Based on extensive research at the FDR Library in Hyde Park, NY, author Peter Moreira describes Morgenthau’s truly breathtaking accomplishments: He led the greatest financial program the world has ever seen, raising $310 billion (over $4.8 trillion in today’s dollars) to finance the war effort. This was largely done without the help of Wall Street by appealing to the patriotism of the average citizen through the sale of war bonds. In addition, he championed aid to Britain before America entered the war; initiated and oversaw the War Refugee Board, spearheading the rescue of 200,000 Jews from the Nazis; and became the architect of the 1944 Bretton Woods Conference, which produced the modern economic paradigm.
The book also chronicles Morgenthau’s many challenges, ranging from anti-Semitism to the postwar “Morgenthau Plan” that was his undoing.
This is a captivating story about an understated and often overlooked member of the Roosevelt cabinet who played a pivotal role in the American war effort to defeat the Nazis.
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The Jew who defeated Hitler
Henry Morgenthau Jr., FDR, and How We Won the War
By Peter Moreira
Prometheus BooksCopyright © 2014 Peter Moreira
All rights reserved.
BATTLING THE AGGRESSORS
* * *
Henry Morgenthau Jr. was growing frustrated that his two most brilliant aides just didn't understand what he was hinting at. It was late on Tuesday, October 11, 1938, and the Treasury Department's chief counsel Herman Oliphant and Harry Dexter White, the director of monetary research, had come to Morgenthau's wood-paneled corner office to persuade him once again to recommend that the president impose countervailing duties on Germany and Japan. They knew Morgenthau supported such a policy. All senior Treasury officials hated the rightist aggressors, and nobody more so than the Treasury secretary himself. Even Morgenthau's secretary, Henrietta Klotz, who was silently taking notes at the meeting, hoped the department could do something to halt the extremists' steady advance. And yet as Oliphant and White outlined their plan, the secretary kept suggesting there was a problem, obviously hoping that they would pick up on what he wanted.
Oliphant told the Treasury secretary that the president had the authority to impose a 50 percent duty if he found a country discriminated against the commerce of the United States. And under section 338 of the Tariff Act, he reminded Morgenthau, the Treasury had already found eleven to thirteen instances of Germany discriminating against the United States. Morgenthau heard him out and focused on one question: Why? Why impose these duties on Germany and Japan and not on other countries? The two men across the desk from him fumbled for a response, even though they were widely considered to be intellectual heavyweights compared to their boss.
Morgenthau perplexed many in Washington because he seemed dimwitted but ran arguably the most efficient department in the capital. Historian Arthur Schlesinger Jr. was not alone when he pondered how the man could possess such a simple mind yet be such an able administrator. The forty-eight-year-old Morgenthau was six feet one inch tall and bald; his pointed nose and pince-nez glasses gave him a birdlike appearance. He had gained a moderate girth in adulthood, despite walking two miles to work each day. "He is slow-thinking and slow-speaking," wrote Joseph Alsop and Robert Kintner in the Saturday Evening Post. "He has an exasperating habit of repeating statements which he thinks important, occasionally stutters and is always forgetting names. When his memory fails him, he snaps his fingers and utters a sort of low cry, intended as an appeal to his companion to supply his deficiency. He is self-conscious without being self-confident, a born worrier and inclined to be suspicious." In the middle of World War II, Time would write: "His eyes light up behind his pince-nez when he shakes a stranger's hand. But his shyness is so painful that he can never relax. Only a few men like Franklin Roosevelt have known the human warmth that lies behind Morgenthau's deaconish mien. Most others have decided, after a time, that he is suspicious, autocratic, a real cold fish." Former National Recovery Administration head Hugh S. Johnson tagged Morgenthau with the nickname "Henry the Morgue," accentuating the secretary's lugubrious features. (Johnson assigned similar nicknames to most members of the Roosevelt circle, so Frances Perkins became "Franny the Perk," Harry Hopkins "Harry the Hop" and Harold Ickes "Harold the Ick.")
Yet Morgenthau was a forceful character, rarely backing down from a fight with a peer. He often pouted if Roosevelt berated him, but he would also tell the president things the chief didn't want to hear. He was known for his ethics, largely because he refused to offer patronage positions to undeserving Democrats. He and his wife were known to have one of the soundest marriages in official Washington, and their children were universally admired. If Morgenthau did have a moral shortcoming, it was that he enjoyed the perks of high office. He was criticized in 1933 for spending $1,406 of public money to install a shower and a cooling system in his office when he ran the Farm Credit Administration. He would have the officers of the Secret Service (then a division of the Treasury) pick up his wife in New York and drive her to Poughkeepsie, and he liked the use of his twin-engine Lockheed coast guard plane to fly to Dutchess County on the weekends at a time when air travel was still the preserve of relatively few. Seven months after the attack on Pearl Harbor, he had the Treasury general counsel contact the Office of Price Administration, which oversaw war rationing, to explain that Morgenthau needed extra gasoline for the Plymouth station wagon on his farm because he used it, among other things, to visit the president. But these were mere bagatelles for a man whose ethical values were so strong that his staff often said they joined the Treasury because of its idealism.
Oliphant had been with Morgenthau longer than any of the other Treasury personnel (other than Klotz), so the lawyer was the one who now pushed the countervailing-duties issue. A shy, tireless man whom Time magazine described as "grey-locked, hollow-eyed," he suggested the president could draw a distinction between trade from Germany and Japan on one hand and the rest of the world on the other. He was supported by White, a compact, Harvard-trained economist who had joined the Treasury in 1934. White had a gruff manner that offended many colleagues, but he was known to have a profound intellect and was respected throughout Washington. "They're discriminating against our trade and possibly by the imposition of that additional duty ... [we] may help them to abandon that practice and thereby in the long run increase our trade," he suggested, trying to make Morgenthau see how the duties would benefit the United States. Though they had worked on this brief for years, Morgenthau still asked Oliphant and White why he should make such a recommendation to the president. The two aides came up with answers, and Morgenthau battled back, demanding better reasons for the recommendation.
Finally, the counsel stated the real reason they were having the discussion. Oliphant said he would like duties to be imposed against Japan because it would be decisive in helping China in its escalating Asian war. "And I would do it in the case of Germany because it might very well be decisive in the struggle between that grisly thing in Europe and the sort of institutions we know about."
Oliphant had said it. They were going after the two most potent aggressor states because the Treasury officials believed they threatened the entire world, including the United States. For the five years the Democrats had been in power, they had watched the right-wing dictatorships expand at a frightening rate. Just the day before, German troops had completed their occupation of the Sudetenland in Czechoslovakia, the result of the embarrassing acquiescence of Britain and France at the Munich summit in late September. In the two years before that, Germany had seized Austria and the Rhineland. Italy under Benito Mussolini had invaded Ethiopia in 1935, gaining control of the African nation in 1936. In Spain, Generalissimo Francisco Franco's Loyalist forces were into the endgame of their bloody civil war. The democratically elected Republicans were clinging to two coastal areas in eastern Spain, and the news of the appeasement at Munich had broken their morale. Across the globe in Asia, Japan was moving at will through China. The island nation had been expanding since it occupied the Korean Peninsula in 1910 and had captured Manchuria, in Northeast China, in 1932. Since 1936, the Japanese occupation of China had advanced as it captured Peking (now Beijing), surrounded Shanghai, and committed the horrendous massacre in Nanking in December 1937.
Of all the members of Roosevelt's cabinet, Morgenthau was most aware of the frightening advance of right-wing extremists. He hated the Nazis with an all-consuming passion. No doubt the fact he was Jewish contributed to this hatred, though a more important factor was his abiding love of democracy and American liberty. As a minority who lived in considerable luxury, Morgenthau had always believed his family could enjoy such a station in life only in a country that guaranteed personal liberties as the United States did. He was consistent throughout his life in his admiration for democratic countries and contempt for totalitarianism, except for a blind spot to the evils of the Soviet Union. He had been warning about the perils of German, Japanese, and Italian aggression in and out of cabinet for years, more so than any other secretary. On December 20, 1936, Morgenthau delivered a speech to the Federation of Brotherhoods of the Temples and Synagogues of Baltimore, calling for America to rededicate itself to the preservation of democracy and freedom. "In 1936, there are any number of lands which have rejected democracy without having tried it, or have experimented with it and then pronounced it wanting," he said. "And even in countries possessed of long sustained democratic traditions, there are those who insist that ours is not the best pattern for social living." He added that the need to preserve democracy was especially important for minorities, who can thrive and practice their religions and traditions within a democratic system. Morgenthau delivered this speech ten months before Franklin Roosevelt gave what became known as his Quarantine speech in Chicago, in which he called for a policy to "quarantine" aggressor states as an alternative to the neutrality so prevalent in the United States. By any measure, FDR's speech was restrained, but it resulted in an uproar by isolationists, who accused the president of trying to draw Americans into another European war. Hamilton Fish, the ranking Republican on the House Committee on Foreign Affairs, called it "dangerous, hysterical and inflammatory."
Roosevelt continued to scheme privately against the aggressors, but his cabinet in late 1938 included only two fervent antifascists: Morgenthau and Secretary of the Interior Harold Ickes, both officially responsible mainly for domestic issues. The secretaries with foreign-affairs portfolios were Secretary of State Cordell Hull and Secretary of War Harry Woodring, a confirmed isolationist. Hull was by no means an isolationist. In fact, he had devoted his tenure in the State Department to increasing US trade with other countries. Given that his wife, Rose, was Jewish, he also understood that brutality was the essence of Nazism. But he was ferocious (as much as this silver-haired, soft-spoken gent from Tennessee could be ferocious) in his devotion to the Neutrality Acts. First enacted in 1935 and renewed annually, these acts prohibited the United States from dealing arms to combatants in a foreign conflict and, in effect, all but prevented the country from aiding the victims of aggression.
It would be wrong to say that Morgenthau disliked Hull or that they were members of different factions. There were no factions in the Roosevelt cabinet largely because the president never allowed any to develop. In fact, the president never let any secretary feel secure enough to form his own faction. But Morgenthau and Hull had profound differences of opinion on foreign policy, which was, after all, Hull's bailiwick. "Despite the fact that he was not at all fully or accurately informed on a number of questions of foreign policy with which he undertook to interfere, we found from his earliest days in the Government that he seldom lost an opportunity to take long steps across the line of State Department jurisdictions," Hull wrote of Morgenthau in his memoirs. He hinted that Morgenthau's motivation was often that he was "emotionally upset by Hitler's rise and his persecution of the Jews" rather than a rational belief that Nazism threatened the United States.
Now Morgenthau's two senior advisers wanted him to go to Roosevelt to say the president had the option to impose duties on the commerce of the aggressor states. Morgenthau told Oliphant and White bluntly that it was a waste of time and that they couldn't penalize these countries just because they didn't like their governments. He didn't have to add that they all knew the State Department would block any optional policy to set the tariffs.
"What I'd hoped you'd say, what I'm begging for you to say, is that it's illegal not to set. See?" he said. "Now if it's just a question of judgment, of aims, I can't get anywhere. But if you say to me that as Secretary of the Treasury the law directs me ... then I have something to work with."
Morgenthau had a tendency to fumble for his words, and he often sputtered out confusing phrases like "illegal not to set." Often when instructing his staff, he talked around a subject, on and on, rarely stating categorically what he wanted but always letting them know what he meant. It frequently took several sentences for him to convey his meaning. He now said he had only so much influence with the president, and White finally understood, saying he knew the secretary wouldn't get to first base with an optional proposal.
They agreed Oliphant and White would examine the matter again, but before they broke up, Morgenthau wanted to read out something White had handed him before the meeting. It was a draft letter the economist and his wife had prepared that weekend that they hoped the secretary would sign and hand to the president. Morgenthau now began to discuss it then read it out loud.
"The events of the past weeks have brought home to all of us the increasing effectiveness of the forces of aggression," the note began; it then went on to document the heinous advance of dictatorships in the past five years. It made quite clear that the aggressor states were a threat to the United States and that only the US government under Roosevelt had the wherewithal to stop them. The letter finished with a passionate appeal for Roosevelt to act.
"Mr. President, I beg that you will not let pass this historic opportunity of a first effective economic measure against aggression, this great moral gesture so sorely needed in a world in which 'appeasement' has superseded morality," concluded the letter. "I have never felt more sure of the wisdom of an investment; I have never felt more sure of its urgency."
When Morgenthau finished, they all congratulated White, and Morgenthau's enthusiasm began to grow. He realized the potential of the letter. He knew Roosevelt in his heart of hearts understood the United States had to stand up to the aggressor nations. What he needed was a call to action. But Morgenthau also knew what the letter was missing. He directed White to rework the letter to include two proposals—first, to extend credit to China; and second, to use the US reserves of gold to help develop Latin America. He noted that if Germany's neighbors contained it, Hitler would have to come to the New World for the raw materials needed for his armament program. By increasing its presence in Latin America, the United States could influence decision making among the southern governments and deny Germany that market. Then Morgenthau revealed the true intelligence of his proposals. He knew that two senior State Department officials, Herbert Feis and Stanley Hornbeck, wanted to aid China, and another faction gathered around Under Secretary of State Sumner Welles wanted to bolster US influence in Mexico and South America. Morgenthau told his aides that they could gain support from the two largest blocs within the State Department by uniting these policies, and in doing so they might be able to outflank Cordell Hull. It was a clever stroke—the type of gambit that demonstrated Morgenthau was cleverer than his reputation.
Morgenthau was now upbeat and ready to fight the State Department. In a more cheerful mood, he told Oliphant, White, and Klotz that the previous night he and his wife had eaten dinner with two other Roosevelt advisers, Tommy Corcoran and Ben Cohen, usually identified with the left wing of the party, the group often hostile to Morgenthau. They'd discussed the growing international problems, and Morgenthau had spoken of the need to confront aggressors. Corcoran, known as Tommy the Cork, proposed that they assemble a group of fifty hawkish senators and make them a unified force with Morgenthau at the center. Morgenthau graciously declined, likely because he would do nothing to jeopardize his standing with FDR. Corcoran understood but added that Morgenthau had the type of unified department needed to fight the burgeoning enemy. "He was kind enough to say that in the Treasury I have the most loyal group of any other department in Washington," Morgenthau told them. "He said, 'You've got the nucleus; you have—you're the only department that has the nucleus.'"
Morgenthau knew that nucleus was sitting in that wood-paneled office with him. Oliphant and White were probably as brilliant as any civil servants in Washington. And in Klotz, Morgenthau had a completely stalwart adviser whose value extended far beyond her work as a secretary. At the center of it all was Henry Morgenthau Jr. himself. He was the one controlling this crucial engine of government at a critical moment in the history of not just the United States but also the world. Few people realized it, and none would have believed it possible a decade earlier. For in his first four decades, it looked as if Henry Morgenthau Jr. would never amount to much of anything.
Excerpted from The Jew who defeated Hitler by Peter Moreira. Copyright © 2014 Peter Moreira. Excerpted by permission of Prometheus Books.
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Table of Contents
1. Battling the Aggressors, 17,
2. The French Mission, 39,
3. The Gathering Storm, 61,
4. The Phony War, 83,
5. The Assistant President, 103,
6. Aiding Britain, 121,
7. Lend-Lease, 147,
8. The Sinews of War, 171,
9. The Jews, 195,
10. Bretton Woods, 223,
11. Octagon, 245,
12. The Morgenthau Plan, 265,
Select Bibliography, 331,