The Rise and Fall of Andrew Mellon
This is an exclusive excerpt for The American Prospect from the new book Goliath: The 100-Year War Between Monopoly Power and Democracy, by Matt Stoller, out this month from Simon & Schuster.
Inauguration day, March 4, 1921, was cold and clear. A new president, Warren Harding, stood outside the Capitol in a velvet collar and a dark coat, flanked by approving wealthy men in silk hats. This was their president, their guy. Finally. After twenty years of absurd reform and fights over “progressivism,” first from the odious egomaniac Teddy Roosevelt, and then the catastrophic Woodrow Wilson, the people had come to their senses and returned power to society’s natural rulers.
The theme of the campaign Harding had run to devastating effect was “a return to normalcy,” which he conveyed in his very persona. Harding was not particularly competent, and he knew it. He once described himself as “a man of limited talents from a small town.” For his inaugural address, the new president gave a stilted speech illustrative of his commitment to mediocrity.
But at his inauguration, the wealthy backers of the new president clapped at his financier-friendly phrases as if it were poetry. Harding was their dream, a candidate whose very lack of talent had appealed to a nation looking for calm.
The triumph over progressives was total. Harding had restored the old coalition of 1896, winning sixteen million votes to the Democratic nominee’s nine million, 60.3 percent to 34.1 percent. The GOP even penetrated the Confederate South, taking Tennessee, and safe Democratic states such as Arizona and Oklahoma. Not a single Democrat won a Senate or governor seat anywhere outside the South. In 1912, Wilson had started with House and Senate majorities; now the Republicans would have a super-majority of 303–121 in the House, and 70–26 in the Senate.
After his inaugural speech, Harding introduced the man who was to run the Treasury Department, a man who would become far more important than the president who hired him. Andrew Mellon had a quiet demeanor, rail-thin bearing, and beautifully manicured hands. His habit of taking long vacations, his age, his manners, and his soft-spoken shyness might have been mistaken for weakness and frailty in someone else. Mellon may have been born rich, but he was not soft. He was a hard man, a banker, an emperor of money, an owner of several companies later included in the Fortune 500. He would help lead the restoration of rule by private financiers.
President Warren G. Harding formally appointed Mellon under the pretense that a plutocrat like Mellon was so rich he couldn’t be bought. The real reason was that a Mellon Bank had lent $1.5 million to Harding’s campaign in 1920. Mellon had become bored with being a mere tycoon. As one of his enemies put it, “Mellon needed a change, and the Grand Old Party needed the cash.”
Mellon’s appointment was probably illegal. A statute from 1789 prohibits the treasury secretary from engaging in commerce or trade, an absurd expectation for a man with such industrial power. The founders had also written a law blocking the treasury secretary from holding bank stocks, another absurdity. Mellon overcame these legal restrictions by pretending to sell his assets to his brother. The rules existed for good reason: a man clothed in public power should not use that power for private ends, though Mellon did exactly that throughout the 1920s. Mellon explained the need to raise tariffs to protect domestic industrial monopolies to Harding even before the election. Harding dutifully mentioned tariffs in his inaugural address.
Mellon left even the other millionaire politicians shocked at the scale of his reach. In one cabinet meeting, the discussion turned to whether the government should shut down a government war plant, or refurbish it with additional investment. Mellon observed he owned a similar plant, which cost $12 million, roughly the same value as the one the government was considering closing. He had the same dilemma, to spend money maintaining an unprofitable but valuable plant. “I scrapped mine,” he said.
In another, someone brought up the Chinese Eastern Railway. The president whispered to his attorney general, “Now we’ve got him. Surely he wasn’t in on this.” Harding asked if Mellon had any interest in the railroad. “Oh yes,” came the casual answer. “We had a million or a million and a half of the bonds.”
“He’s the ubiquitous financier of the universe,” marveled Harding.
Harding, so healthy at his inauguration, became consumed by corruption scandals, and ended up dying within three years of taking office. Mellon, by contrast, would remain treasury secretary for eleven years, under three presidents. Or, as progressive senator George Norris put it in a common joke of the era, “three presidents served under him.” The decade might have started with Warren Harding’s presidential victory, but the political economy of the 1920s would be structured by Andrew Mellon.