All the Presidents' Bankers

1. Early 20th-Century Power Shift: From Industry to Finance

By the end of the nineteenth century, the titans of banking were replacing the barons of industry as the beacons of economic supremacy in the United States.

From Barons to Bankers. The early 20th century witnessed a significant shift in power from industrialists to financiers. Men like J.P. Morgan and the Rockefellers, who initially built their fortunes in industries like steel and oil, began to dominate the financial sector. This transition marked a move from wealth creation through production to wealth creation through the control and manipulation of capital itself.

• Railroads, once the dominant industry, became a source of financial instability, allowing bankers to consolidate their power.
• The focus shifted from making products to making money, with control over capital becoming paramount.
• This shift created a new dynamic between Wall Street and Washington, where the White House would increasingly rely on the expertise and resources of powerful bankers.

The Rise of the "Money Trusts." Two main groups emerged: the Morgan group, including J.P. Morgan and George Baker Sr., and the Rockefeller group, allied with James Stillman of National City Bank. These groups, often referred to as "money trusts," controlled vast amounts of capital and exerted significant influence over the US economy.

• Interlocking directorates and stock ownership allowed these groups to control multiple banks, trusts, and insurance companies.
• The power of investment bankers grew, as they became the primary source of capital for corporations.
• These groups met in secret, such as at Jekyll Island, to discuss and shape the financial landscape of the country.

The Power of Influence Capital. Early 20th-century bankers were not just focused on creating wealth; they were also interested in manufacturing "influence capital." The manner in which they dictated the behavior of money rivaled the way the government directed the country. This influence extended to both domestic and international affairs, shaping America's role as an emerging global power.

2. The 1907 Panic: Bankers' Power and Government Dependence

The Panic of 1907 revealed the weakness in the Morgan-dominated banking system, in that it relied too heavily on the maneuvers and money of an elite group of men who wielded increasing control over the country.

The Panic Unveiled Weaknesses. The Panic of 1907 exposed the fragility of the US financial system, which was heavily reliant on the actions of a few powerful bankers, particularly J.P. Morgan. The crisis was triggered by a failed attempt to corner the copper market, which led to bank runs and a general loss of confidence in the financial system.

• The panic highlighted the lack of a central banking mechanism to provide stability and liquidity during times of crisis.
• It revealed that the Morgan Bank held more money and gold than the Treasury Department, underscoring the immense power of private financiers.
• The crisis demonstrated the government's dependence on private bankers to stabilize the economy.

Morgan's Intervention and Government Reliance. In the absence of a central bank, J.P. Morgan stepped in to organize a pool of funds to support the market and prevent a complete collapse. However, his actions were not entirely altruistic, as he used the crisis to further consolidate his power and influence.

• Morgan's intervention, while initially effective, was ultimately insufficient to stop the panic.
• The Treasury Department had to deposit $39 million in the National Bank of New York, which was then loaned to other banks at substantial rates of interest.
• The government's reliance on Morgan and other private bankers to stabilize the financial system raised concerns about the concentration of power in the hands of a few unelected individuals.

Roosevelt's Response and the Shift in Power. President Theodore Roosevelt, initially a trustbuster, was forced to work with Morgan to avert a national calamity. This collaboration, while necessary, highlighted the limitations of government power in the face of concentrated financial influence.

• Roosevelt's actions, while intended to save the country, also reinforced the power of the bankers.
• The panic and its aftermath led to calls for banking and currency reform, setting the stage for the creation of the Federal Reserve System.
• The events of 1907 underscored the need for a more balanced relationship between the government and the financial sector.

3. Jekyll Island: The Secret Birth of the Federal Reserve

“I do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System.”

The Need for a Central Bank. The Panic of 1907 made it clear that the US needed a central banking mechanism to provide stability and prevent future crises. Both bankers and politicians recognized the need for reform, though their motivations differed.

• Bankers wanted a system that would provide them with a lender of last resort and a more stable currency.
• Politicians wanted to reduce the power of private bankers and ensure government control over the financial system.
• The National Monetary Commission was established to study foreign central banking systems and develop a proposal for the US.

The Secret Meeting at Jekyll Island. In 1910, a group of powerful bankers and politicians, led by Senator Nelson Aldrich, secretly met at Jekyll Island, Georgia, to draft a plan for a central bank. The meeting was shrouded in secrecy to avoid public scrutiny and accusations of banker influence.

• Attendees included representatives from the Morgan and Rockefeller empires, as well as key political figures.
• The group developed a plan for a National Reserve Association, a quasi-independent entity that would have the power to create a unified currency and provide loans to banks in times of crisis.
• The secrecy of the meeting reflected the power and influence of the bankers, who preferred to operate outside the public eye.

The Aldrich Plan and Its Aftermath. The Aldrich plan, while intended to create a more stable financial system, was met with skepticism and opposition from those who feared it would give too much power to the bankers.

• The plan was criticized for being too closely aligned with the interests of Wall Street.
• It was seen as a way for the money trusts to further consolidate their power.
• The plan ultimately failed to gain enough support in Congress, but it laid the groundwork for the Federal Reserve Act, which would be passed under Woodrow Wilson.

4. World War I: Bankers Finance Global Conflict and Gain Influence

“The war should be a tremendous opportunity for America.”

The War as an Opportunity. World War I provided a significant opportunity for American bankers to expand their influence and solidify their position as global financial leaders. The war created a massive demand for loans and credit, which US banks were eager to provide.

• The Morgan Bank, with its close ties to the British and French governments, became a key player in financing the Allied war effort.
• National City Bank, under the leadership of Frank Vanderlip, also sought to expand its international presence, particularly in Latin America and Russia.
• The war transformed the US from a debtor nation to a creditor nation, further enhancing the power of its financial institutions.

Bankers and the Policy of Neutrality. Despite President Wilson's call for neutrality, many bankers, particularly those with ties to the Allies, actively supported their cause. This created a tension between the government's official policy and the actions of powerful private actors.

• Jack Morgan, head of the Morgan Bank, openly expressed his support for the Allies and his opposition to Germany.
• The Morgan Bank provided loans to the French government and the Rothschilds' Bank, which were used to purchase war supplies in the United States.
• This financial support for the Allies further solidified the Morgan Bank's position as a key player in international finance.

Domestic Concerns and the Federal Reserve. The war also highlighted the need for a more robust and flexible financial system. The Federal Reserve System, established in 1913, played a crucial role in financing the war effort and managing the nation's economy.

• The Federal Reserve provided loans to banks and helped to stabilize the financial system during the war.
• The war also led to the expansion of US banks into overseas markets, further solidifying their global presence.
• The war demonstrated the interconnectedness of finance, politics, and international power.

5. Post-War Turmoil: Failed Treaties and Rising Banker Power

“From the very start, we did everything we could to contribute to the cause of the Allies.”

The Treaty of Versailles and Its Aftermath. The end of World War I brought about a new set of challenges, including the negotiation of peace treaties and the management of war debts. The Treaty of Versailles, while intended to establish a lasting peace, ultimately failed to address the underlying economic and political tensions that had led to the war.

• The treaty imposed harsh reparations on Germany, which created economic instability and resentment.
• The US Senate rejected the Treaty of Versailles and the League of Nations, reflecting a growing isolationist sentiment in the country.
• The failure of the treaty created a power vacuum in Europe, which US bankers sought to fill.

Bankers and Post-War Reconstruction. Despite the political turmoil, US bankers continued to play a significant role in the post-war world. They sought to finance reconstruction efforts and expand their influence in Europe and other regions.

• Thomas Lamont, a partner at the Morgan Bank, became a key figure in post-war negotiations and worked closely with President Wilson.
• The Morgan Bank continued to provide loans to European governments and businesses, further solidifying its position as a global financial leader.
• National City Bank, under the leadership of Charles Mitchell, also expanded its international presence, particularly in Latin America.

The Rise of Charles Mitchell and National City Bank. Charles Mitchell, a brash and ambitious banker, emerged as a key figure in the post-war era. He transformed National City Bank into a global financial powerhouse, focusing on short-term profit-seeking and aggressive expansion.

• Mitchell's approach differed from the more relationship-based model of the Morgan Bank, emphasizing customer deposits and global speculation.
• He established the postwar model of short-term profit-seeking, which would have a significant impact on the financial landscape of the 1920s.
• Mitchell's rise marked a shift in the banking industry, with a new generation of bankers challenging the dominance of the old guard.

6. The Roaring Twenties: Deregulation and Speculative Excess

By the decade’s end, under the tutelage of a new generation of voracious bankers led by the brash and ambitious Charles Mitchell, National City Bank would become the first American bank to reach $1 billion in assets.

Political Isolationism, Financial Internationalism. The 1920s were characterized by a paradox: while the US government adopted a policy of political isolationism, American bankers continued to expand their international influence. This created a disconnect between the government's domestic agenda and the global ambitions of Wall Street.

• Presidents Harding and Coolidge favored a laissez-faire approach to business, which allowed bankers to operate with minimal government oversight.
• The Republican Party, while promoting isolationism, also supported policies that favored big business and financial expansion.
• This created an environment of deregulation and speculative excess, which would ultimately lead to the Crash of 1929.

The Rise of Speculation and the Stock Market. The 1920s saw a dramatic increase in stock market speculation, fueled by easy credit and a widespread belief in endless prosperity. Bankers played a key role in this process, creating and distributing securities and encouraging investors to participate in the market.

• The stock market became a dominant force in American culture, with many people investing their savings in the hope of quick profits.
• The focus shifted from long-term investment to short-term speculation, creating a bubble that was destined to burst.
• Bankers, driven by the pursuit of profit, often engaged in risky and unethical practices, further exacerbating the speculative frenzy.

Charles Mitchell and the New Banking Model. Charles Mitchell, head of National City Bank, epitomized the new breed of banker who prioritized short-term profits and aggressive expansion. He transformed National City into a financial supermarket, attracting a wide range of customers and engaging in risky international lending.

• Mitchell's approach was a departure from the more conservative practices of the past, emphasizing the accumulation of customer deposits to finance global endeavors.
• He became a symbol of the speculative excess of the 1920s, and his actions would ultimately contribute to the financial crisis of 1929.
• Mitchell's rise marked a shift in the banking industry, with a new generation of bankers challenging the old guard and pushing the boundaries of financial regulation.

7. The 1929 Crash: The Big Six and the Market Meltdown

Fast-forward to the financial crisis of 2008. The prelude to the global debacle was similar, as the chapters on the 1920s and 1930s reveal.

The Crash of 1929. The stock market crash of 1929 marked the end of the speculative boom of the 1920s and ushered in the Great Depression. The crash was triggered by a combination of factors, including excessive speculation, easy credit, and a lack of government regulation.

• The market crash was not an isolated event but the culmination of years of reckless financial practices.
• The crash exposed the fragility of the US financial system and the dangers of unchecked speculation.
• It also revealed the extent to which the economy had become dependent on the stock market and the financial sector.

The Big Six and Their Response. In the immediate aftermath of the crash, the leaders of the six largest banks, known as the "Big Six," met at the Morgan Bank to discuss how to stabilize the market. However, their efforts were ultimately unsuccessful.

• The Big Six, including Thomas Lamont, Charles Mitchell, and Albert Wiggin, attempted to pool their resources to support the market.
• Their actions, while intended to prevent a complete collapse, were ultimately insufficient to stem the tide of panic.
• The Big Six's response highlighted the limitations of private sector solutions to systemic financial crises.

The Aftermath and the Great Depression. The stock market crash of 1929 had a devastating impact on the US economy, leading to the Great Depression. The crash exposed the flaws in the financial system and the need for greater government regulation.

• The crash led to bank runs, business failures, and widespread unemployment.
• It also revealed the extent to which the economy had become dependent on the stock market and the financial sector.
• The Great Depression would ultimately lead to a major overhaul of the US financial system, including the passage of the Glass-Steagall Act.

8. The New Deal: Regulation and a New Era of Banker-President Alliances

Between the 1930s and 1960s, the bankers who most influenced presidents were on close personal terms with them. They influenced policy to suit themselves, to be sure; but in the postwar world, that worked well for the population.

FDR's Response to the Depression. President Franklin D. Roosevelt's New Deal programs were a direct response to the Great Depression and the failures of the unregulated financial system. The New Deal sought to provide relief, recovery, and reform, including significant changes to the banking industry.

• FDR's policies aimed to restore public confidence in the financial system and prevent future crises.
• The New Deal marked a shift in the relationship between the government and the financial sector, with the government taking a more active role in regulation.
• The New Deal also created a new era of political-financial alliances between Washington and Wall Street.

The Glass-Steagall Act. The Glass-Steagall Act of 1933 was a landmark piece of legislation that separated commercial banking from investment banking. This separation was intended to prevent the kind of speculative excesses that had led to the Crash of 1929.

• The act prohibited commercial banks from engaging in securities underwriting and other risky investment activities.
• It also established the Federal Deposit Insurance Corporation (FDIC) to protect depositors' savings.
• The Glass-Steagall Act was a major step toward regulating the financial industry and preventing future crises.

New Alliances and the Rise of New Bankers. The New Deal also saw the emergence of new alliances between presidents and bankers. While FDR was critical of the "money changers," he also recognized the need to work with the financial community to stabilize the economy.

• Bankers like Winthrop Aldrich of Chase and James Perkins of National City Bank became key allies of FDR, supporting his policies and working to implement his reforms.
• These bankers, while still pursuing their own interests, also recognized the need for a more stable and regulated financial system.
• The New Deal marked a shift in the nature of banker-president alliances, with a greater emphasis on collaboration and mutual benefit.

9. World War II: Bankers and the War Effort

In the 1970s, the nature of these alliances changed. Bankers now had a fresh source of power: the ability to “recycle” Middle East petrodollars and expand into Latin America.

Bankers and the War Effort. World War II provided another opportunity for US bankers to demonstrate their patriotism and expand their influence. They played a crucial role in financing the war effort, selling war bonds, and providing loans to the government and war-related industries.

• Bankers like Jack Morgan and Thomas Lamont, who had been instrumental in financing World War I, again stepped up to support the war effort.
• The war created a new sense of unity between the government and the financial sector, with both sides working together to achieve a common goal.
• The war also led to the establishment of new international financial institutions, such as the World Bank and the IMF, which would further solidify the power of US bankers.

The Shift in Alliances. While the war brought about a sense of unity, it also marked a shift in the nature of banker-president alliances. Bankers now had a fresh source of power: the ability to "recycle" Middle East petrodollars and expand into Latin America.

• The memories of the war and the Depression, and the sense of public spirit, had receded.
• Bankers like David Rockefeller and Walter Wriston were pushing presidents Nixon and Carter to do their bidding absent the kind of authentic personal ties that bound former bankers to former presidents.
• This more selfish stance solidified through the 1980s and 1990s, when the notion of US banks being "competitive" with strengthening European and Japanese banks paved the way for a spate of banking deregulation and enhanced banker power that extends through today.

The Rise of New Banking Titans. The war also saw the rise of new banking titans, such as Charles Mitchell of National City Bank, who were less tied to the old guard and more focused on aggressive expansion and profit-seeking.

• These bankers were less concerned with public service and more interested in maximizing their own wealth and power.
• They pushed the boundaries of regulation and sought to expand their influence both domestically and internationally.
• The war and its aftermath created a new landscape for banking, with a greater emphasis on competition and global expansion.

10. The Cold War: Global Finance and the Rise of New Banking Titans

Between the 1930s and 1960s, the bankers who most influenced presidents were on close personal terms with them. They influenced policy to suit themselves, to be sure; but in the postwar world, that worked well for the population.

The Cold War and Financial Power. The Cold War provided a new context for the relationship between bankers and presidents. The US government sought to contain the spread of Communism, and bankers saw an opportunity to expand their influence in the non-Communist world.

• The Cold War created a new sense of urgency and purpose for US foreign policy, which was often aligned with the interests of the financial sector.
• Bankers played a key role in financing the US military buildup and providing loans to allied countries.
• The Cold War also led to the creation of new international financial institutions, such as the World Bank and the IMF, which further solidified the power of US bankers.

The Rise of New Banking Titans. The Cold War era saw the rise of new banking titans, such as David Rockefeller of Chase and Walter Wriston of Citibank, who were more focused on global expansion and less concerned with domestic regulation.

• These bankers were adept at navigating the complex political and economic landscape of the Cold War.
• They used their influence to shape US foreign policy and promote the interests of American banks around the world.
• Their actions marked a shift in the nature of banker-president alliances, with a greater emphasis on global power and financial dominance.

The Shift in Alliances. The Cold War also saw a shift in the nature of banker-president alliances. While bankers continued to work with presidents, their relationships became more transactional and less personal.

• Bankers now had a fresh source of power: the ability to "recycle" Middle East petrodollars and expand into Latin America.
• The memories of the war and the Depression, and the sense of public spirit, had receded.
• By the 1970s, bankers like David Rockefeller and Walter Wriston were pushing presidents Nixon and Carter to do their bidding absent the kind of authentic personal ties that bound former bankers to former presidents.

11. The 1970s: Oil Crisis, Inflation, and the Limits of Power

In the 1970s, the nature of these alliances changed. Bankers now had a fresh source of power: the ability to “recycle” Middle East petrodollars and expand into Latin America.

The Oil Crisis and Petrodollars. The oil crisis of the 1970s, triggered by the Arab oil embargo, had a profound impact on the global economy and the relationship between bankers and presidents. The crisis created a new source of power for bankers: the ability to "recycle" petrodollars from the Middle East.

• The oil crisis led to a surge in oil prices, which generated massive profits for oil-producing nations.
• These petrodollars were then deposited in Western banks, which used them to extend loans to developing countries.
• This recycling process created a new cycle of debt and dependence, further solidifying the power of US bankers.

Inflation and Economic Instability. The oil crisis also contributed to a period of high inflation and economic instability in the United States. This created new challenges for presidents, who had to navigate the competing demands of bankers, businesses, and the public.

• The Nixon and Carter administrations struggled to control inflation and maintain economic stability.
• Bankers, while benefiting from the flow of petrodollars, also faced new risks and challenges.
• The economic turmoil of the 1970s highlighted the limitations of government power in the face of global financial forces.

The Limits of Power. The 1970s marked a turning point in the relationship between bankers and presidents. While bankers continued to work with presidents, their alliances became more transactional and less personal.

• Bankers now had a fresh source of power: the ability to "recycle" Middle East petrodollars and expand into Latin America.
• The memories of the war and the Depression, and the sense of public spirit, had receded.
• By the 1970s, bankers like David Rockefeller and Walter Wriston were pushing presidents Nixon and Carter to do their bidding absent the kind of authentic personal ties that bound former bankers to former presidents.

12. Deregulation and the 2008 Financial Crisis: A Century of Unchecked Power

Personal connections became merely opportunistic ones. Democratic president Bill Clinton and Republican president George W. Bush selected Goldman CEOs (in the form of Robert Rubin and Hank Paulson, respectively) to run the Treasury Department and network with the private bankers.

The Rise of Deregulation. The 1980s and 1990s saw a wave of deregulation in the financial industry, driven by the belief that free markets would lead to greater prosperity and innovation. This deregulation was actively supported by both Republican and Democratic administrations.

• The notion of US banks being "competitive" with strengthening European and Japanese banks paved the way for a spate of banking deregulation and enhanced banker power that extends through today.
• Personal connections became merely opportunistic ones.
• Democratic president Bill Clinton and Republican president George W. Bush selected Goldman CEOs (in the form of Robert Rubin and Hank Paulson, respectively) to run the Treasury Department and network with the private bankers.

The Repeal of Glass-Steagall. The repeal of the Glass-Steagall Act in 1999 marked a major turning point in the history of US banking. The act, which had separated commercial and investment banking, was seen as an obstacle to competition and innovation.

• The repeal of Glass-Steagall allowed banks to engage in a wider range of activities, including securities underwriting and trading.
• It also led to a wave of mergers and acquisitions, further consolidating power in the hands of a few large financial institutions.
• The repeal of Glass-Steagall was a key factor in the financial crisis of 2008.

The 2008 Financial Crisis. The financial crisis of 2008 was the culmination of decades of deregulation, speculative excess, and unchecked power in the financial sector. The crisis exposed the flaws in the US financial system and the dangers of allowing bankers to operate without proper oversight.

• The crisis was triggered by the collapse of the housing market and the subsequent implosion of the subprime mortgage market.
• It led to a global recession and a massive government bailout of the financial industry.
• The crisis highlighted the need for greater regulation and accountability in the financial sector, but also revealed the extent to which the bankers had captured the political system.

Last updated: January 14, 2025