By Andrew F. Laverdiere
With the current government shutdown ongoing by the Democrats over their “heroic” defense of the Wall Street/insurance cartel bailout abomination known as the Obama Affordable Care Act, lets remember that since 1976, the government has shut down 21 times, the longest, the Dec 22, 2018 shutdown of 35 days.
During the 1976 campaign, Jimmy Carter stated his intention of achieving a balanced budget, the first ever announced by a recent president. Ever since the end of the Bretton Woods Monetary System in 1971, de-industrialization, deregulation, the introduction of globalization, the ever expanding military presence globally that is nearly up to a trillion dollars annually, and numerous bailouts of the financial system, balancing the budget has become the central obsession with congress besides the amount of time spent kissing rich people’s asses (i.e. fundraising).
As was joked during the 1990’s during the Gingrich Gramm Conservative Revolution rampage, “how can unbalanced minds balance a budget?’ The failure of budget-cutting can be traced hereditarily to the axiom which underlies its thinking: that one can manage a national budget the way one manages the budget of a household. This insanity derives from John Locke’s misbegotten conception of economics.
On Feb. 24, 1995, Sen. Phil Gramm, in announcing his intention to run for President, stated, “As President, I will balance the federal budget the way you balance the family budget.”
In 1691, Locke stated, in his pro-usury tract “Some considerations of the Consequences of lowering the Interest and raising the Value of money“: “It is with a kingdom as with a family. Spending less than our commodities will pay for, is the only sure way to grow rich.”
This is the same John Locke who, as the English Commissioner of Trade from 1696 through 1701, tried to outlaw all American manufacturing (specifically listed in the Declaration of Independence as one of the abuses of the British king), and who in drafting a constitution for the colony of Carolina in 1669, called for the permanent institutionalization of an aristocracy and of slavery. This outlook has seeped deep into the thinking of many Americans, who do not question its underlying premise.
Had more congresspeople (or more appropriately, their baby sitter staffers) bothered to study other economists beyond those that worked for the British Empire, one would read Alexander Hamilton, America’s first treasury secretary, as he stated in his series of the Federalist Papers and his 1791 “Report on the Subject of Manufactures“, that if the State, acting dirigistically, providing indispensable functions which only the nation-state can provide, successfully increases economic activity, this will generate greatly increased flows of tax revenue, which more than cover the spending functions of the State. The budget will balance itself.
And indeed, it did up until a Ku Klux Klan and Confederate loving professor from Virginia implemented a policy of subverting the government once he was president in 1913.
As far back as 1884, Woodrow Wilson in his book Congressional Government attacked the very idea of budget surpluses! Wilson stated: “From almost the very first they [Congress] have had boundless resources to draw upon, and they have certainly of late days had free leave to spend limitless revenues in what extravagances they pleased . … The chief embarrassments have arisen, not from deficits, but from surpluses.”
He continued, “The object of our financial policy, however, has not been to equalize receipts and expenditures, but to foster the industries of the country.”
He then praised the British Chancellor of the Exchequer, for whom “the support of the government is everything,” and attacked the U.S. House Ways and Means Committee, for which “the care of the industries of the country is the beginning and end of duty.”
Wilson boasted that he was among the “first Americans . . . to entertain any serious doubts about the superiority of our own institutions as compared with the systems of Europe.”
While the scope of the article doesn’t allow for full coverage of the level of treasonous subversion that President Wilson (1913-1921) implemented as a continuation of Teddy Roosevelt’s love affair with an Anglo-American special relationship thanks to his Bull Moose campaign which sabotaged William Tafts re-election campaign, a short list is required: the creation of the 1913 Federal Reserve Act on behalf of the coterie of British allied Wall Street bankers that met at Jekyll Island Georgia at the behest of Paul Warburg; the Internal Revenue Service (IRS) as the debt collectors for the British oligarchy; the Federal Bureau of Investigation under 32 degree mason, klan member and homosexual cross dressing J Edgar Hoover as the secret police enforcer for the bankers; the mass recruitment to the Klu Klux Klan through his endorsement of the D. W. Griffith film “The Klansman” later titled “Birth of a Nation” based on Wilson’s college chum Thomas Dixons book about a KKK coup in South Carolina in 1871; using the deliberate sinking of the Lusitania to propagandize for entering WW1 on behalf of the British Empire and their Entente Cordiale; the 1915 military invasion of Haiti and imposition of a military government on behalf of England and France; the military invasion of Mexico in 1914 around the oil export ports of Veracruz and Tampico in behalf of Standard Oil (read War Is A Racket by Gen. Smedley Butler); and the invasion of Russia 1918-20 as part of the allied British, French, Australia, & Canada military operation against the Bolsheviks which Wall Street banker Jacob Schiff had financed to begin with.
Of course, any discussion of Wilson shouldn’t leave out his British agent-of-influence handler, Col. Edward M. House. An anglophile from the beginning thanks to his rich English father, his political career began when he steered a number of former confederates into governorships culminating in his prize of managing Wilson’s presidential campaign.
During the campaign House anonymously published a manuscript “Philip Dru, Administrator” which lauds dictatorship and economic empire! The “hero” seizes power by a violent coup, overthrows the U.S. Constitution, initiates a policy of global free trade and negotiates a successful alliance between the United States and Great Britain to rule the world all the in the name of Progressivism!
Reviewer Godfrey Hodgson notes “Philip Dru is a profoundly authoritarian vision, not of a democratic leader but of an “administrator”… House’s hero is a dictator in the original sense, a strong man who knocks heads together when the constitution government is incapable of responding to deep-seated social problems.”
Hodgson also emphasizes the cozy wartime relationship with the cream of British elites. “In America’s wartime relations with Britain, House was the key figure.
He worked closely with British Intelligence chief agent Sir William Wiseman and dealt with intimate equal with the British war leaders, Herbert Asquith, Arthur James Balfour (he of the Balfour Accords that created the state of Israel), and David Lloyd George.
He went everywhere in Britain: He stayed at Cliveden with the Astors, dined with the PM at Downing Street, and got on famously with the king.” Lastly, House’s involvement with The Inquiry and then the League of Nations, a secret committee of the allied powers to essentially divide the German, Austro-Hungarian, and Ottoman Empires as they pleased involved Fabian scribbler Walter Lippman to lure Germany into cooperation with the bait of Wilson’s 14 points after which they ignored them. Milner Round Table member George Beer, a direct influence of geopolitical manipulation that made a mockery of “Wilsonian democracy” with the economic looting under the Versailles Treaty, occupation, and hyperinflation that laid the basis for Fascism and Nazism later. Houses involvement with the League of Nations, an effort at global dictatorship, comes from his endorsement of Sir Edward Grey as the initiator and General Jan Smuts and Lord Robert Cecil as the brains of the movement.
To return to the subject of those horrible surpluses professor Wilson complained about, its useful to consider the simplicity by which each executive department merely submitted individual budgets to the appropriate authorizing committee in Congress and they authorized what the department needed.
When it was combined with policies of internal improvements, protective tariffs, and government issued credit for productive industrial enterprises, it produced surpluses. From 1910 to 1920, a series of commissions were initiated in order that this “inefficient system” be replaced with “scientific” methods of fiscal management.
In 1921 a Bureau of the Budget was established headed by Charles Dawes of which we’ll hear about later. Congress responded by creating the appropriations committee as a buffer between Federal departments and their authorizing committees.
Later in 1974 the congress created the House and Senate Budget Committee and Congressional Budget Office over President Nixon’s refusal to spend money that had been appropriated which has authority over both the authorizing and appropriations committees. The effect of course has been the severing of our elected representatives from economic policy making beyond handing out money once in a while to pet projects or pork barrel projects geared towards re-election.
In 1884 Woodrow Wilson declared “Probably the best working commission would be one which should make plans for government independently of the representative body.”
William F. Willoughby, a member of those early commissions admitted that “It is desirable to point out the great possibilities that are embraced in a system determined by an outside organization which has no legal status and has no control other than that which it is willing to impose on itself.” Even more telling is Willoughby’s 1932 essay in American Political Science Review “Popular government, in the United States at least, took its rise at a time when there was an almost unquestioned belief in the doctrine of natural law and natural rights. Government by the people was held to be not merely the form of organization that would best achieve the ends of political action, but the only form that had moral and philosophic justification. There are few students of politics and jurisprudence who now hold to this doctrine. This being so, popular government, if it is to be justified, must be justified by its results.”
To put his thoughts in context, its useful to note his research organization eventually morphed into the Brookings Institute, one of the many think tanks in Washington DC that puts an official imprint on the British liberal imperialism that dominates policy thinking. Perusing their latest annual report, you see all the modern accoutrements; DEI, climate change, demonizing Russia and China, countering disinformation, the dangers of white christian nationalism, etc.
As a side note, I would strongly recommend reading what the founding fathers like Ben Franklin, George Washington, Alexander Hamilton,Thomas Paine and Gottfried Leibniz’s thoughts were on Natural Law versus Positive Law as an antidote to the usual drivel promoted by them and other free trade outlets.
The aforementioned Brookings Institute, the result of study groups formed to investigate “scientific government” and efficiency during the mobilization for WW1, was led by Robert Brookings, a successful businessman from St. Louis. His loyalties (thanks no doubt to a loan from a British bank that saved his company from bankruptcy) can be summed up in an article he wrote in 1926 about the upcoming Pan-Europe conference in Vienna.
Echoing similar themes from British propagandists such as Fabian Socialist H. G. Wells about the dire need of eliminating nationalism and adopting a global dictatorship (led by the British Empire naturally), Brookings gives a fair description of the American System of Henry Clay and Daniel Webster, and the need to protect the young United States economy from the depredations of France and England. He then goes into the figure of Friedrich List and his importation of the American System into Germany with the Zollverein (Customs Union) whose protective tariffs hurt poor wittle old Britain!
These 19th century policies he somehow contrives to put full responsibility for all the economic woes of Europe following the utter devastation following the Great War. Historian Carroll Quigley in his epic book, Tragedy and Hope—A History of the World in Our Time (New York: MacMillan Company, 1966), accurately describes Pan-Europe as a thinly disguised Catholic movement standing in opposition to Bolshevism but in reality as nothing more then a bankers dictatorship ostensibly by Hjalmar Schacht (later to be Hitler’s finance minister) but conceived of by Venetian Count Coudenhove-Kalergi as a global system modeled on the Roman Empire, governed by the “science” of eugenics, violent hatred of industry in favor of “mother earth”, opposition to “artificial” urban life in favor of “natural” pastoral life, the breakup of nation-states into small ethnic-religious or tribal satrapies, and the philosophy of Nietzsche.
Enter Charles Dawes
Born in Marietta, Ohio in 1865, Dawes attended Cincinnati Law School before beginning a legal career in Lincoln, Nebraska, more to participate in the advantages of a fast-growing economy than to engage in the practice of law. In the seven years he lived there he earned a reputation as an intelligent, ingenious, persuasive, alert businessman. He controlled a city block of business offices, controlled a meat packing company, acted as director of a bank, and was an investor in land and in bank stocks. He laid the foundation for his large personal fortune in 1894, when he purchased control of a plant manufacturing artificial gas in La Crosse, Wisconsin, and of another plant immediately to the north of Chicago following the Panic of 1893.
I had the lucky chance of finding a small book Dawes wrote in 1894 entitled “The Banking System of the United States and its Relationship to the Money and Business of the County”.
The context of the time he wrote it was during the 2nd Grover Cleveland administration which was the first Democrat to gain the white house since before the Civil War and his anti-tariff, pro-free trade, Laissez Faire policies, and rise of British think tanks like the Cobden Club.
For the most part, the book is fairly decent description of the system of National Banks that existed at the time before the Wall Street coup in 1913 with the Federal Reserve. The system of credit and the nature of the currency are comprehensively covered and he sums up the fierce debate that was ongoing between the factions that argued for gold solely or bi-metalic currency or parity between gold and silver following the 1879 Specie Resumption Act that discontinued the Lincoln era dominance of the Greenback and put us at the mercy of the City of London. Alan Salisbury’s book “The Civil War and the American System” is the best resource as far as the history of that time and what the major economists were saying. There are three separate times in the book where Dawes cites John Stewart Mill of the Haileybury School of the East India Company and his constant use of Supply and Demand to describe things.
The last two chapters are of particular interest, “The truth of the matter is that no man lives, no government exists which can devise an absolutely equitable currency system. No inflexible system can be ample enough to accommodate itself successfully to what are known as panic times. The crying need of the day is for a currency so flexible enough in the hands of the government when bank credit currency is diminished by widespread withdrawals of deposits and life-blood is being drawn from business it can be increased by the government under such plans as exist in England today or under some other proper restrictions or in some way used to lessen the awful process of such a liquidation as that of 1873 and 1893.”
Those two dates are of interest, in particular 1873. The panic of that year was caused by economic warfare by London and Wall Street against the banking house of Jay Cooke.
With Abraham Lincoln asserting constitutional control over the issuance of currency (greenbacks) through the National Currency Act on Feb. 25, 1863 and the National Banking Act on June 3, 1864, Cooke became the sole financier of 5:20 bonds that largely financed the Civil War because they were marketed to average citizens. Later, the financing of the transcontinental railroad would be accomplished by Cooke’s methods that drove the rapid industrialization of the nation in addition to Cooke assisting the Japanese Meiji government to begin industrializing.
In 1872, Drexel, Morgan and Co. circulated libels against the solvency and honesty of Jay Cooke’s bank and the Northern Pacific Railroad he was building, “predicting” an anti-Cooke panic.
The lies were printed in the Philadelphia Ledger—controlled by Anthony Drexel; and in the London Times (Ledger editor George Childs was an “intimate house guest” in London with Times financial editor H.B. Sampson). The lies were reprinted as leaflets, passed around in banking circles in Europe and America. Scandals were simultaneously gotten up against the completed Union Pacific, frightening Congress away from further supporting Cooke and the construction of the Northern Pacific.
On Sept. 18, 1873, Jay Cooke and Co. collapsed, detonating a worldwide crisis and a depression of many years’ duration. Northern Pacific Railway construction was halted. The panic-stricken New York Stock Exchange closed for a week. J P Morgan not ironically came out of the crisis with a $1 million profit.
1893 was a severe global crisis lasting from May of 1893 to November, 1893, with a run on currency, and banks closing, and businesses and manufacturers not being able to open because they had not cash to pay workers or buy materials. The panic began when the Argentina government defaulted on 43 million pounds (21 million which was loan for water and sewage projects in Buenos Aires) to Baring Brothers in London (those of you who are seeing the parallels to president Trumps recent $20 Billion bailout of the international creditors of the Javier Milei government, award yourself a star).
The panic included precipitous declines in the stock market, the failure of Wall Street brokerage houses, and the failure of 158 national banks mostly in the South and West. Other bank failures included 172 state banks, and 177 private banks, as well as 47 savings banks and 13 loan and trust companies and 16 mortgage companies. The panic started in New York and spread to the rest of the country. During the summer of 1893 commercial, industrial and manufacturing depression accompanied financial panic. Businesses failed and several major
Baring Brothers railroads, with Chicago as their transportation hub, went into receivership, and control of ‘unprecedented mileage’ was handed over to the state and federal courts in bankruptcy. For the year ending in June, 1894 over 125 railroads went into receivership. To cover the default the Bank of England borrowed from the Bank of France which borrowed from the Bank of Imperial Russia, and in November of 1893 there were numerous bank failures and run on currency in Europe. The financial crash of 1893 would have come sooner to America had there not been a bumper crop of wheat in the face of European famine, and thus gold temporarily poured into the coffers of United States banks. Then there was a political revolution in Brazil, followed by a banking crisis in Australia. And the economic depression in France and Germany depressed the price of silver.
Taking advantage of the situation, the house of J. P. Morgan led a raiding expedition on the U.S. Treasury. Morgan would redeem U.S. legal tender greenback notes, drawing the gold supply at the Treasury below $100 million in gold (which was considered a minimum safety level). The Treasury would then have to purchase gold abroad, through a London gold selling house. The U.S. paid exorbitant interest rates on the borrowings to get the gold; Morgan intermediated and took a cut on the U.S. purchase of gold from London. Once the gold was parked in the U.S. Treasury, Morgan, joined by Jacob Schiff, Ned Harriman, and others, presented the U.S. Treasury with greenbacks for redemption and drew the level of gold at the Treasury below the critical $100 million once again.
The last chapter goes over ideas being mulled over in Congress about a minor tax on the national banks that would go toward a fund in the US Treasury that would provide for the reimbursement of depositors in failed national banks. This would not be realized until the Franklin Roosevelt administration’s New Deal banking reforms like the Glass-Steagall Act, and the Federal Deposit Insurance Corporation were implemented. His reforms required freeing the United States from the stranglehold of the British which was accomplished early on by the public prosecution of the tycoons of Wall Street under the Pecorra Commission and FDR’s refusal to adhere to the December 1932 London Monetary Conference which was put together by the League of Nations and led by the Bank of International Settlements and Bank of England around the theme of “maintain a fundamental equilibrium in the balance of payments” of countries around a global gold standard.
Those those who have a fetish for gold and typically rant about FDR, be aware that in 1931, Britain itself went off the gold standard which caused a severe draining of gold from the United States in addition to a flood of British goods that destroyed a lot of US manufacturing. When you keep all this in mind, you wonder about the loyalties of gentlemen like Dawes by inconveniently not mentioning the causes of major crisis situations. Was his research faulty, or just deliberately vague?
Eventually, Dawes and his brothers controlled twenty-eight gas and electric plants in ten states. In 1902, turning over to his brothers the management of the utilities, he entered the third phase of his business career, that of banking. He founded and became president of the Central Trust Company of Illinois, often referred to as the «Dawes Bank», and spent virtually full time in its management until 1917. The comptrollership of the currency was Dawes’s first official governmental position. President William McKinley, for whom he had acted as a fund raiser in the 1896 campaign, had appointed him in 1898, and in 1901 promised to support him as a candidate for the Senate from Illinois. When McKinley was assassinated, Dawes, shorn of presidential support, withdrew his candidacy.
In 1917 Dawes received a commission as a major in the army and twenty-six months later was discharged as a brigadier general. While on General Pershing’s staff he integrated the system of supply procurement and distribution for the entire American Expeditionary Force and later performed an analogous service for the Allies by devising an inter-Allied purchasing board, as well as a unified distribution authority. In 1919, despite the opposition raised by his own Republican Party, he strongly urged the Congress to accept the Treaty of Versailles and the League of Nations.
In 1920, appointed to the newly inaugurated position of Director of the Budget in the Harding administration, Dawes applied his conceptions of efficiency and unity to the reform of budgetary procedures in the United States government. His most important reform resulted from his insistence that each department of the government prepare a true budget projecting future expenditures and stay within it. Here are his thoughts about the process before he went to England to be ambassador:
“I have never lost an opportunity to urge the establishment of a proper accounting system in our own Government. Realizing its necessity when Director of the Bureau of the Budget, I instituted at that time an effort to provide one, only to have it condemned by the Comptroller General’s organization. This matter I took up again with Hoover at Washington and found that he has it in mind. He is thinking of recommending to Congress the establishment by law of a separate accounting office, thus relieving John R. McCarl of this line of work, while continuing his functions of passing upon the legality of payments. As soon as McCarl, capable as a lawyer but who is not an expert in accounting and is under the advice of subordinates wedded to our present archaic and ridiculous system of government accounting, is relieved of this part of his present responsibilities, the proper system should be promptly instituted. For eight years, off and on, I have been urging this necessary reform.” Charles Dawes Journal as Ambassador to Great Britain May 20, 1929 [The comptroller general of the United States is the director of the Government Accountability Office, a legislative-branch agency established by Congress in 1921 to ensure the fiscal and managerial accountability of the federal government.]
Following the 1922 assassination of Walter Rathenau and the 1923 hyperinflation period of Weimar Germany, the League of Nations invited Dawes to chair a committee to deal with the question of German reparations.
The Dawes Report, submitted in April, 1924, provided facts on Germany’s budget and resources, outlined measures needed to stabilize the currency, and suggested a schedule of payments on a sliding scale. In reality, three U.S. banks—Dillon, Read; Harris, Forbes & Co.; and National City—led syndicates which issued almost three-quarters of the loans to German companies under the plan.
Dillon Read was a major lender to Fritz Thyssen’s United Steel Works, while National City made big loans to both I.G. Farben and A.E.G., the German subsidiary of Morgan’s General Electric. Despite the fanfare, and Dawes being awarded the Nobel Peace Prize, the Dawes plan only lasted a few years, requiring the 1930 Young Plan to be implemented instead. Despite Oxford University praising Dawes for increasing industrial exports, Germany went through bad leadership with Heinrich Brüning who was Chancellor of Germany from 1930-1932 and then Franz von Papen, a national conservative who served as Chancellor of Germany in 1932, and then as Vice-Chancellor under Adolf Hitler from 1933 to 1934.
As a result of the global effect of the 1929 Wall Street crash, unemployment rose sharply, voters wanted the government to take action. Brüning’s first solution was to increase taxes to pay for rising unemployment benefits. However, as more people became unemployed tax income fell, defeating his original idea. Brüning realised that the payment of unemployment benefit was increasingly unpopular with those still in work, so he placed restrictions on who could claim benefits. However, this policy was deeply unpopular across the political spectrum. Left-wingers argued that restricting benefits was against their fundamental beliefs in equality. Right-wingers were equally opposed as they deplored the payment of benefits to those who were unemployed. If you think this sounds eerily similar to the United States now, you aren’t far off.
From 1924 to 1932, Dawes devoted his entire attention to public service. He was elected to the vice-presidency of the United States in 1924, serving in Office from 1925 to 1929 in the Coolidge administration. During the campaign, its notable how he reflected the traditional Republican party in his attacks on the KKK but also the bad direction the party was going with his denunciation of Progressive candidate Robert LaFollette as a radical sympathizer of the Bolsheviks despite their dislike of him.
LaFollette’s platform argued for cutting military spending, attacking monopolies, and nationalizing the railroads.
He also supported nationalization of several major industries and an increase of taxes on the wealthy, in addition to his warnings of a severe farm crisis and attacks on speculators. At his swearing-in in the Senate chamber in March 1925, Dawes was called upon to deliver a brief inaugural address, a tradition that dated back to John Adams in 1789. What the audience heard, however, was far from traditional.
As the Senate’s new presiding officer, Dawes addressed himself to “methods of effective procedure,” rather than any particular policies or programs. He then launched into an attack on the Senate rules, “which, in their present form, place power in the hands of individuals to an extent, at times, subversive of the fundamental principles of free representative government.” The rules of the Senate, he declared, ran contrary to the principles of constitutional government, and under these rules “the rights of the Nation and of the American people have been overlooked.”
Dawes focused his attack on filibusters, which at that time were being carried out most frequently by the small band of progressive Republicans, such as Robert La Follette, Sr., and George Norris, who held the balance of power in the Senate.
Dawes declared that Rule 22, which required a two-thirds majority of those present and voting to shut off debate, “at times enables Senators to consume in oratory those last precious minutes of a session needed for momentous decisions,” thus placing great power in the hands of a minority of senators. “Who would dare oppose changes in the rules necessary to insure that the business of the United States should always be conducted in the interests of the Nation and never be in danger of encountering a situation where one man or a minority of men might demand unreasonable concessions under threat of blocking the business of the Government?” he asked. Unless the rules were reformed, they would “lessen the effectiveness, prestige, and dignity of the United States Senate.”
He insisted that “reform in the present rules of the Senate is demanded not only by American public opinion, but I venture to say in the individual consciences of a majority of the Members of the Senate itself.” He concluded by appealing to senators’ consciences and patriotism in correcting these defects in their rules.
Since Dawes had not given advance copies of the speech to the press or anyone else, no one had anticipated his diatribe.
In the audience, President Calvin Coolidge attempted indifference, but could not hide his discomfort. Dawes had managed to upstage the president’s own inaugural address, which was to follow at ceremonies outside on the Capitol’s east front.
As the senators proceeded to the inaugural platform, they talked of nothing else but their anger over Dawes’ effrontery, making Coolidge’s address anti-climactic.
After the ceremony, Dawes compounded the ill will when he joined the president to ride back to the White House, instead of returning to the chamber to adjourn the Senate. In the Senate chamber, there was considerable confusion. Senator James A. Reed of Missouri noted that the Senate did not adjourn, nor did it recess. “It simply broke up.”
In other ways, Dawes differed from Coolidge.
Due to the collapse of the farming sector after WW1, members of Congress from midwestern and plains states formed the Farm Bloc, consisting of some twenty-five senators and one hundred representatives. Holding the balance of power in Congress, they promoted legislation to solve the problem of distributing surplus farm produce. Each year between 1924 and 1928, Senator Charles McNary of Oregon and Representative Gilbert Haugen of Iowa, both Republicans, sponsored the McNary-Haugen bill to permit the federal government to buy crop surpluses and sell them abroad while at the same time maintaining a high tariff on the importation of farm goods.
Using his leverage in the Senate, Robert M. La Follette, Jr., who had succeeded his late father in the Senate, led a filibuster against the McFadden-Pepper bill to extend the charters of the Federal Reserve Banks. By holding up passage of the bank bill, La Follette sought to pressure the Senate to vote on the McNary-Haugen bill. The only way to break this logjam, as far as Dawes could see, was to form a coalition “between the conservatives favoring the bank bill and certain radicals favoring the farm bill.” The vice president intervened, calling representatives of both groups to a meeting in his room. Despite his personal leadership in getting the legislation passed, President Coolidge, a loyal flunky to the House of Morgan to the end vetoed the farm bill twice!
In 1929, when the Dominican Republic requested advice on improving the financial operation of its government, Dawes headed a commission whose extensive recommendations for reform were later adopted.
From June of 1929 to January of 1932, Dawes was the U.S. ambassador to Great Britain where a significant amount of his time was spent in negotiations with the major naval powers over ship tonnage and gun caliber.
In 1930 he was a delegate to the London Naval Conference. Interestingly, in 1930 while attending a debate in parliament, he remarked on the dire condition of the British economy “In the debate the other day, the speakers kept referring to the tenets of Cobden. I wonder if any of them have ever read the wonderful “Report on Manufactures” by Alexander Hamilton. Forced by events which are deaf to human precedents and tradition, Britain is being forced in self-perservation to the the policy of a protective tariff. Why, therefore, do its leaders not read Hamilton, the greatest exponent of that policy? I have asked this directly of Winston Churchill and of Stanley Baldwin, but neither had read Hamilton’s famous report to Congress.”
Later in 1931, he remarked that 2,600,000 British subjects were currently on the dole and in the course of preparing a speech to the civil service, remarked “The more I study the principles of the British Treasury control, the more I see where they are lacking.”
In the course of his study of the British Treasury, “My study has shown me that the budget law of the United States, which was handed to me as Director of the Budget to enforce, was simply a copy of the British Treasury Control and Accounting system.”
In his journal, he details the kind of reforms that he had implemented in the United States and presented them to the PM Ramsey MacDonald (one of the founders of the Labour Party, the political side of the Fabian Socialist). For those of you who want to study the 1930’s, Dawes’ journal provides an interesting view from England since he was interacting with most of the government and ambassadors of the major powers of the day.
In 1931, he met NY Governor Franklin Roosevelt and noted “After this evening’s visit, I feel that if he is the next president of the United States, he will serve with honor to his country and credit to himself. He seems to have strength, and equipoise, clarity of mind with soundness of judgment, and to steer his course by the compass of common sense.”
Unfortunately, he also has praise for President Hoover “he was always the alert, competent and compelling Chief Executive, and at the end of the day nothing had shaken his confidence in the soundness of his original position and views”
A typical utterance of Hoover at that time was, “I am convinced we have now passed the worst and with some continued unity of effect we shall rapidly recover” or those of VP Charles Curtis “Prosperity is just around the corner”
It wasn’t until the heads of Wall Street were grilled unmercifully under the Pecora Commission that the reality of how J. P. Morgan had deliberately popped the bubble and tipped off those within his preferred client list and got out in time or the fact that the entire European central banking system depended on looting Germany so that you had the collapse of the French Oustric banking group, the collapse of the Austrian Kreditanstalt bank, the collapse of the German Danatbank, Britain going off the gold standard, & all European countries defaulting on war debt payments to France and Britain to pay the USA. Most of all, it was the constant lying to the American people in order to “restore confidence”; the insistent demand for a balanced budget, drastic cuts in Government spending, demands for increased taxes, the imposition of the infamous Smoot-Hawley tariff which raised duties on US imports to irrational and punitive levels which effected world trade (which President Trump unironically seems to have copied); financial bailouts first under the Federal Credit Corporation and then the Reconstruction Finance Corporation which only provided temporary stabilization but since nobody was lending, it became a worthless jesture.
Dawes in his journal repeats his earlier fears about the panics of 1873 and 1893 but for your knowledge, I suggest you study the Tulip Bubble in the Netherlands in 1630, the John Law bubble in France and the South Sea bubble in England in the 1720’s, the Spanish and Portugese colonial bankrupties of the 16th Century which provoked the insolvency of the Fuggers of Augsburg, and England defaulting on loans to the Bardi and Peruzzi in Florence in the 14th century which brought on the plague and dark ages.
In 1932 Dawes accepted the chairmanship of the American delegation to the Disarmament Conference in Geneva but resigned to accept the chairmanship of the Reconstruction Finance Corporation, a governmental agency empowered to lend money to banks, railroads, and other businesses in effort to prevent total economic collapse during the depression which of course didn’t work as long as Treasury Secretary Andrew Mellon was committed to his policy of bailing out worthless speculative debt of Wall Street.
In June 1932, Dawes abruptly resigned as chairman of the RFC. His own financial base, the Central Republic Bank of Chicago was near collapse and required a ninety million dollar loan from the RFC to keep it alive and to keep the entire Chicago banking structure from collapsing. Dawes had to resign to avoid a conflict of interest.
Eventually the Central Republic Bank was placed in receivership and liquidated. Dawes reorganized it as the City National Bank & Trust Company of Chicago and paid back the RFC loans. He remained associated with the bank until he died at the age of eighty-five, on April 23, 1951.
The Great Depression reduced the former active businessman; pipe smoker; General famous for outbursts like “Hell and Maria!”; pianist, flutist and composer of musical compositions like Melody in A Major that became a top 10 hit and then was later arranged into popular tunes like “Its All In The Game” during the 1950’s and 60’s into a subdued and broken person. Dawes privately founded several charitable organizations to fight poverty and homelessness before governmental programs serviced the need. He and his wife Caro were also involved with adoption issues and provisions, co-founding The Cradle and serving the Illinois Children’s Home and Aid Society. Charles Dawes is now largely forgotten however, you can still visit his 1894 era mansion in Chicago which is the Evanston History Center website
https://opil.ouplaw.com/display/10.1093/law:epil/9780199231690/law-9780199231690-e281
https://florencekelley.northwestern.edu/historical/panic
https://babel.hathitrust.org/cgi/pt?id=uc1.31175010989500&seq=10
https://www.nobelprize.org/prizes/peace/1925/dawes/biographical
https://larouchepub.com/other/2015/4201us_former_greatness_1870.html