek response of the Morgan partners to these charges was that, while it might appear that they had control of many companies and banks, they were merely performing a "service" and exercised no control other than the "power of argument and persuasion."
Thomas Lamont, the partner who effectively managed the firm, told the committee that the common belief in the great power of the House of Morgan was "a very strong popular delusion." All the firm did was offer advice, which its clients could take or leave. "We are credited with having what is known as power or influence; and we admit that we hope that our counsels are of some avail in the certain directions in sound finance."
On the very first day, it was revealed that J.P. Morgan, arguably the most powerful banker in the nation, and all the 20 partners in his Morgan and Company and its Philadelphia operation, Drexel and Co., had paid no income taxes in 1931 and 1932 and had paid only small amounts in previous years. Morgan defended himself, claiming that he had merely taken advantage of tax laws: "If the laws are faulty, it is not my problem," he told the committee. It was also shown that the Internal Revenue Service (IRS) had never examined Morgan transactions--anything that was prepared by the bank was simply passed on by the examiners without even a cursory glance!
At one point, Morgan expounded on how the Federal Reserve was effectively backed up by the U.S. government, even though it was a private bank. His boy, Carter Glass, was forced to rush to clarify this point, stating that even if Mr. Morgan perceived that the Federal Reserve was backed by the government and could draw upon its resources, it was indeed a private bank and the government had only the slimmest of supervisory powers over it. Morgan acknowledged his "error and misstatement."
Pecora fought to have various items entered on the public record: lists of companies in which Morgan partners held directorships, lists of banks on which they were directors, list of banks which held their deposits, and the firm's balance sheets for the previous three years.
Most shocking were the lists of "preferred clients" and friends of the bank, who had been let in at a below-market price on a major 1929 speculative stock offering. The list revealed two tiers of Morgan "cronies." The first were true "friends of the firm" who were Morgan allies and operatives, and the second was a "fishing list," by which they sought prospective new operatives, with whom they would deepen their relations. It showed that Morgan had effectively controlled those who made U.S. financial policy for more than three decades, as well as the leadership of both political parties, and much of the federal bench!
Pecora showed, and the partners confirmed, that Morgan handled one of the most confidential and critical aspects of British policy--the Bank of England's pound stabilization fund operations. This was handled, on this side of the Atlantic, by J.P. Morgan, Jr., personally, and his top henchman, Thomas Lamont. In London, the office of Morgan, Grenfell, from which two partners were members of the House of Lords, coordinated continental operations. The firm had also established $200 million in revolving credit for the British government, which was used to buy British securities and discount them in dollars at 4.5 percent.
A similar fund was set up to market $24 million in securities for Mussolini's fascist Italy (and an additional 5 million pounds sterling in securities), administered by Morgan Grenfell, and a syndicate of private bankers including Hambros and N.M Rothschild and Sons. Additional securities and currency accounts were set up with Morgan by the Fed, the Bank of England and Schacht's Reichsbank.
Morgan was thus shown to be the key instrument for carrying out international financial warfare and credit policy for British interests.
It was brought up that such operations might in fact be against the interests of the United States and some of the "clients" Morgan represented in the U.S.A. Morgan categorically denied this. Besides, the Morgan partners testified, this is just a matter of doing business, even when we represent foreign governments. When Pecora pointed out that members of the Morgan firm in London were members of the House of Lords and were even officials of the British government, Morgan and his partners blustered that there was a "wall" between business and politics. When Pecora pursued the issue, Morgan simply stated that there could be no conflict in policy between U.S. and British interests as such, and if there was such an "absurd" eventuality, the House of Morgan would behave as "reliable bankers!"
The most pointed exchanges occurred when Pecora zeroed in on the fact that Morgan, which took deposits, did not have to submit to any of the regulations or audits of a regular commerical bank. At first, Morgan hid behind the limp argument that the bank was "private," that it could only accept from someone recommended and it did not solicit business. Then, he brusquely attacked all bank regulation, stating that it was "useless," that it hadn't kept banks from failing, and that he didn't see why he should have to put up with it. Morgan will never reveal its relations with its "clients," he fumed. "It is our business, and our business alone, and none of yours."
In the several days of hearings, there were repeated exchanges between Pecora and Morgan allies on the committee, trying to blunt the damaging attack of the former prosecutor. This group, led by the Tory Glass, were mostly "Dixiecrats" and "Southern Gentlemen" who rose to defend the honor of "Mr. Morgan" and to charge that he was being badgered by Pecora, whom The New York Times repeatedly referred to as a "swarthy," "sweating" man attacking the "elegant" and "composed" Morgan partners.
But on more than one occasion, even The Times was forced to admit that Morgan was feeling the heat and sweating under the glare of public scrutiny.
Glass, showing the fury that Morgan couldn't or didn't dare show, railed at Pecora on May 26, demanding to know what the purpose of his interrogations of these "esteemed" men and was demanding to know why the committee had not been briefed in advance on his line of questioning, presumably so that he, Glass, and his allies, could have put a stop to it before it began.
Pecora issued a spirited counterattack, stating that he was following the Senate resolution which gave powers to investigate securities and banking operations, for the purpose of ultimately allowing the Senate to make proposals as to what to do about them. "And I want to add, I did not seek this assignment as counsel to this committee; I appreciated the honor and still appreciate the honor, the dignity and opportunity for service in having been asked to serve as counsel to this committee.
"I am happy to render whatever service I modestly could as counsel to the committee; and I want to assure Sen. Glass that the compensation of $255 a month which I am receiving for these services certainly is no incentive to me to render these services or to continue to render them," Pecora told the senators.
The transcript then reports that, in response to this statement, there was "Applause in the room on the part of the spectators, loud and long continued."
Effectively defeated, but still furious, Glass shot back: "Oh yes, that is what it is all about. What we are having is a circus and all that is lacking is the peanuts and colored lemonade."
Morgan, in one of the worst public relations gaffes on record, decided to take Glass's circus image to heart. He brought a female midget to the hearings and had her sit on the lap of J.P. Morgan, Jr., for a photo that appeared in papers around the world. The move got no sympathy, and spurred charges that now Morgan was manipulating even poor unfortunate midgets!
Throughout the country, even the Morgan-controlled press was forced to print the daily dispatches from the hearings. Given what was being said, given Morgan's attitude, it was impossible to edit them in such a way that could place Morgan in a favorable light. Meanwhile, there were calls for resignations of public figures who had been shown to be on Morgan's lists for "insider" stock offerings, including Treasury Secretary Woodin.
The New York Times meekly editorialized that there was nothing sensational in what was being revealed, that it was all "old news." It even tried to praise Morgan for pointing up inadequacies in income tax law!
"The power of J.P. Morgan was not 'a very strong popular delusion,' as Mr. Lamont would have it, but a stark fact. It was a great stream that was fed by many sources: by its deposits, by its loans, by its promotions, by its directorships, by its pre-eminent position as investment bankers, by its control of holding companies which, in turn, controlled scores of subsidiaries, and by its silken bonds of gratitude in which it skillfully enmeshed the chosen ranks of the `preferred lists.' It reached into every corner of the nation and penetrated into public, as well as business affairs. The problems raised by such an institution go far beyond banking regulation in the narrow sense. It might be a formidable rival to the government itself."To be continued.
July 4, 1994, The American Almanac, Franklin Delano Roosevelt vs. the Banks: Morgan's Fascist Plot, and How It Was Defeated, Part II, by L. Wolfe,
Part 1 of this article was printed in American Almanac, Vol. 8, No. 23, of June 27, 1994.Senate Banking Committee hearings investigating the New York commercial banks, convened by Roosevelt allies in the Senate, continued through the second week in June 1933.
After that, committee special counsel Ferdinand Pecora turned his guns on Kuhn Loeb and its flamboyant head, Otto Kahn. The affable Kahn, whom Pecora described as far more slippery and congenial than Morgan, was instructed to relax the stonewall that the Morgan partners had put up in the face of Pecora's attack. While he refused to give in significantly on any proposed regulation of the private bankers, Kahn, unlike Morgan and his partners, admitted to serious mistakes in the handling of the speculation of the 1920s. He spoke of a frenzy that had gripped even the staid banking community, claiming that partner and Fed-creator Felix Warburg had tried to warn people of their errors, "but it was too late." He even offered some kind words for the New Deal, and finally conceded prophetically, that in order to protect private banking itself, there might have to be some regulation of the securities and other sales, "even if it hurts my own pocketbook."
The Dillon Read partners were similarly congenial, as Pecora brought out more evidence of the private bankers' manipulation of the financial markets and their highly irregular practices. The hearings were suspended until late fall, when they resumed to examine certain specific speculative swindles.
Roosevelt's Legislative Agenda
The hearings had already achieved Roosevelt's tactical purpose. This becomes obvious when one grids the hearings with other events.
On May 25, the lead headlines of The New York Times blared that "Morgan Paid No Income Tax in 1931 and 1932; Neither Did His Partners." Other front-page items included the announcement of preparation for a congressional vote on the administration's $3.3 billion public works bill, the largest ever proposed, as well as the announcement by Treasury that it was beginning a major expansion of credit, the first of an expected $4 billion.
On May 26, The Times featured front-page stories with headlines such as "Morgan's Foreign Financing Detailed" and revelations about "insider" private lists for stock offerings and the public officials who were on them. Another story reported on the progress in Congress of the Glass-Steagall banking bill.
Glass's bill, which had passed the Senate the day before, was originally drafted primarily to enhance the powers of the Federal Reserve system, while containing a clause that would have restated the Fed's independence from the Treasury Department and its existence as a private banking operation. Roosevelt chose to use the Morgan agent Glass's own bill as a vehicle for his major legislative attack on the Morgans.
The President asked House banking Chairman Rep. Steagall to draft a parallel House bill that would force a divorce between deposit banks and their securities operations, while doing what he could to water down the efforts of Glass to increase the power of the Fed. The major commercial banks had already been forced to accept this unpalatable concept. They were hoping that they might be thrown the crumb of loosened restrictions on interstate banking operations. But, under orders from Roosevelt, Steagall made sure that the bill would contain no provisions that would allow for essentially unregulated interstate banking operations, in violation of state charters.
In order to try to gain more widespread support for its passage, Roosevelt let it be known that he would support a federal deposit insurance program, provided that it would not insure very large deposits, or be used to bail out bankers' profit sheets, and provided that state banks would have easy access to the program, without being forced to meet criteria established by the Federal Reserve. Roosevelt was extremely wary of the concept of deposit insurance, because it could become, as it has in the current depression, a means to bail out the banks in a crisis, while not forcing them to make sufficient contributions to the system to cover a real emergency. Roosevelt was not happy with the proposal that emerged, but he saw it as necessary to get the separation of deposit banking from securities operations.
It was impossible for Morgan and his Wall Street allies, given the publicity around the hearing, to mount an effective effort to block the bill, which was passed later in June, and signed by the President. While expressing his "unhappiness" about some of its provisions, Roosevelt called the bill the most significant piece of banking legislation in 20 years.
The bill as passed gave the Morgans and the other private banks, as well as any commercial banks who had securities operations, one year to decide whether they would remain deposit banks, i.e., banks which took deposits, or whether they would sell and market securities. Morgan chose to remain a deposit bank.
On May 26, as Pecora clashed with Virginia Senator Carter Glass to the applause of the gallery, Roosevelt submitted legislation repealing the gold clause, and permitting payment of all debt in legal tender. All new bonds would have no gold clause and would bar repayment in gold for any currency or bonds that previously contained the gold clause. This last clause caused particular ire for the private bankers, who had been hoarding gold-backed securities with the idea of redeeming them for their clients, and thereby further looting the nation's gold supply.
The same day, the administration's so-called Industry Bill, authorizing a $3.3 billion public works program, passed Congress. The bill also tightened up the tax code to make manipulations of the type Morgan bragged about as being "legal" more difficult.
The New York Times reported on May 27, 1933 that Roosevelt was about to ask for "wide power" to deal with tariffs. The Times had reported previously that such powers were primarily to lower tariff barriers, but the administration now said, in a blow to the British "free trade" crowd, that they planned to use, where necessary, the broad powers requested also to raise tariffs to protect recovering American industry, and to boost investment in America's industrial potential.
By the next day, the gold bill had been pushed through both congressional committees, over the strenuous objections of Morgan flunky Glass.
The Fascist Plot Develops
Some time between April and June of 1933, the Morgan interests decided to give their backing to a plan for a major destabilization of the United States government. The intended goal was to create a situation which would overturn what some people were calling "the Roosevelt Revolution." The alternative? One of the options was the imposition of an Americanized form of fascist state, imposed by the power of armed men, acting with the financing and direction of the House of Morgan.
The plot involved using an asset that had already been created for such a purpose--the networks of the American Legion.
The legion today is thought to be a rather docile association of veterans, with a "right wing" slant on things. It was founded in 1919 with money from Morgan and other New York bankers and their allies as a union-busting organization of thugs for hire. Its leadership, appropriately called the "Royal Family," was culled from bankers, stockbrokers, and the like.
Many disgruntled veterans resented their brothers being used as cannon fodder for policies that they neither supported, nor even understood. The disgust led to the formation of a rival organization, the Veterans of Foreign Wars (VFW), which, as the depression deepened, lobbied for the immediate cash payment of promised veterans' bonuses.
In the early summer of 1933, as the plans for a fascist plot developed, its organizers hoped to draw upon both the Legion and the VFW to a form of people's militia, modeled on Mussolini's fascisti, using the veterans' anger over Roosevelt's reduction and cancellation of bonus payments.
However, in 1934, the man whom these fascists wished to lead their army, Maj. Gen. Smedley Darlington Butler, the most honored and decorated soldier in the land, blew the whistle on the whole rotten affair. In spectacular revelations to the House Un-American Activities Committee in November and December, Butler reviewed his first-hand knowledge of the the plot, identifying the House of Morgan and its operatives as playing a central role.
Smedley Butler appeared to be an unlikely candidate for the fascist coup plotters. Twice decorated with the Congressional Medal of Honor, he had served with distinction in every American military action of the twentieth century. A Quaker from a prominent Pennsylvania family, he thought of himself as a patriot who would never betray the values embodied in the Constitution. He had been both the most distinguished serving officer in the nation, and also its most outspoken. He had even served for two years on special assignment as police commissioner of Philadelphia in 1920s, where he fought the rackets while respecting constitutionally guaranteed rights, only to be hamstrung by partisan politics.
Butler, as a ranking Marine officer, had been placed in charge of the deployments of Marines on behalf of American business and banking interests in foreign lands. For a long time, he held his tongue, loyally carrying out orders, which he had personally questioned. But, following a stint in China in the late 1920s during which he perceived his orders were to protect Standard Oil's interests, even at the expense of American citizens, he began to speak out.
In December 1929, speaking to veterans in Pittsburgh, he stated that in his deployment in 1912 in Nicaragua, he had helped rig elections to back the candidate desired by the banking firm of Brown Brothers. He was immediately called on the carpet by Navy Secretary Adams, a man whose name was later to appear on the Morgan preferred list. But the local press, and then some national press, covered the remarks and they were later favorably reported by various members of Congress. Two days after his attack, the Hoover administration was forced to beat a hasty retreat from its public support of "gunboat diplomacy," and it repudiated the Teddy Roosevelt corollary to the Monroe Doctrine, stating that it would not intervene "by right" into the internal affairs of an Ibero-American nation.
Butler, however, was passed over for commandant of the Marine Corps, an appointment which, considering his rank and his service credentials, should have been his.
Butler Is Court Martialed
In January 1931, while in uniform at what was supposed to be an off-the-record private meeting, Butler delivered a stinging attack on Mussolini, recounting a story told to him about how Mussolini had been riding in his limousine and had run over a little child. Butler's friend, who was in the car with Mussolini, screamed. "Mussolini said that you shouldn't do that, that it was only one life and the affairs of state could not be stopped for one life," Butler told his shocked audience. "How can you talk disarmament with a man like that?"
An Italian diplomat, present at the meeting, sent a wire to Rome, and the Italian government filed a protest with the State Department. The pro-Mussolini press castigated Butler for insulting the head of a "friendly power." The secretary of state, Henry Simpson, cabled a personal apology, on behalf of Herbert Hoover, to Il Duce.
On Jan. 29, Butler, the commandant of the Quantico Marine base at the time, was placed under arrest and told that he was to be court-martialed by direct order of President Hoover, with the full approval of the secretary of the Navy.
The plans for the court-martial provoked a tremendous outpouring of support for Butler. The anti-fascist local press leveled charges against the Hoover administration that it was knuckling under to the "thug" Mussolini and sacrificing America's most distinguished military figure. Franklin Roosevelt, then the governor of New York, and a friend of Butler's dating from his days as secretary of the Navy, worked to help the general and spoke out against his court martial.
Hoover and Adams were forced to back down. By Feb. 9, the court-martial was cancelled, and Butler was given only a mild reprimand. He refused, however, to retract his statement, saying only that he had been told in advance of the meeting that what he said would be confined to the four walls of the room.
Bulter's attack on Il Duce had angered the Morgan interests, who had played a major role in financing Mussolini's fascists. According to testimony in congressional hearings, the House of Morgan had syndicated a $100 million loan to Mussolini's government in 1925, and had made subsequent loans to that government, as well as a $30 million loan to the government of the city of Rome. Dillon Read, which had participated in the Morgan loan, also arranged a loan of $30 million for the city of Milan.
Through the mid-1930s, Morgan partners, including Thomas Lamont, continued to praise the fascist experiment in Italy.
It was becoming increasingly obvious to Butler and many others that the American Legion was a stooge of these fascist bankers. As early as 1923, the legion's Commander in Chief Alvin Owsley, had openly embraced Mussolini, and endorsed fascism as a viable policy for the United States. Having done that, he announced that the legion was, if necessary, prepared to kick out the elected government of the United States and back anyone who would follow a policy of "Americanism."
"If ever needed," he stated, "the American Legion stands ready to protect our country's institutions and ideals as the Fascisti dealt with the destructionists who menaced Italy."
Asked if this meant taking over the government, he stated: "Exactly that. The American Legion is fighting every element that threatens our democratic government--soviets, anarchists, I.W.W., revolutionary socialists and every other red.... Do not forget that the Fascisti are to Italy what the American Legion is to the United States."
In late March 1931, National Commander Ralph T. O'Neill presented Italian Ambassador de Martino, the same person who had made the formal demand for satisfaction over Butler's remarks, with a copy of a resolution passed by the American Legion's National Executive Committee praising Mussolini as a great leader. Meanwhile, the Legion's leadership, heavily intermeshed with the Freemasonic movement, propagandized against the "non-Aryan" pollution of the American stock, repeating the racialist garbage of the eugenics movement. They argued for the end of immigration for all but the Anglo-Saxon races, claiming that the nation must protect itself against the threat of "communist" and "anarchist" infiltrators, and all other enemies of "Americanism."
Throughout the 1920s and early 1930s, the legion was used as a recruiting base for the rebirth of the Ku Klux Klan, with many of the southern legion branches run by and operating as Klan cells.
The so-called communist menace used to help organize a fascist counter-reaction was a bogeyman. The Communist Party, U.S.A. and its splinter groups, were effectively run by police agents, and other stooges, and were even funded by the bankers themselves, including Morgan. Many well-meaning people, upset with the effects of Anglo-American policy, wandered into these circles, only to have their actions rendered impotent by the overall control of these movements and their ideology.
Thus, both the "left," and the fascist and neo-fascist "right" were effectively British policy assets, to be used for whatever purposes the times required.
Butler, still the highest-ranking officer in the Marines, refused to retire, preferring to serve one more year. In August, he chose an address made before an American Legion convention in Connecticut to deliver perhaps the most remarkable speech ever given by a serving officer about the misuse of military power. "I have spent 33 years ... being a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer for capitalism," Butler said.
"I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912. I helped make Mexico and especially Tampico safe for American oil interests in 1916. I helped make Haiti and Cuba a decent place for the National City (Bank) boys to collect revenue in. I helped rape half a dozen Central American republics for the benefit of Wall Street.... In China, I helped see to it that Standard Oil went its way unmolested.... I had ... a swell racket. I was rewarded with honors, medals, and promotions. I might have given Al Capone a few hints. The best he could do was operate a racket in three cities. The Marines operated on three continents...."To the dismay of the bankers who directed the legion, Butler's remarks were greeted with riotous applause. In Washington, Hoover refused to answer reporters' questions about the general's statements. The major press blacked out most of what Butler said, but the word leaked out in the regional press, and was spread through word of mouth.
Navy Secretary Adams demanded that someone silence Butler, but no one dared to say anything, especially after the Mussolini flap. Butler continued to hammer away on the theme that the American military was being deployed to collect bankers' debts and secure looting rights in foreign countries.
When Butler finally retired, he was no longer constrained in comments by military protocol. He now traveled the country, addressing anyone who would listen, attacking the bankers who controlled the deployment of the military.
On Dec. 5, 1931, an article under his byline appeared in Liberty Magazine, titled "To Hell with the Admirals! Why I Retired at 50." In it, Butler charged the leadership of the Navy with complicity in policies that now revolted him and in working to try to prevent his promotion and ulitmately, to silence him. He attacked a number of Central American leaders as Wall Street stooges, naming again Brown Brothers and Morgan. In Honduras, the government-controlled press showered him with epithets and demanded that he be silenced. In the U.S.A., the Navy had a plaque that had been erected in his honor removed from the Navy Building.
In the spring of 1932, the bankers moved preemptively to prevent Butler from becoming a political force. Gifford Pinchot, the governor of Pennsylvania and a member of a banking family, lured Butler into seeking the GOP nomination for U.S. Senate against James Davis, a Morgan private-list member, who was Hoover's secretary of labor. Butler stumped the state, and held true to his promise to campaign in GOP wards for two issues which the party did not support--an end to Prohibition and the passage of the soliders' bonus bill that would pay their bonuses due in 1945, now. To ensure Butler's defeat, Pinchot ordered his machine at the last minute to work for Davis.
The Bonus Army
In late July 1932, the Bonus Army of unemployed starving veterans descended upon Washington to back passage of the Bonus Bill. Butler was asked by the head of the VFW to come to lend the soliders support. As the soldiers rallied in Washington, the bill passed the House but was overwhelmingly defeated in the GOP-dominated Senate. Butler was asked to address the 10,000 angry veterans who had set up a shanty town on the banks of the Anacostia River.
He urged them to fight on. "If you don't hang together, you aren't worth a damn," he said. "They may be calling you tramps now, but in 1917 they didn't call you bums.... When you go home, go to the polls in November, lick the hell out of those who are against you. You know who they are.... Now go to it." The crowd roared.
Butler stayed with the veterans, talking to them through the night and into the next day. As he prepared to leave, he warned them against allowing their frustrations to well over into violence: "You are all right as long as you keep your sense of humor...."
The next day, Hoover ordered Gen. Douglas MacArthur to drive the veterans from Washington at bayonet point, unleashing violence against the unarmed "army." The nation was stunned.
Butler phoned the governors of a number of states and received their agreement to provide relief for the veterans who wanted to return home. He told the leaders of the Bonus Army of this arrangement, and urged them to break camp. They agreed. Butler then delivered a sharp attack on the Hoover administration for its heartlessness.
For his actions, Butler earned the praise of many Americans, including the Democratic nominee for President, Franklin Roosevelt.
Butler and Roosevelt
Butler, a lifelong Republican who claimed he had never voted for a Democrat, had greeted Roosevelt's nomination with a wire to his former navy secretary: "We salute your nomination as one of the greatest blessings granted any nation in its hour of need."
On July 7, speaking in New York, Butler demanded that the government be rescued from the "clutches of the greedy and dishonest."
"Today, with all our wealth, a deadly gloom hangs over us. Today, we appear to be divided. There has developed, through the past few years, a new Tory class, a group that believes that the nation, its resources, and its manpower was provided by the Almighty for its own special use and profit.... On the other side is the great mass of the American people who still believe in the Declaration of Independence and in the Constitution of the United States.Butler was particularly useful to Roosevelt in countering the line from the bankers' press that a Democratic victory would open the door to a "socialist America." In an interview on Oct. 2, the two-time Medal of Honor winner branded that charge an "absurd myth." He said that his nationwide tour on behalf of veterans' rights and for Roosevelt had convinced him that the American people wanted a change in administration. "I learned that the average American is convinced that no change in our form of government is necessary or adviseable," Butler stated.
"This Tory group, through its wealth, its power and its influence, has obtained a firm grip on our government, to the detriment of our people and the well-being of our nation. We will prove to the world that we meant what we said a century and half ago--that this government was instituted not only to secure for our people the rights of life, liberty, and the pursuit of happiness, but the right to eat, and to all our willing millions, the right to work."
Less than a week before the election, at a rally in Queens, New York, Butler told cheering veterans that he was a "member of the Hoover for Ex-President League because Hoover had used gas and bayonets on unarmed human beings.... Nobody has any business occupying the White House who doesn't love his own people. I was raised a Republican, but I was born an American. I have no ring through my nose and I vote for whom I please."
When Roosevelt won an overwhelming victory, Butler sent him a telegram of congratulations.
Three weeks before the inauguration, when an assassin's bullets were fired at the President-elect, Butler wondered aloud whether those bullets weren't being ordered by the bankers' cabal which was enraged that Roosevelt would not be their President.
All of this would make it seem remarkable that the Morgan interests would even consider turning to Butler as the putative leader for their fascist coup against Roosevelt.
Plain spoken, he gave voice to the concerns of the millions of veterans who were poor and angry, and distrusting of all establishment figures, including most of the leaders of their own organizations.
Butler's Blind Side
Butler, like most well-intentioned patriots, had a blind side: He lacked a true understanding of history. He often stated his hatred of British imperialism and everything that it stood for, and denounced those who preferred the British king to the American republic and its Constitution. A populist, he attacked "Wall Street" as the sponsors of evil and anti-American policies against foreign lands and the American people. But he was blind to the true sponsorship of those policies by an international oligarchy whose powerful center was not New York, but London.
Those behind the offers to be made to Butler also believed that every human being, even a patriot, is corrupt or corruptible, that each person has his price, be it monetary, sexual, or other inducement. Butler seemed easy prey: After he had left the service, his financial situation bordered on the catastrophic, and he was heavily in debt. If all the appeals to the general's ego and all the "promises" of support for his soldier causes failed, Smedley Darlington Butler, could be "bought," they thought.
On July 1, two American legion officials visited Butler at his Newton Square, Pa. home. They were Bill Doyle, the commander of the Massachusetts American Legion, and Gerald C. MacGuire, who was a former commander of the Connecticut department of the legion. Both identified themselves as Purple Heart veterans.
MacGuire was in the employ of Col. Grayson Mallet-Prevost Murphy, who ran a leading New York brokerage that traded in stocks and international bond syndications, working with the House of Morgan.
Grayson Murphy, who was on Morgan's "preferred client list," was a director of Morgan's Guaranty Trust bank and several Morgan-connected corporations. He and his banking house had played an important role in syndicating Morgan loans to fascist Italy, for which he was decorated by Mussolini.
Murphy came from a long line of traitors. The Mallet-Prevost families have been central to British intelligence operations since the eighteenth century. They have been involved in assassinations, in espionage and political warfare against the enemies of London, (including their control of the traitor and assassin of Alexander Hamilton, Aaron Burr, who was married to a Prevost), and their direct control of the forces that ran the mobs of the French Revolution. Through intermarriages and financial manipulations, the Mallet-Prevost interests evolved into the Schlumberger financial empire, whose interests continue to be deployed as an asset of British intelligence and played a role in the assassination of President Kennedy.
Grayson Mallet-Prevost Murphy carried on his family's tradition of treason as a high-ranking officer in a private intelligence operation that reported to the Morgan cabal, and interfaced directly with British intelligence, with a specialty in covert operations. As early as 1903, he had been selected by President Theodore Roosevelt for secret assignments, which included planning U.S. military interventions into the Americas to collect debt, during which time he deployed directly with Morgan interests. Later, he became the head of American Red Cross relief efforts in post-World War I Europe, a post he used to develop a network of informants and operatives in European governments. In the 1920s, he made several "fact-finding" trips to Europe, accompanied by "Wild Bill" Donovan who was later to become Office of Strategic Services director; these missions, which included trips to Italy for meetings with Mussolini prior to his coup, were carried out at the behest of Morgan and London interests, and the reports about them were hidden from the U.S. government.
In February 1919, the intelligence operative Murphy had been one of 200 elite serving U.S. officers who met in Paris with the guidance of Morgan & Company operatives to found the American Legion. Murphy personally underwrote that operation to the tune of $125,000, and solicited additional funds from allies of Morgan in the industrial and financial community.
Murphy, it was admitted to Butler in subsequent conversations, retained his role as "kingmaker" for the legion's "Royal Family" by virtue of the fact that the legion still owed him and his friends a great deal of money.
MacGuire informed Butler that both he, MacGuire, and Doyle, were speaking for a group of "influential" legionnaires who were extremely dissatisfied with the legion's current leadership, because it had betrayed the common soldier. He announced that they were planning to dislodge the current regime at an upcoming Chicago convention. They asked Butler to join their ranks, and to deliver a rabble-rousing speech against the "Royal Family."
Butler, although sympathetic, declined their invitation, stating that he wanted to stay out of internal legion politics.
MacGuire then revealed that he was the chairman of a "distinguished guest committee," and was on the staff of the outgoing national commander, Gen. Louis Johnson, a former secretary of Defense (and another figure on Morgan's preferred-client list). MacGuire claimed that he had had Johnson include Butler's name on the invitation list, but that Johnson had taken the list to Louis Howe, Roosevelt's personal political secretary, and that Howe had crossed Butler's name off the list, stating that the President was opposed to any invitation of Butler. They offered no reason for this, but Doyle said that they had come up with a plan for Butler to address the convention anyway: He would be appointed a delegate from Hawaii, which would therefore give him the right to speak.
Butler, smelling a rat, declined their offer. Later, Butler said that he did not believe their story about Roosevelt being against him, and that it appeared they were trying to plant ideas in his head about the President.
The Plotters Try Again
In August, Doyle and MacGuire returned, with a new plan for the convention. They now agreed that it would be undignified for Butler to try to speak from the floor. The new plan called for him to gather 200-300 legionaires and take them by train to Chicago. They would scatter throughout the audience, and when Butler appeared in the gallery, they would stage a demonstration. Along with "allies" of MacGuire-Doyle faction, they would stampede the convention with cries demanding that Butler speak. They would guarantee that nothing would proceed until the general delivered a speech.
"A speech about what?," Butler asked. MacGuire and Murphy showed him the draft of the speech. Butler said that most of the soldiers he knew didn't even have enough to eat, and that he had hardly any money, and he asked how he would get them to Chicago. At that, MacGuire showed him a bank deposit book with two recent deposits, one for $42,000 and a second for $64,000. Don't worry, butler was told: If he could round up the soldiers, MacGuire and his friends would take care of getting them to Chicago and pay their expenses while there.
The speech Butler had been handed was a rabble-rousing defense of the gold standard, featuring a demand that the Roosevelt policy severing the U.S. from gold be reversed immediately, so that the soldiers' bonuses could be paid with "sound money." Butler was later to learn that the speech had been written by John W. Davis, the former Democratic presidential candidate who was chief counsel to J.P. Morgan and Company, and the personal counsel to J.P. Morgan.
Unbeknownst to Butler, one of the funding conduits for this fascist plot was the Committee for a Sound Dollar and Sound Currency, Inc., a group backed by and composed of members of Morgan's "preferred-client list." MacGuire was himself an official of the committee, which produced a stream of propaganda calling for a return to the gold standard and denunciations of Roosevelt's policy. Included among its members were several Morgan partners and Walter E. Frew, of the Corn Exchange Bank, which was controlled through National City Bank after a 1929 deal engineered by Morgan and exposed by the Pecora congressional investigation. Frew personally gave MacGuire $30,000 for the project under discussion with Butler.
A short time after the second visit, MacGuire went to see Butler again, this time alone. After listening to another pitch for him to round up 500 veterans, Butler told MacGuire that he would not risk his personal prestige unless he was told who might be standing behind him. MacGuire stated that he had the backing of "some of the most powerful men in America." He claimed to have already a small war chest funded by nine men, with the largest contribution being $9,000 and the smallest $2,500. However, he would name only three men, showing their checks to Butler: his boss, Murphy; another financier, Robert S. Clark, a member of Morgan's "preferred-client list" and an heir to the Singer Sewing fortune; and John S. Mills, who was intermarried into the du Pont family. All three were members of the Committee for a Sound Dollar.
MacGuire told Butler that an expense account would be opened in Chicago with the money from the "nine men."
In September 1933, Butler was invited to address the American Legion's 29th Division in Newark.
MacGuire showed up again to ask him whether he was prepared to deliver the gold standard speech in Chicago and carry out the plans that had been discussed. Butler said that he wasn't going, and told MacGuire that he thought that he and his backers were "bluffing. You haven't got any money." With that, MacGuire took out his wallet and placed a pile of 18 $1,000-dollar bills on the bed in Butler's hotel room. MacGuire claimed that there had been "some contributions" made to the cause the night before.
Butler, angry at being "bribed," managed to control his temper enough to demand that he meet with one of the principals. MacGuire agreed to "send over" Ronald S. Clark to see him.
One week later, Clark arrived by train in Paoli, Pa. to see Butler. Clark, as Butler described him, carried himself as a member of the "ruling class." Clark told Butler that he was going to the American Legion convention in a private railroad car attached to the Pennsylvania Limited and that he had already made arrangements for the train to stop at Paoli to pick up Butler. A suite of rooms had been booked at the Palmer House, Chicago's most exclusive hotel.
Clark asked Butler about the "gold speech," and expressed amusement that Butler had thought that MacGuire or Doyle had written it. "That speech cost a lot of money," he told Butler, and revealed that Davis had been its author. Butler stated that he didn't see what difference it made to soldiers whether the nation was on the gold standard. Clark replied that the soldiers' bonus must not be paid in "rubber money," and said that gold-backed dollars were the only answer.
Butler challenged him, stating that it looked like the speech was "a big business speech." Clark replied,
"I have $30 million dollars. I don't want to lose it. I am willing to spend half the $30 million to save the other half. If you go out and make that speech in Chicago, I am certain that they will adopt a resolution and that will be one step toward the return to gold, to have the soldiers stand up for it. We can get the soldiers in great bodies to stand up for it."When Butler asked why he thought that they could make Roosevelt, who was opposed to the gold standard, listen, Clark replied from the standpoint of his faction:
"You know the President is weak. He will come right along with us. He was born in this class. He was raised in this class and he will come back. He will run true to form. In the end he will come around. But we have to be prepared to sustain him when he does."Butler lost his mercurial temper. He said that he would not go to Chicago and that he refused to be part of a plan to use the soliders to impose the gold standard and force the President "back to his class."
Clark then tried to bribe Butler: "Why do you have to be so stubborn? Why do you want to be different from other people? We can take care of you...." He offered to pay the mortgage on Butler's house and to take care of his family.
Butler blew up. He took Clark into his trophy room, where his medals were displayed along with gifts from many poor peoples around the world. "I will not betray their trust," he told Clark.
Not wanting to close off all relations with Butler, Clark called MacGuire in Chicago, and said that Butler had given him "excellent" reasons for not going and that he wouldn't be going either. "I apologize to him for my connection with it," he told MacGuire. "You can put this thing across. You have got $45,000. You can send those telegrams. You will have to do it that way."
Clark apologized again, and Butler regained his composure. He drove Clark back to the Paoli station, thinking that there would be no further contact from these people, and that his temper had cost him the chance to learn more of the plot.
The Legion Is Manipulated
Within a week, the legion convention was underway in Chicago. According to a New York Times report, the convention was swamped by "a flood of telegrams" supporting the gold standard and adopted by acclamation a resolution supporting it.
On his way back from Chicago, MacGuire stopped to see Butler, this time arriving in a hired limo. He and his cohorts had been successful in getting their person in office as commander and had passed the gold resolution, he boasted to the general. "Yes," said Butler, "but I see you didn't endorse the soldiers' bonus."
"Well, we have to have a sound currency before it is worthwhile to endorse the bonus," MacGuire replied.
"Their man" who had been elected commander was Frank N. Belgrano, Jr., who happened also to be a senior Vice president of Gianinni's Bank of Italy/Bank of America, the bank that handled Mussolini's business accounts in the United States and internationally. Although the bankers had controlled the legion from its outset, this was the first time that an actual banker had served as its head.
Two weeks later, the persistent MacGuire was back again in Newtown Square. This time he offered Butler $1,000 and transportation in a private railroad car to Boston to make a speech to veterans, to be arranged through Doyle and other conspirators. The speech was to be in support of the gold standard. Butler refused. Undaunted, MacGuire persisted, "Well, then, we'll think of something else."
At the end of October, 1933, Butler arrived in New York City to make some campaign speeches on behalf of a fellow Marine who was running for municipal office. To his surprise, he was met at Penn Station by MacGuire. Butler was planning on a nationwide recruiting tour for the VFW, in order to counter the treachery of the legion and its Royal Family. MacGuire knew of his plans, which surprised the general. He was even more surprised when MacGuire proposed that he accompany Butler "to talk to the soliders in the background and to see if we cannot get them to join a great big superorganization to maintain democracy."
This was the first time that MacGuire was to mention the creation of an organization that would essentially supersede the legion, the first indication that something more than support for the gold standard was a goal. Butler told MacGuire that he couldn't stop him from following him around, but that he wanted no part of such organizing, which he said would "fiddle with this form of government." MacGuire assured him that this was not their goal, that everything would be "very democratic."
MacGuire also offered to finance the general's tour through payments of $750 for each speech in which he inserted a short reference to the need for a return to the gold standard. Butler again refused to have words put in his mouth, at any price. MacGuire left, and disappeared for a time from the scene.
The White House was made aware of MacGuire's activities in trying to use the general to work against Roosevelt policy. On December 11, a former New York City detective, and associate of the Senate Banking Committee counsel and former assistant New York District Attorney Ferdinand Pecora, Val O'Farrell sent a confidential letter to Roosevelt's personal secretary Col. Louis Howe detailing the offer and praising Butler for refusing it. O'Farrell indicated that it was his belief that a plot against the U.S. government was underway.
To be continued.
July 11, 1994, The American Almanac, Franklin Delano Roosevelt vs. the Banks: Morgan's Fascist Plot, and How It Was Defeated, Part III, by L. Wolfe,
Part 1 of this article was printed in American Almanac, Vol. 8, No. 23, of June 27, 1994. Part 2 was printed in Vol. 8, No. 24, of July 4, 1994.Despite the presence of Morgan agents in his cabinet and among his advisers, Roosevelt remained in control of policy and, from the standpoint of Wall Street, highly unpredictable.
On Nov. 16, 1933, Roosevelt recognized the Soviet Union, the first Western leader to do so. The bankers' press screamed of a potentially dangerous "new Rapallo" agreement with the Soviets. The fear was that if America broke Russia's isolation, British geopolitical aims, which included the unleashing of a war between Nazi Germany and the Soviet Union, might be subverted.
Six weeks later, Roosevelt announced that he would never again send American troops to Ibero-America to violate the sovereignty of nations to protect the bankers' investments.
The bankers' cabal began now to consider more drastic action to deal with their Roosevelt problem.
The keynote for what was intended was struck by none other than Morgan partner Thomas Lamont, who chose an address before the Foreign Policy Association, to heap praise on Mussolini and his methods, stating that fascism, as economic and political policy, works.
"We count ourselves liberal, I suppose," he told the FPA. "Are we liberal enough to be willing for the Italian people to have the sort of government they apparently want?" asked Lamont.
Fascism or some variant of it, he said, was not to be ruled out as policy for the United States.
On Dec. 1, 1933, MacGuire left with his family for an extended trip to Europe. He stayed more than seven months, spending time in France, Fascist Italy, Nazi Germany, London and Scotland, Holland, and, according to one report, Russia. He was later to report to Butler that he was on a "fact-finding" mission to study the relationship of soldiers to fascist mass movements. He was looking for something that would work in the United States.
MacGuire, in order to impress Butler with the powers that were backing his efforts to establish a fascist superorganization, stated that while in Paris, he worked directly from the offices of Morgan and Hodges. MacGuire may have indeed established contacts with various fascist organizations, and found the structure of the Masonic-led "secret conspiracy" of the French Croix du Feu (Fiery Cross) as a useful metaphor for the type of organization to be created in the United States. But those behind the bond salesman and manipulator MacGuire certainly did not need to learn how to create fascist "mass" movements, of either the left or right. They had been doing so for years.
MacGuire had gone to Europe, under Morgan instructions, and with the blessings of the cabal of U.S. British assets that included:
- J.P. Morgan, Jr., the key banker for the House of Windsor, the personal friend and confidant of King George V and King George VI. He was in Britain from July-early September 1934, at the point at which the decision was made to go forward with the coup plans, where he met several times with members of the House of Windsor.
- Thomas Lamont, who actually ran the House of Morgan, also spent a great deal of time in Great Britain, with access to high levels of the British oligarchy, if not quite as high as Morgan himself. Lamont in particular coordinated policy with British intelligence and the foreign office on Asia, working with the networks of the former British East India Company. Lamont also took a direct role in coordinating with Bank of England head Montagu Norman financing of both the Hitler and Mussolini operations, as well as London-directed financial warfare against the United States. He, too, was in Europe at this time.
- John W. Davis, the former U.S. ambassador to the Court of St. James and accepted into the top circles of the British elite. A high-ranking Scottish Rite Freemason, Davis came from a line of British-linked traitors from Virginia, and was seconded into the Morgan firm as its counsel through these connections. Later, he was to defend segregation as necessary for the preservation of the race in the landmark 1954
Brown v. Board of Education Supreme Court case. Davis was with Morgan on his prviate yacht during the late spring of 1934.
- Grayson Mallet-Prevost Murphy's British pedigree has already been estblished, to which we must add his membership in the Freemasons. Robert Clark's British connections come through the Morgan channels in Paris and through his Asian contacts, including to the British Royal Society, for which he did work on China. Hanford MacNider, a member of the Legion's Royal Family, was later made ambassador to Canada, where he became ensconsed in the networks of MacKenzie King, London's top Canadian operative.
A Fascist Base
MacGuire sent Butler a card from the French Riviera in February. He sent another in June 1934 from Berlin.
Meanwhile, aspects of the plot that had little directly to do with MacGuire, were already in motion.
During the spring of 1934, money was being pumped into the creation of various fascist paramilitary organizations, each of which claimed to be the protection of America from the "red menace" and from the influences of the "New Deal." Some were openly fascist, such as the Silver Shirts, the stormtroopers led by the Rev. Gerald L. K. Smith. Others, such as the Crusaders, spurned the fascist epithet, but nonetheless avowed fascist policy goals to crush organized labor and the "Reds." Still others were directly funded by bankers and financiers, such as the Sentinels of the Republic, funded by the Morgan-allied Pew and Pitcarin families.
The Scottish Rite Freemasons, in the tradition of the treasonous Albert Pike, helped John H. Kirby establish the Southern Committee to Uphold the Constitution, which, like the Klan itself, was financed with "northern money."
In Hollywood, the actor Victor McLaglen, who was reputed to be an operative of the British Foreign Office, established the California Light Brigade, which was ready to march at a moment's notice against any threat to "Americanism." He was rewarded for his efforts with an Academy Award for best actor by pro-fascist Louis Mayer's Academy of Motion Picture Arts in 1935.
All these organizations spawned cells throughout the country. They were in no way impeded in their operations by the FBI, under the direction of Masonic operative "Gay" Edgar Hoover.
This organizing, in the spring and early summer of 1934, took place under an intensifying media brainwashing barrage about the danger of the "New Deal socialism" and the threat of a "Red" takeover in the United States. Morgan mouthpiece Herbert Hoover called the New Deal "class hatred ... preached by the White House." Hoover called New Deal policies "universal bankruptcy." He urged the American people to "rise up" against the political menace represented by Roosevelt.
While this propaganda was directed at the Babbits of the American middle class, there was an outright organizing campaign for fascism directed at the leaders of American industry and finance and management level personnel in the private sector and the government. The content of this, taken from the media of the day, is all basically the same: glorification of the economic "miracle" of Mussolini's Italy with pointed inference that this form of fascism was just what the doctor ordered to restore order in the United States.
For example, the July 1934 issue of Henry Luce's Fortune magazine devoted its entire issue to praise of Mussolini! In an editorial by Laird Goldsborough, the British-linked foreign editor of the magazine, readers were told that "Fascism is achieving in a few years or decades such a conquest of the spirit of man as Christianity achieved only in ten centuries.... The good journalist must recognize in Fascism certain ancient virtues of the race, whether or not they happen to be momentarily fashionable in his own country. Among these are Discipline, Duty, Courage, Glory, and Sacrifice."
In June 1934, Roosevelt, for the first time in U.S. history, ordered a halt to all farm foreclosures, while using existing legislation, supplemented by other acts, to establish a system of crop parity payments. He established the Securities and Exchange Commission to end unregulated stock speculation, while establishing regulatory agencies to oversee the communications and radio industries.
But the most politically significant steps he took were to guarantee the rights of trade unions to organize, to prevent actions by employers to block unionization, and to force employers to accept collective bargaining agreements. These moves, which were to culminate in the 1935 Wagner Act, the so-called "Bill of Rights" for labor, strengthened and expanded, especially among industrial workers, political institutions--trade unions--which could be used by Roosevelt as a direct counter to the fascist mobilization being organized by the Morgan-allied clique.
Roosevelt, by personally taking the lead in fighting for the right to organize and for protection of workers against employers' excesses, won the political loyalty of the rank-and-file unionist. Should a fascist movement have been activated in the manner described in Butler's testimony and being planned by those behind MacGuire, Roosevelt could have and probably would have called on these layers to defend the Constitution and his presidency.
And when MacGuire returned from Europe in late July, a fascist coup was very much on the agenda.
The Plan for the Coup
On Aug. 22, Butler received a phone call from MacGuire. It was urgent that he talk to the general immediately, MacGuire said. There was something "of the utmost importance" that he must tell him that day. Butler, exhausted from an extended nationwide tour for the Veterans of Foreign Wars (VFW), nonetheless agreed to meet at the Bellevue Hotel in downtown Philadelphia. In a corner of the hotel's deserted restaurant, MacGuire laid out the plans that been hatched in Europe, and now apparently agreed upon by the coup plotters.
Now, MacGuire said that the time had come to "get the soldiers together." He explained that the purpose of his seven-month European trip was to study "organizations" whose methods and structure could be adapted to American needs. He had found that veterans' organizations were the "backbone" of the fascist movements in Italy and Germany; however, American soldiers would not go along with such a paramilitary movement, organized for an overtly political purpose.
However, in France, he said, he had found the perfect organization: The "Croix du Feu" of de la Rocque. This organization had functioned politically, but was organized for an economic purpose. He explained that the "Fiery Cross" had a core membership of about 500,000 officers and non-commissioned officers, but that each member was responsible for organizing at least 10 others, covertly, giving the organization a "fighting strength" of more than 5 million.
Butler asked what this new "superorganization" of soldiers would do. MacGuire hesitated, then answered that it would "support" the President; the general replied that Roosevelt didn't need such support and wondered when MacGuire and his clique had become "supporters" of Roosevelt.
MacGuire responded by pointing out that Roosevelt needed money to finance the New Deal programs and that money came from the sale of government bonds through the banking interests that were controlled by Morgan and his allies. "There is not any more money to give him," MacGuire now claimed.
"Eighty percent of the money is now in government bonds, and he can't keep this racket up much longer.... He has either got to get more money out of us or he has got to change the method of financing the government, and we are going to see that he does not change that method. He will not change it."MacGuire tried to explain that his backers were confident that they would force Roosevelt to change his policy, and the 500,000 soldiers and the millions behind them in secret organizations "would sustain him when others assault him."
Butler questioned how Roosevelt, who had staked his personal reputation on the New Deal, would explain such an abrupt about-face.
MacGuire explained that Roosevelt did not have to "explain" it.
"Did it ever occur to you that the President is overworked?" MacGuire asked. He said that the "overworked President" needed help and that an "Assistant President" was needed. This "assistant President" would take over much of Roosevelt's job and could take the blame for the change of policy.
MacGuire said that it "wouldn't take any constitutional change to authorize another cabinet official, somebody to take over the details of the office--to take them off the President's shoulders." He mentioned that the position would be sort of a "super secretary" or what he referred to as a "secretary of general affairs." MacGuire claimed that the American people would be more than willing to swallow this: "We have got all the newspapers. We will start a campaign that the President's health is failing. Everybody can tell by looking at him and the dumb American people will fall for it in a second."
MacGuire then indicated that Roosevelt was already surrounded by allies of the Morgan coup plotters. He said that the pro-fascist Gen. Hugh Johnson, whom Roosevelt had put in charge of the National Recovery Administration and who had expressed admiration for Mussolini, was the man the Morgan group would have preferred as this general secretary. But, according to MacGuire, Roosevelt was going to fire him because he "talked too damn much." (Roosevelt did "fire" Johnson, just as MacGuire said he would, the next month. After his forced resignation, Johnson was given a regular column by the Scripps-Howard newspapers, for the express purpose of attacking the President, which he did, in the most vitriolic manner possible.)
Butler asked MacGuire how he knew so much about what was going on inside the White House and the administration. "Oh, we are in with him all the time," came the reply. "We know what is going to happen."
MacGuire told Butler that, within a year from this discussion, the coup plotters wanted him to march his army of 500,000 people into Washington. He stressed that there would be no revolution, that everything would be constitutional: It had all been worked out, in advance. The Secretary of State, Cordell Hull, would resign, as would Vice President John Nance Garner; the sense given was that both these figures were "in" on the plot, or minimally, that Morgan and their allies had enough "chits" to call in that they could be counted on to do what they were instructed, under the circumstances. According to MacGuire, Roosevelt would allow the plotters to appoint a new secretary of state. If Roosevelt, with 500,000 men occupying Washington, was willing to "return to his class," he would be allowed to remain on as President.
"We'd do with him what Mussolini did to the King of Italy," MacGuire told Butler, saying that the President's function would become ceremonial much like the President of France.
But, if Roosevelt refused to go along, MacGuire insisted, he "would be forced to resign, whereupon under the Constitution, the presidential succession would place the secretary of state in the White House." Butler was to tell a congressional committee that MacGuire thought that all this could take place bloodlessly--a "cold coup." All that was needed was a "show of force in Washington" and then he, Butler, would be "the man on the white horse" who would "ride to the rescue of capitalism." An armed show of force was the "only way to save the capitalist system," MacGuire asserted.
Butler, trying to play along with MacGuire to discover who was behind this plot, said that what was being proposed would cost a great deal of money. He was told not to worry. MacGuire already had "$3 million to start with, on the line, and we can get $300 million if we need it." He reminded Butler that the banker Clark had told the general that he was personally willing to commit as much as $15 million.
He then told Butler that even more powerful people than Clark stood directly behind the plan. When he was in Europe, he reported, he had held meetings at the Paris office of Morgan & Hodges, Morgan's Paris operation. He claimed that the Morgan group had strong reservations about Butler, fearing that he might try to double cross them. He stressed that the others involved, however, had gotten the Morgan interests to agree that Butler was the best man to "get the soldiers together," implying that Grayson Murphy, Clark, and himself had backed the general. MacGuire claimed that the Morgan interests would have preferred Gen. Douglas MacArthur, whose wife was the daughter of Morgan's partner at Drexel in Philadelphia; if not MacArthur, they preferred the former Legion national commander and former ambassador to Canada and confidant of MacKenzie King, Hanford MacNider. Both later denied having been approached by the plotters, although it is likely that Butler was not the only choice to head the "superarmy."
Butler tried to probe further, asking when there would be signs of the coming together of a larger and powerful organization which would provide public backing for this plot. He was astonished when he was told that "within a few weeks" there would be an organization of some of the most powerful people in the land who would come together to "defend the Constitution." MacGuire explained the manner in which this organization, which he would not name, would function using a musical analogy: It was to serve the purpose of "the villagers or chorus in an opera," establishing the setting and the scene, for the great action to take place.
Asked for more information, MacGuire would only reveal that one of the new group's spokesmen would be the 1928 Democratic presidential candidate Al Smith, who until that time had backed Roosevelt and the New Deal. It was explained that Smith, who edited New Outlook magazine, would within weeks, break with Roosevelt and launch attacks on the New Deal and administration. It had all been arranged, he told Butler, who still refused to make a commitment to the plot.
MacGuire got up to leave, telling Butler that he was headed for Miami and the American Legion convention to agitate for the gold standard and to organize the soldiers into the "superarmy."
The League of Treason
As MacGuire and Butler met in Philadelphia, Jouett Shouse, a protégé of du Pont lawyer and Morgan operative John J. Raskob, had assembled the press to his office in Washington, D.C.'s National Press Building to announce the formation of a new policy advocacy group, the American Liberty League.
A former congressman from Kansas and assistant secretary of treasury during the Wilson administration, Shouse had gained the reputation of a political "fixer," much like the present-day Robert Strauss. In 1928, the bankers' operative Raskob, a former director of General Motors, was moved into the chairmanship of the Democratic National Committee, running the disastrous election campaign of Al Smith, ensuring a Hoover victory. Not wishing to give up control of the party to the political machines, Raskob brought in Shouse as the executive director of the national committee.
As soon as Roosevelt was in a position to do it, he moved to get rid of both of these "inside" men.
Now, in the heat of the summer of 1934, Shouse announced that the Liberty League would be a mass-based movement, whose intention it was, as the next day's headline on the front page of The New York Times declared, "To Scan New Deal, 'Protect Rights.'" The Morgan rag, The Times printed the entirety of Shouse's statement, that had been prepared in conjunction with Raskob. This new organization would, according to Shouse, "unite several millions of people from all walks of life who are now without organized influence in legislative matters."
There were, said Shouse, "no covert purposes. There is no object sought beyond the simple statement in our charter." He stressed that there was no partisan purpose, that the group was not "anti-Roosevelt."
"The League aims to do just what is outlined in its charter, to organize those who believe in upholding property and constitutional rights into a vocal group," Shouse told the press. "It is not intended to be antagonistic to the administration. We intend to try to help the President." Asked how such a group could "help" the President, Shouse replied: "If a tendency towards extreme radicalism developed which the President wished to check we might be most helpful with our organization in which we expect to enlist 2,000,000 to 3,000,000."
Shouse announced that a group had been self-selected to serve as the League's initiating executive committee. All of them were Morgan-allied stooges: Morgan's lawyer, John W. Davis, the former Democratic presidential candidate; Irenee du Pont, who ran the du Pont fortune now controlled by the Morgan interests; Nathan Miller, the former GOP governor of New York and a Morgan preferred-client list member; Rep. James Wadsworth of New York, a Republican and supporter of the gold standard; and Al Smith, the "happy warrior" who had been totally corrupted by Morgan money and who had headed the corporation that built and ran the Empire State Building.
Shouse showed the press letters from financiers, business leaders, and politicians from all over the country applauding the League's formation.
A few weeks later, the chorus of "villagers," as MacGuire had described them, was expanded to include additional prominent leaders of finance and business, with a heavy emphasis on Morgan allies. On its advisory council were, among 200 others: Dr. Samuel Hardin Church, who ran the Carnegie Institute in Pittsburgh, and who was a mouthpiece for the Mellons; W.R. Perkins of National City Bank; Alfred Sloan, the man the Morgans selected to run General Motors; David Reed, a U.S. senator from Pennsylvania, who in May 1932, said on the floor of the Senate, "I do not often envy other countries and their governments, but I say that if this country ever needed a Mussolini, it needs one now"; E.T. Weir of Weirton Steel, who was also known as a supporter of fascism. On its executive committee was Morgan stooge and former New York Supreme Court Justice Joseph M. Proskauer, the general counsel to the Consolidated Gas Company; J. Howard Pew of Sun Oil and the funder of the openly fascist Sentinels of the Republic; and Hal Roach, the Hollywood producer, who, like many of his peers, was an open admirer of Mussolini, and who was later to become a partner with Mussolini's son in a Hollywood production company, RAM ("Roach and Mussolini") Films, Inc.
The league's treasurer was none other than Grayson Mallet-Prevost Murphy!
Despite all the publicity and statements from Shouse, the league never recruited large numbers of people, nor was it really intended to. It was a sham, intended to give the appearance of mass resistence to Roosevelt, and to offer a constant attack on his policies.
Those involved in its creation knew the league's role as a "villagers chorus," working to establish the climate for the larger fascist plot. That was made clear in a series of pre-meetings in July that created the league from the shards of another Morgan-linked operation, the Association Against the Prohibition Amendment, which had been directed by Raskob and Shouse. Attending the planning sessions in the offices of Al Smith in New York were Raskob, Shouse, Morgan partner Lamont, members of the du Pont family, including Irenee du Pont, and Morgan lawyer John W. Davis.
One week earlier, Shouse had gone to the White House to brief the President on the new organization, and determine the President's advance knowledge. Roosevelt played things very close to the chest, telling Shouse that he welcomed open debate and that he would not come out and denounce the formation of the league. In fact, he told Shouse, he would be willing to give it a short statement expressing his approval. Roosevelt said he would be on vacation on the day that the league was to be formed, so he told his secretary to prepare such a statement.
On Aug. 22, Shouse called the White House, hoping for the promised statement. He was told that no one knew about it, since the President's secretary had gone with him. Neither the secretary nor Roosevelt could be reached and the White House would make no supportive comment, he was told.
Roosevelt returned to Washington on Aug. 24 and held his weekly press conference. He had avoided all comment on the League until them, but when asked he had a ready reply. The Liberty League, he told the press, was founded "to uphold two of the Ten Commandments," the ones nominally dealing with protecting property. It said nothing about protecting the average citizen, or of helping the unemployed and others in need. In short, said the President, it didn't deal with anything that was covered by that most important Commandment, "Thou shalt love thy neighbor as thyself." The league was fine as far as it went, he said, but it was stopping short of doing what was Christian and necessary. He couldn't support it because of that problem, but whether other people want to or not, is "none of my business," he said laughing.
The league's attack on Roosevelt started in late November, after the fall congressional elections. In the last four months of 1934, it spent about $94,000; the next year it was to spend just under $390,000, mostly on the publication and circulation of pamphlets, leaflets, and bulletins attacking Roosevelt's policies. The league also received millions of dollars in free publicity for its "authoritative" views from a very friendly press and radio networks. This operation, in all its forms, was the most sophisticated multi-media smear campaign in history up to that point.
Exposing the Plot
Butler had once thought that perhaps MacGuire was a "loose cannon," operating without the sanction of those whom he professed were in on the plot.
However, after the Aug. 22 meeting, and the quick succession of events that MacGuire had matter of factly "forecast," including the appearance of the Liberty League, Butler became convinced that a network, centered around the powerful Morgan interests, had indeed launched a "live" coup operation against the government in Washington.
General Butler decided that it was his duty, regardless of the consequences that might befall him and his family, to expose the plotters, to the extent of his knowledge of that plot. Butler had been both controversial and in the public eye for some time; he realized that all those involved in the plot would simply deny it, using their influence over the press to ridicule him for publicity seeking. He therefore decided to take a risk, and seek help in at least corroborating some of the key information, before he went public.
Butler turned to Tom O'Neill, the city editor of the Philadelphia Record with whom he had become friends during his stint fighting the underworld as the city's appointed anticrime czar in the 1920s. O'Neill was flabbergasted by the report of the coup plot, but knowing how the Morgan interests operated in his own city, he didn't doubt that they were capable of treason. He assigned his star reporter, Paul Comley French, to investigate the story. French, who also wrote for The New York Evening Post and who was later to become the director of the Committee for American Relief in Europe (CARE), was set up by Butler to talk to MacGuire, posing as an intermediary to discuss the general's further participation in MacGuire's plans.
In early September, French went to see MacGuire at his offices on the premises of Grayson M.P. Murphy and Company in New York. In the meeting, French was able to substantiate every allegation about the plot that Butler had attributed to MacGuire. But the bond salesman chose to be even more frank with French than he had dared to be with the general. He made it clear that those backing the coup were interested in destroying the presidency and in creating an American form of fascist government.
"We need a fascist government," French was to quote MacGuire as saying in his testimony before a congressional committee, "to save the nation from the Communists." MacGuire repeated this theme several times during his conversation with French. Taking the bait that French was operating as Butler's "agent" in negotiations, MacGuire told him that his backers would have no problems coming up with $1 million immediately to organize Butler's "army." MacGuire said that all he needed to do to get the money was place phone calls to Morgan attorney John W. Davis and W.R. Perkins of National City Bank, and to some other people of similar status. MacGuire also revealed that several national commanders of the American Legion, including Louis Johnson, Henry Stevens, and the present commander, the banker Belgrano, were all in favor of the plot and would back it.
MacGuire, seeing that French was more interested in questions of policy than the crusty General, informed French that his backers had already devised a plan to end unemployment: "It was the plan that Hitler had used in putting all of the unemployed in labor camps or barracks--enforced labor. That would solve it [the unemployment problem] overnight." He also claimed that they would force all people in the nation to "register" and carry identification papers. "He said that would stop a lot of these communist agitators who were running around the country," French later told the congressional committee.
MacGuire reported that those behind him were going to create a deliberate financial crisis for the administration. They were prepared to choke off credit to the New Deal programs, force interest rates higher, and force the rates that the government would have to pay to borrow up toward then-astronomical level of 5 percent or more. This, MacGuire said, would produce a "new crash." He then described how the crash would unleash the "left," creating new agitation and disruptions, especially among the growing numbers of new unemployed. With the nation consumed in chaos, the time would be right for the "man on the white horse" to ride into Washington, force the overturning of the elected government, the end of "presidential rule" and the start of a new, fascist era for the nation.
MacGuire told French that it would be no problem getting the soldiers army weapons from the du Pont-controlled Remington Arms Company; the du Pont interests were fully in support of the plans, MacGuire stated.
French went to see MacGuire once more, on Sept. 27, again at the offices of Grayson M.P. Murphy and Co. in New York. In a brief meeting, MacGuire said that things were moving along nicely. "'Everything is coming our way' is the way he expressed it," French told the committee.
With corroboration in hand, Butler felt it now was necessary to go public. Before he could make his decision on how to proceed, he was approached by investigators for the Special House Committee to Investigate Nazi Activities in the United States.
That committee was quickly to have its Congressional mandate changed to focus primarily on "Reds," evolving still later into the House Un-American Activities Committee, which became even more noxious under the leadership of Rep. Martin Dies. But at this moment, its leadership was controlled by allies of Roosevelt. The committee had, through its own sources, heard of a plot to overthrow the government that had involved General Butler. It was arranged for General Butler to testify in executive session on Nov. 20, when the committee was in New York.
Butler welcomed the chance to testify, but was concerned that it was going to be behind closed doors. This would allow for managed news coverage, that would be leaked to the media from the committee staff. It would also mean that, with the plotters controlling the press, there could be no assurance that his story would ever be made known to the American people. Butler and French decided on an insurance policy: Three days before he was to testify, French broke the coup story simultaneously in The Record and The Post, under the banner headline "$3,000,000 Bid for Fascist Army Bared;" the story featured direct statements from Butler, naming most of the names he was later to reveal in his testimony.
Butler Names the Names
Butler traveled from Paoli to New York to testify on Nov. 19. By the time the hearing started at the offices of the Bar Association the next day, the temperature was already well on the way to a record 74 degrees F, the hottest day for any November in history. Butler was prepared to add to that "heat."
As the hearing opened, Butler thought it necessary to make a brief statement concerning his involvement in the plot: "May I preface my remarks, by saying sir, that I have one interest in all of this and that is to to try to do my best to see that democracy is maintained in this country?"
Cutting him short, committee co-chair Rep. John McCormack, Democrat of Massachusetts, who was later to become Speaker of the House, stated, "Nobody who has either read or known about General Butler would have anything but that understanding."
Butler then proceeded to tell the story, in the great detail, that we have described above. As he proceeded, he was asked for clarification on several points. The general provided what additional details he could, but never ventured into speculation, sticking to the statements made directly to him by those involved in the conspiracy.
He was followed as a witness by Paul Comley French, who, from his own direct contact with MacGuire, was able to corroborate all the pertinent details of the fascist plot, and added additional details revealed by MacGuire, including the fascist policies preferred by the coup's backers. In all, their testimony lasted approximately two hours.
Butler and French were followed in the afternoon by Gerald MacGuire, the employee of Grayson M.P. Murphy who had served as the intermediary for "the higher ups" to General Butler. MacGuire meekly claimed that he was merely a $150-a-week bond salesman, and denied that there was any plot. He told the committee that he had merely gone to talk to the general about buying some bonds. He denied ever showing Butler 18 $1,000 bills in Newark, and spending the amounts Butler claimed he had spent to get a gold standard resolution passed at the 1933 American Legion convention. MacGuire claimed that his seven-month sojourn to Europe was merely "a family vacation." When questioned about where he got the money for it on his supposedly meager salary, he changed his story to say that it was also a "business trip" to sell bonds, although he couldn't remember the name of a single contact he had made in Europe!
Committee investigators produced evidence that the bond salesman MacGuire handled funding for various operations outside "normal business" for the banker Robert S. Clark, for whom he did not work. It was revealed that he was the treasurer for the Committee for a Sound Dollar, Inc., which was widely known to be a front for Morgan and other large financial interests. Caught in his own lies, MacGuire offered no explanation of how he became involved in this activity, but claimed that it had nothing to do with any conversations with General Butler, whom he described as a "personal friend."
Several times, under direct examination, MacGuire denied asking Butler to lead any organization of soldiers or of discussing any plans to march "troops" on Washington.
Members of the committee found MacGuire's denials unconvincing; they ordered him to return the next day for further questioning.
Reporters crowded the steamy corridors outside the hearing room, looking for a story. When the witnesses, including the committee co-chairs, emerged, they provided the press with bare outline of Butler and French's testimony. Within hours, the story, which had been broken by French three days earlier, was out all over the country. Knowing what was in store, the plotters now tried damage control, using, as Butler had expected, ridicule as their main weapon against the truth.
On Nov. 21, The New York Times, a paper that Heywood Broun once described as "black with the shoepolish of Morgan," took the lead in this campaign, with a front-page two-column article under the headline: "General Butler Bares 'Fascist Plot' to Seize Government by Force." Having already put the words 'fascist plot' in quotes, the paper led with:
"A plot of Wall Street interests to overthrow President Roosevelt and establish a fascist dictatorship backed by a private army of 500,000 ex-soldiers and others, was charged by Major General Smedley D. Butler, retired Marine Corps officer, who appeared yesterday before the House Un-American Activities Committee, which began hearings on the charges."The Times avoided providing on the front page an account of the charges as given by the committee co-chairs and instead, citing "sources in Philadelphia," the paper claimed that Butler had named Morgan and Murphy as being behind a plan under which the former NRA administrator Hugh Johnson "was scheduled for the role of dictator."
What followed then on the front page was a string of denials or ridicule of the charges from those prominant people named: "Perfect moonshine! Too utterly ridiculous to comment upon," said Morgan partner Thomas Lamont. "A fantasy! I can't imagine how anyone could produce it or any sane person believe it. It is absolutely false as far as it relates to me and my firm, and I don't believe there is a word of truth in it with regards to Mr. MacGuire," said Grayson Murphy. "It's a joke! A publicity stunt! I know nothing about it. The matter is made up out of whole cloth. I deny it completely," said Gerald MacGuire. "He had better be pretty damn careful. Nobody said a word to me about anything of this kind and if they did, I'd throw them out the window. I know nothing about it," said Hugh Johnson.
Only on the jump, did one find some details of what Butler charged, and statements by committee co-chair Rep. Samuel Dickstein, Democrat of New York, that Butler had substantiated much of what had been attributed to him in previous press reports. ``From present indications,'' Dickstein is quoted as saying, ``Butler has the evidence. He's not going to make these charges unless he has something to back them up. We'll have names here with bigger names than his.'' The congressman said that he planned to subpoena about 16 people whom Butler had named and that there would be a public hearing the following week.
The article ended with another denial by Grayson Murphy of any involvement, terming reports of his involvement "an absolute lie."
Butler was amused by The Times report, whose mangled contents were put on the wire services and then fed out to the rest of the country. When he arrived back home in Pennsylvania the next day, he was besieged by reporters wanting to know more details. He referred them to the reports in The Record and The New York Post by French, and told them that he was certain that there would be more revelations as the committee called the various prominent people named in his testimony.
To be continued.
July 25, 1994, The American Almanac, Franklin Delano Roosevelt vs. the Banks: Morgan's Fascist Plot, and How It Was Defeated, Part IV, by L. Wolfe,
Part 1 of this article was printed in American Almanac, Vol. 8, No. 24, of July 4, 1994; part 2 in Vol. 8, No. 25, of July 11; and part 3 in Vol 8., No. 26, of July 18, 1994.That same day, Nov. 21, 1934, MacGuire entered the committee room with his lawyer, and the doors were closed once again. Once again, he denied all charges that he had approached General Butler with plans for a fascist coup, or that he had asked Butler to lead an army of ex-soldiers on Washington, D.C. He was asked about reports that he had under his control substantial sums of money for these fascist organizing purposes. Now, instead of completely denying those reports, as he had the day before, he produced records from the Committee for a Sound Dollar and Sound Currency, showing that he had received $30,000 from the banker Robert Sterling Clark. Changing his story yet again, MacGuire claimed that he and his backers were only trying to interest Butler in that committee and its fight for the gold standard; they were prepared to let Butler ``make a little money'' if he would serve their cause. He admitted that Clark, his attorney A.G. Christmas, and Walter Frew of the Corn Exchange Bank, and other powerful financiers were all members of this committee. He claimed that Clark had ``no interest in any fascist organization.''
Part 1 explained why the British, and their Wall Street allies, the Morgans, hated President Franklin D. Roosevelt and how FDR battled to reduce their influence and power. Part 2 continued the story of FDR's fight and laid out Morgan's counterattack, featuring a 1934 plan for a fascist coup against the FDR White House, which the Morgans hoped would be led by the Marine hero, Maj. Gen. Smedley D. Butler. Part 3 began the story of explosive congressional hearings in which Butler exposed the Morgan plot.
MacGuire did not know that the investigators for the McCormack-Dickstein committee already had in their possession letters from MacGuire to Clark and Christmas describing the former's search, at the latter's request, for an appropriate fascist organization, while on his all-expenses-paid junket to Europe.
In answer to many specific questions, MacGuire feigned a loss of memory: "It's too far back ... I can't recall."
Emerging from the hearing room, Rep. Dickstein told reporters, supposedly off the record after MacGuire's testimony, that the bond salesman was ``hanging himself'' by contradictions in his account of events, and by forced admissions when confronted with evidence developed by investigators.
Mangling the News
The New York Times of Nov. 22 pulled the story off its front page, placing it on page 5, in one column, under the headline "Inquiry Pressed in 'Fascist Plot.'" It led with MacGuire's denials of all charges. Committee cochair McCormack stressed that all testimony would be withheld. Backtracking, McCormack now said that the committee was undecided as to calling any other witnesses, or if there would be a public hearing. If there were to be one, it would Dec. 17. It was only many paragraphs into the article that the Times reported that committee co-chair Dickstein had said that MacGuire had hung himself and that he had indeed gone to Europe for purposes related to establishing a fascist organization in the United States. The article then quoted MacGuire's attorney as categorically denying this and other charges about his client. It ended with denials from Legion officials of any involvement in the plot.
The Times and those who dictated its policy were clearly upset by what was occurring and didn't think it sufficient to merely mangle and manage the news. Its lead editorial was entitled, "Credulity Unlimited," and began: "A Washington correspondent asked: 'What can we believe?' Apparently, anything, to judge by the number of people who lend a credulous ear to the story of General Butler's 500,000 Fascists in buckram marching on Washington to seize the government. Details are lacking to lend verisimilitude to an otherwise bald and unconvincing narrative.... The whole story sounds like a gigantic hoax. General Butler himself does not appear to more than half credit it. He and some others, however, ask us to follow the famous saying of Tertullian: `I believe it because it is impossible.' It does not merit serious discussion, but if the army and the navy authorities, or the Congressional committee can develop any `facts' about it, let them do so quickly, so as to prevent this nation from appearing as gullible as were the Germans in the case of the Hauptmann von Kopenick [the innocent person the Nazis blamed for the Reichstag fire]."
With The Times editorial setting the tone, there began a smear and ridicule campaign against Butler. New York's Mayor Fiorello LaGuardia, who was known as the "Little Flower" but who more appropriately should have been called the "Little Fascist," a lover of the fascist program of Mussolini, coined the term "cocktail putsch" to describe the Butler story: It's a joke of some kind, he told the wire services, "someone at a party had suggested the idea to the ex-marine as a joke."
From Paris came a statement by Clark expressing his "bewilderment" at the charges. He said that he would send his lawyer to New York to clear the matter up, "if the whole affair isn't dispatched to the funny papers by Sunday."
Meanwhile, more corroboration of Butler's story came from the national commander of the Veterans of Foreign Wars, James Van Zandt. He had been called immediately after the August 22 meeting with MacGuire by Butler and warned that, according to MacGuire, he was going to be approached by the coup plotters for his support at an upcoming VFW convention. Butler told him, and now Van Zandt told the press, that the purpose of the proposed new soldier organization was to force the dollar back on gold and to "get rid of the man in White House." He said that, just as Butler had warned, he had been approached "by agents of Wall Street," who tried to enlist him in their plot.
MacGuire returned for a third and final time as a witness on Nov. 23. He now had some new twists to his already contorted story. He claimed that in September 1933, when he was supposed to be meeting Butler in Newark, and throwing $1,000 bills around, he was already at the Palmer House in Chicago. But investigators for the committee confronted him with evidence that he was lying, that he had indeed met with Butler, where and when the general had reported, and that he had in his possession $1,000 bills, drawn from a bank that very day.
MacGuire produced the bank records of the "Sound Currency" group, and now claimed that he had only spoken to Butler about financial backing for a contracting concern. He was confronted with records showing that he received $75,000 from the banker Clark for "unexplained purposes," while also receiving $30,000 from Walter Frew. He claimed to have spent $8,000 on his "business trip" to Europe, but was confronted with letters to Clark and Christmas about fascist organizations, including the French "Croix de Feu."
The anti-fascist journalist John L. Spivak, who wrote for the Communist-linked journal New Masses, was subsequently able to confirm by independent investigation that in July 1933, as the coup plot went "live," MacGuire deposited $140,000 into his account, then $150,000 a month later, and $45,000 two days after that--all preceding the meeting with Butler where the plot was laid out.
Catching the Traitors
In the face of overwhelming evidence to the contrary, MacGuire maintained his claim to complete innocence of all charges made by Butler. He even denied that he had given Butler a speech to read at the convention, and could not remember whether Clark had told him that he met with Butler or what they had talked about, or even that Clark had called him in Chicago to give him orders on what to do about the gold standard resolution. He denied everything that he could, and then feigned loss of memory on what couldn't be denied.
At the beginning of his testimony that day, MacGuire read a cable from Albert Christmas, the Morgan preferred list member and attorney for Robert S. Clark:
"Read this wire when you testify. Reports of Butler testimony in Paris outrageous. If reports are correct, my opinion is that a most serious libel has been committed. I am returning at once so as to testify to our anti-inflation activities."At the end of the hearing, McCormack indicated that the committee would subpoena Clark as soon as he returned from Europe. "As the evidence now stands," McCormack told reporters, "it calls for an explanation that the committee has not been able to obtain from Mr. MacGuire."
On Nov. 24, the committee completed the first phase of its inquiry, with additional corroborating evidence submitted by bank clerks who handled the accounts of the "Sound Currency" group and those of Clark and Christmas.
It was decided that, given the extreme interest in Butler's remarks and in the speculation taking place about them, the committee would issue a summary of what it had found during the executive sessions. In a statement announcing the committee's intentions, McCormack said that the committee would reveal "several important inconsistencies" between MacGuire's testimony and what he was telling the press--which the press was subsequently quoting and portraying as "fact." The congressman emphasized that General Butler could not and should not be accused of "publicity seeking" in going public with his exposure of the plot.
On Nov. 26, the committee released an 8,000-word statement summarizing the testimony and providing details of the plot. In discussing the evidence, it showed that MacGuire swore several times his denial of the details of Butler's testimony about the expenditure of monies for purposes described in the general's testimony, only to have committee investigators substantiate each of the general's claims.
However, the attention of most of the press focused on the first paragraph of the summary statement: "This committee has had no evidence before it that would in the slightest degree warrant calling before it such men as John W. Davis, General Hugh Johnson, General James G. Harbord, Thomas W. Lamont, Admiral William S. Sims or Hanford MacNider. The committee will not take cognizance of names brought into testimony which constitutes mere hearsay. This committee is not concerned about premature newspaper accounts, when given and published prior to the taking of testimony."
Whatever was being done by the committee was being worked out directly with the White House, and most likely with Roosevelt himself. That was the reason for the hinting about the calling of big names, and then the apparent pullback from that posture. From the point that Butler had stepped forward and likely even before that, the White House knew that it had caught its enemies in the act of treason. From the point of its public revelation, prior to the committee hearing, by the reporter French, and then in the hearing itself, the attempted fascist coup was a dead letter: It could no longer happen as planned, under any circumstances.
The Morgan interests and their allies were named by Butler, and now their names appeared in the first paragraph of the committee's summary. There had been 16 people named by Butler, but of those 16, the names of Morgan lawyer Davis, Morgan partner Lamont, supposed Morgan stooge Johnson, (whom Roosevelt had fired as NRA administrator), and Morgan operative MacNider, were placed in the first paragraph. Meanwhile, left open was the possibility of calling Clark, his attorney Christmas and Grayson Murphy, the treasurer of the Liberty League.
All these people knew they were caught up to their eyeballs in a fascist conspiracy: That was the signal sent by the statement.
Dickstein had sent Roosevelt a copy of the report. Roosevelt sent the congressman a reply on Nov. 30. "I am very interested in having it," wrote the President. "I take it that the committee will proceed further."
Dickstein had made sure that this was in fact what was stated to the press on Nov. 26, when he said that the committee would continue to look into these very serious charges of a fascist conspiracy, and would definitely call Clark.
The New York Times was unhappy with the report. The Times headlined its Nov. 26 article on it "Committee Calm Over Butler 'Plot'" with a subhead announcing "Has No Evidence to Warrant Calling Johnson and Others Named, It Declares." Then, contradicting that statement, it featured a second larger subhead, "But It Will Call Clark." Its lead paragraph boldly mangled the truth, asserting in its most cynical manner, "The so-called plot of Wall Street interests to have Major General Smedley D. Butler head a Fascist movement to take over the national government and restore the gold dollar failed yesterday to emerge in any alarming proportions from the statement by the Congressional Committee on Un-American Activities on the evidence before it."
Dickstein, with the backing of the White House, called The Times and demanded either a retraction of the story or a revised article. He threatened to go public with their distortion if they did not comply. The Times reluctantly agreed, and in its Nov. 27 edition printed a small, one-column story that headlined, "Butler Plot Inquiry Not to Be Dropped." It was the first time that the paper had dropped the quote marks from around the word plot. The article quoted Dickstein as saying that the committee intended to get to the bottom of the plot, and that its statement was not intended to "whitewash" anyone. He said that the committee was proceeding "carefully in such an important matter." In addition, the committee co-chair announced that, as opposed to what had been reported in The Times, neither Clark nor Christmas had returned to testify, though both had stated that they would do so. He repeated that the committee wanted to question both of them, and would meet again in executive session, when their testimony became possible.
Plotters Lay Low
Clark, however, was instructed to lay low in Europe. He communicated to the committee that he was delayed for "business reasons." His lawyer, Christmas, was told to return, but to delay his European departure until close to the end of the year, while they maneuvered to kill the investigation on this side of the Atlantic.
The plotters also ordered an intensification of the ridicule of General Butler. The vehicle chosen was Time magazine, the Luce interests' mass circulation "current events" rag.
Under the headline "Plot Without Plotters," the Dec. 3 Time ran an artfully crafted parody of Butler's testimony as its lead article. It opens with an account of Butler, astride a "white horse," assembling 500,000 veterans at a CCC camp in Elkridge, Maryland and asking them to follow him on a march down Route 1 to Washington; they are followed by a munitions train, supplied by DuPont and Remington Arms. It describes Butler as trailed in the leadership by several commanders of the American Legion, and General Hugh Johnson; in the back, in a limousine, are J.P. Morgan and Thomas Lamont.
After mocking other details of the plot, Time wrote "Such was the nightmarish page of future United States history pictured last week in Manhattan by General Butler himself to the Special House Committee investigating un-American activities. No military officer of the United States since the late tempestuous George Custer has succeeded in floundering in so much hot water as Smedley Darlington Butler."
What follows is a string of denials from the various "participants" in the plot and an attack on the committee for taking Butler seriously: "Thanking their lucky stars for having such sure-fire publicity dropped in their laps, Reps. McCormack and Dickstein began calling witnesses to expose the 'plot.' But there did not seem to be any plotters.... Though most of the country was laughing at the latest Butler story, the special House Committee declined to join in the merriment.... 'From present indications,' said the publicity loving New York Representative [Dickstein], `General Butler has the evidence....'"
Three pictures accompany the article. One makes Butler look a bit daft, with his finger in one ear, and is labelled "He was deaf to dicatatorship"; a second shows a genial J.P. Morgan, Jr., and is captioned: "Moonshine provided the amusement." Finally, there is a picture of a uniformed Col. Grayson Mallet-Prevost Murphy, looking every bit the suave patrician, with a caption, quoting him on the plot, "A Fantasy."
Interviewed 27 years later by author Jules Archer, the still-feisty McCormack commented: "Time has always been about as filthy a publication as ever existed. I've said it publicly many times. The truth gets no coverage at all...."
The Time article and similar coverage in the Morgan-allied press only provoked a national outrage. The plotters were now caught in a backlash of the same populism that they had tried to manipulate for their fascist purposes.
From around the country, VFW posts sent letters of support to President Roosevelt, commending Butler for exposing the plot. VFW commander Van Zandt gave radio interviews supporting the statements of General Butler. Other letters went to newspapers demanding fair coverage of the general's statements. Butler himself took to the airwaves starting Jan. 4, 1935, on WCAU in Philadelphia, repeating the charges he had made before the committee and demanding that action be taken against those powerful interests, led by the Morgans, who would impose a fascist regime on America.
The day before, on Jan. 3, the committee heard its last witness--Albert Christmas--on the final day of the committee's life. There were no questions asked of the lawyer about any discussions he might have had with his client Clark about the plot or about General Butler. Christmas did his best to try to represent MacGuire as a "loose cannon," a deliberate attempt to shield those who had dispatched the lowly bond salesman to do their bidding.
With the hearings concluded, Dickstein stated in February 1935, "The country should know the full truth about these reputed overtures to General Butler. If there are individuals or people who have these ideas and plans such as he testified to, they should be dragged out into the open."
The Morgan interests now turned their efforts to making sure that the charge of the committee would not be renewed. Their lobbyists pulled whatever levers they had to let the investigation die. It would have taken direct intervention from the White House to force the issue, but no such intervention was forthcoming.
On Feb. 15, the committee published its findings in a report submitted to the House on its full investigation. The section dealing with the Butler testimony began with the following paragraphs:
"In the last few weeks of the committee's official life, it received evidence that certain persons had made an attempt to establish a fascist organization in this country.
"No evidence was presented and this committee had none to show a connection between this effort and any fascist activity of any European 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 expedient.
"The committee received evidence from Major General Smedley D. Butler (ret.), twice decorated by the Congress of the United States. He testified before the committee of conversations with one Gerald C. MacGuire in which the latter is alleged to have suggested the formation of a fascist army under the leadership of General Butler.
"MacGuire denied these allegations under oath, but our committee was able to verify all the pertinent statements of General Butler, with the exception of the direct statement suggesting the creation of the organization. This however was corroborated in the correspondence of MacGuire with his principal, Robert Sterling Clark of New York, while MacGuire was abroad studying various forms of organizations of fascist character...."The committee had thus stated that it had confirmed a plot to seize the government of the United States by force, organized by interests whose control by Morgan and allied circles was already widely established.
The New York Times the next day ran a front page story, not on the fascist plot being confirmed, but on the committee's request for "New Laws to Curb Foreign Agitators!" A small subhead, at the end of the various headlines, says "Plan for March on Capital is Confirmed." Four paragraphs into the article there is the following, under the subhead, "Plan for 'March' Recalled:"
"It is also alleged that definite proof has been found that the much publicized Fascist march on Washington, which was to have been led by Major Gen. Smedley D. Butler, retired, according to the testimony at a hearing was actually contemplated. The Committee recalled testimony by General Butler that Gerald C. MacGuire had tried to persuade him to accept leadership of the fascist army."And that was all the mention there was in The Times of the plot. An editorial on the committee report focused on the threats to the nation represented by "Reds and communists" and the danger of "foreign propaganda," to which it concluded in the most supercilious fashion, that there are already enough propagandists in this country who are seditious.
Around the country, the media, with rare exception, took its lead from The Times and buried the news of the committee's confirmation of the "Butler Plot."
Nor was there any prosecution of the individuals and entities named by General Butler and confirmed by the committee to be at least contemplating a seditious, fascist plot against the lawful government of the United States.
The story would have probably stayed buried, had it not been for a discovery made by the journalist John L. Spivak, who wrote for the Communist-linked magazine New Masses. He had been tipped by a source in Washington that the committee's report had been "sanitized," that sections of General Butler's testimony had been deleted, especially the parts where he named some of the Wall Street conspirators, other than Clark, Murphy, and MacGuire, and including the references to Morgan partner Thomas Lamont and John W. Davis, the Morgan lawyer, as well General Butler's statements about the American Liberty League.
Spivak went to check out the story, and to see McCormack and Dickstein. With their approval he was told that he should look through some committee records. At this point, according to the journalist, he was "inadvertently" handed the unexpurgated transcript of the Butler hearings by a file clerk of the committee. He furiously copied down sections of the texts showing the deletions and then took what he found to Butler.
The general exploded, as only Smedley Butler could explode. He took to the radio in a campaign denouncing the committee for bowing to the power of Wall Street and for censoring his remarks. Meanwhile, Spivak published an exposé of the "coverup" in New Masses, charging a wide-ranging conspiracy to bury the true origins of the plot and political deals to protect those who would commit treason. Dickstein defended the committee's action, stating that what had been deleted had only been "hearsay," but in so doing repeated the substance of General Butler's charges against the Morgan operatives and Al Smith.
It is hardly likely that a clerk would have handed the "secret" text of the committee proceedings to a person known to be a leftist rabble-rouser: Dickstein had deliberately "leaked" them, to keep the information before the public.
The furor about the "censorship" kept the news of the "Wall Street plot" circulating through veteran, labor union, and leftist circles, which in the 1930s, comprised a good portion of the electorate. It kept circulating in these layers as a minor backdrop to the 1936 election campaign, without the benefit of major media coverage.
Spivak and author George Seldes charged elements in the administration with preventing a further investigation and sabotaging indictments of the named conspirators. Butler had originally brought the information about the plot to the Secret Service, which is under the control of the Treasury Department. In early 1934, an ailing William Woodin had been replaced by covert British operative Henry Morgenthau, whose function in this period was to prevent Roosevelt from moving for a more comprehensive banking reorganization. Morgenthau killed any investigation of Butler's information, but some agents apparently informed the McCormack-Dickstein committee of the charges of the plot.
FBI Director and 33rd-degree Mason "Gay" Edgar Hoover was also informed, and refused to investigate.
A Missed Opportunity
With the publication of the committee report, Roosevelt had been given an opportunity to achieve a strategic victory against the British-dominated cabal that was the historic enemy of the American republic. But, Roosevelt sought no strategic victory, only a tactical advantage against his adversaries. There would be no cleaning house over the fascist plot, and he backed off from the threat of a major reform of the banking system outside the bounds acceptable to London. He sought not to defeat the power that the British-controlled Morgan represented as an enemy, but merely to tame it towards his end. His was a factional battle within the patrician camp, not some battle with evil, as it more properly had to be understood.
But this was also because Roosevelt had no real conception of the kind of economic policies that were required to defeat the Morgan cabal, and the British forces that stood behind it. His advisers and cabinet, loaded with various factions of British-allied snakes, could offer no real help. The best of his advisers were followers of John Maynard Keynes, the British economist, whose concept of monetary policy is to be sharply distinguished from Alexander Hamilton's view of credit and national banking. Keyne's concept promoted a redistribution of incomes and consumer spending, rather than the use of government credit for specific projects. In the end, such policies can only saddle government with usurious debt, with profits to be made by the cabal of bankers that controls the marketing of government securities, while creating the demand for later cuts in social spending and wages to repair escalating budget deficits.
Any effort to develop infrastructure, to expand physical economic output, and to produce "recovery'' from economic ruin using such policies must ultimately fail.
While there were some among his advisers and cabinet who had fascist leanings, and elements of policy that they pushed, such as the National Recovery Administration (NRA), had fascist overtones, Roosevelt was himself no fascist. He was a "presidential" President, using the powers of the Constitution and the power to mobilize the population behind his initiatives, to implement policy. Whatever else might say, he preserved the U.S. government and the presidency as institutions, and made them function during a period when others would have destroyed them in a coup.
Over time, Roosevelt's policies, especially under the pressure of the war build up and wartime economy, were forced increasingly toward a more dirigist, more Hamiltonian approach. However, lacking true knowledge of the policy, he could only approach it.
However, in the 1933-35 period under discussion, Roosevelt had threatened to do more. That, along with his direct attack on the principal British agents in the United States, arrayed under the deployment of the House of Morgan, had made him enough of a threat that the Morgan forces were ordered to initiate a fascist coup attempt.
The public exposure of the fascist plot by Butler and others had guaranteed that no similar plot could succeed, and it appears that from mid-1935 onward, no such operation was again seriously considered by Morgan or allied groupings. At the same time, General Butler's identification of the American Liberty League as an instrumentality of the plotters continued to dog that banker-directed organization throughout its existence. As damaged goods, its attacks on Roosevelt for being a "dictator" and "anti-constitutional" rang hollow to the larger numbers of the American electorate.
Roosevelt, throughout the 1936 campaign, maintained his fire on the bankers' cabal, keeping them pinned down and defensive. When election day came around, Roosevelt scored a crushing victory, losing only the states of Maine and Vermont.
As he had desired, Roosevelt had strengthened his own tactical position. On the strength of that victory, he had placed further enormous power in the office of the President. But despite this, the patrician Roosevelt had not changed the strategic alignment of power of those who had been arrayed against him.
Despite the President's talk about economic improvement, the Morgan cabal had succeeded in choking off sufficient credit to prevent anything but modest recovery. By 1938, the economy was tumbling again into a tailspin.
Meanwhile, Morgan, which gave up its investment banking in 1935, reconsituted that function in a new firm, Morgan, Stanley and Company, a year later. Morgan and the cabal it still dominated remained in control of government credit, through the Fed, in the way that they had before Roosevelt and Pecora altered things. Acknowledging Roosevelt as a wild beast and respecting the potential power of his presidency, they sought less to provoke him and gave him most of what he wanted: Why shouldn't they? He was paying them their usurious interest!
Butler Is Tamed
As for the straight-talking General Butler, he was placed under effective control of the same traitorous crowd he sought to destroy.
Shortly after the hearings, the Mason Hoover was dispatched to personally solicit the general's "advice" on crime fighting; he quickly became a trusted confidant of Butler. The general who had exposed the attempt to impose a fascist police state now became a gushing admirer of Hoover and his police-state tactics. Unbeknownst to Butler, Hoover kept close tabs on all the general's activities, including his associations with ``leftists'' such as Spivak.
Becoming increasingly discouraged by Roosevelt's policy of rearmament, which he mistook as a "racket" directed by Wall Street, Butler broke with the President. His speeches became more and more pacifist, even as the threat of the expansion of fascism in Europe became more real. Butler fought against any use of American troops overseas, and any use of troops unless the United States itself were attacked.
However, Butler continued to make reference to the "Wall Street plot," as he made thousands of talks to groups of all kinds and sizes across the country. He died on June 21, 1940 of an ailment suspected to be cancer, only hours before France was to surrender to Hitler.
The next day, The Times printed a flattering obituary, calling him "one of the most glamorous and gallant men who ever wore the uniform of the United States Marine Corps ... a brave man and an able leader." The Times added that he was often a "storm center" and that ``It was when he ventured into public affairs that his impetuosity led him into trouble."
President Roosevelt sent personal condolences to Butler's family: ``I grieve to hear of Smedley's passing.... My heart goes out to you and the family in this great sorrow.''
In 1971, former Speaker of the House John McCormack told Jules Archer that Roosevelt and the nation owed General Butler a debt of gratitude for his exposure of the Morgan plot:
``If General Butler had not been the patriot that he was, and if they [the plotters] had been able to maintain their secrecy, the plot certainly might very well have succeeded, having in mind the conditions existing at the time.... If the plotters had gotten rid of Roosevelt, there is no telling what might have taken place.''
It is now more than 60 years since these events. McCormack is gone; almost all the people who were players on the stage of history during those critical years of the 1930s are long gone.
Unfortunately, our nation's history has been scrubbed clean of this important story and the period in which it unfolded. American school children know little about the Great Depression and the buildup toward World War II. They have never heard or read Roosevelt's speeches against the ``money changers,'' nor have they been taught about this President's war against the House of Morgan. History books do not mention the 1933 assassination attempt against Roosevelt. The Pecora hearings, and their dramatic exposure of the power of Morgan, are but obscure footnotes in some economic and history texts.
In times of crisis, people can throw off the blinders that have been placed over their eyes by misleadership and propaganda. It is the responsibility of leadership to provide direction to that effort, to mobilize the political will for the great tasks at hand. In the 1930s, in the midst of the Depression, it was not just the banking system that lay flat on its back, not just the economy, reeling under British-directed assault from without and within. The very soul of the republic, the political will of the average citizen, was sapped by the calamity, and the nation was plunged into despair and pessimism.
It was this despair that Roosevelt sought to dispel and that the Morgan coup plotters sought to organize into a fascist movement. Hear the words of Roosevelt, informed by the coup plot that had just been defeated, and by the danger still present, as he addressed the American people, accepting the nomination for President on June 27, 1936:
"In 1776 we sought freedom from the tyranny of a political autocracy--from the eighteenth-century royalists who held special privileges from the crown. It was to perpetuate their privilege that they governed without the consent of the governed; that they denied the right to free assembly and free speech; that they restricted the worship of God; that they put the average man's property and the average man's life in pawn to mercenaries of dynastic power; that they regimented people.``And so it was to win freedom from the tyranny of political autocracy that the American Revolution was fought...."Speaking of the emergence of a new economic autocracy in this century, Roosevelt stated:
"Out of this modern civilization, economic royalists carved new dynasties. New kingdoms were built upon the concentration of control over material things. Through new uses of corporations, banks, and securities, new machinery of industry and agriculture, of labor and capital--all undreamed by the fathers--the whole structure of modern life was impressed into this royal service.If such language sounds foreign to you, it is a reflection of the decay of the mental life of the average citizen. With these words, Roosevelt summoned a nation to war for moral principles; but that war was not fought to be won, nor fought around a program that could succeed.
"There was no place among this royalty for our many thousands of small business men and merchants who sought to make worthy use of the American system of initiative and profit. They were no more free than the worker or the farmer. Even the honest and progressive-minded men of wealth, aware of their obligation to their generation, could never know just where they fitted into this dynastic scheme of things.
"It was natural and perhaps human that the privileged princes of these new economic dynasties, thirsting for power, reached out for the control of the Government itself. They created a new despotism and wrapped it in the robes of legal sanction. In its service, new mercenaries sought to regiment the people, their labor, and their property. And as a result, the average man once more confronts the problem faced by the Minute Man...."
"Against economic tyranny such as this, the American citizen could appeal only to the organized power of the Government...
"The royalists of the economic order have conceded that political freedom was the business of the Government, but they have maintained that economic slavery was nobody's business. They granted that the Government could protect the citizen in his right to vote, but they denied that the Government could do anything to protect the citizen in his right to work and his right to live....
"The economic royalists complain that we seek to overthrow the institutions of America. What they really complain about is that we seek to take away their power. Our allegiance to American institutions requires the overthrow of this kind of power. In vain, they seek to hide behind the Flag and the Constitution. In their blindness, they forget what the Flag and the Constitution stand for. Now as always, they stand for democracy, not tyranny; for freedom, not subjection; and against dictatorship by mob rule and the overprivileged alike....
"It has been brought home to us that the only effective guide for the safety of this most worldly of worlds, the greatest guide of all, is moral principle.
"We do not see faith, hope, and charity as unattainable ideas, but we use them as the stout supports of a nation fighting the fight for freedom in a modern civilization.
"Faith--in the soundness of democracy, in the midst of dictatorships.
"Hope--renewed because we know so well the progress we have made.
"Charity--in the true spirit of that grand old word. For charity literally translated from the original means love, the love that understands, that does not merely share the wealth of the giver, but in true sympathy and wisdom, helps men to help themselves.
"We seek not to make Government a mechanical implement, but to give it the vibrant personal character that is the very embodiment of human charity.
"We are poor indeed if this Nation cannot afford to lift from every recess of American life the dread fear of the unemployed that they are not needed in this world. We cannot afford to accumulate a deficit in the books of human fortitude....
"Governments can err, Presidents do make mistakes, but the immortal Dante tells us that Divine justice weighs the sins of the cold-blooded and the sins of the warm-hearted in different scales.
"Better the occasional faults of a government that lives in the spirit of charity than the consistent omissions of a Government frozen in the ice of its own indifference.
"There is a mysterious cycle to human events. To some generations, much is given. Of other generations, much is expected. This generation of Americans has a rendezvous with destiny.
"In this world of ours, in other lands, there are some people, who, in times past, have lived and fought for freedom, and seem to have grown too weary to carry on the fight. They have shed their heritage of freedom for the illusion of a living. They have yielded their democracy.
"I believe in my heart, that only our success can stir their ancient hope. They begin to know that here in America, we are waging a great and successful war. It is not alone a war against want and destitution and economic demoralization. It is more than that: It is a war for the survival of democracy. We are fighting to save a great and precious form of government for ourselves and for the world...."
There is much more to be said about Roosevelt and the Depression, as well as the period leading up to and through World War II. But limited as it was, the victory against the coup plotters during 1933-35, did at least buy time. It did allow us this second chance to succeed.
There is a crucial difference between the 1930s and the current crisis: In the Great Depression there was no Lyndon LaRouche and a movement built around his ideas and economic program. Had there been, the history of the nation and the world might have been much happier.
We must learn from the lessons of history, or we are doomed to repeat its mistakes. In the period of the coming financial blowout, we must seek now to gain the strategic victory against the British-Venetian enemy whose continued power still means the ultimate destruction of our nation.