Mr. Wilson's War

  PART TWO

  Trying to be Neutral

  For nineteen hundred years the gospel of the Prince of Peace has been making its majestic march around the world, and during these centuries the Philosophy of the Sermon on the Mount has become more and more the rule of daily life. It only remains to lift that code of morals from the level of the individual and make it real in the law of nations, and this I believe is the task that God has reserved for the United States.

  —William Jennings Bryan

  in his oration: “The Prince of Peace”

  Chapter 6

  THE FREEDOM OF THE SEAS

  THE shattering of the forty years of peace so often acclaimed as the heyday of European civilization was at first hardly believable. Americans had for generations held devoutly to the creed that progress was inevitable. How to reconcile progress with these monstrous crimes? What was the use of Christianity if after twenty centuries it had not taught men better? Many a man’s faith in God was shaken.

  Americans in those years particularly, when almost a third of the population was of European origin, were a people of refugees, brought up in revulsion against the Old World’s wrongs; but during the sunny years of the century’s first decade, the educated classes had been inventing a nostalgic geography of civilized and cultured Europe where existence was conducted on a higher plane than the grubby materialism of American business.

  Travel in Europe, particularly for the wife and children, was one of the rewards of success: Paris, the crossroads of civilization, city of boulevards and the Eiffel Tower, magnet of American artists and millionaires, was where good Americans went when they died.

  Culture was only to be had on the old continent. The Rhineland, Heidelberg, Göttingen, Munich, Bayreuth were hives of the world’s scholarship and the world’s music. Kensington, the English lakes, the Cotswolds were redolent with the fame of the great Victorians. Rome and Florence, with their domes and colonnades and towers and their dark cypress gardens, were cities of refuge for men of letters fleeing the yammer of moneymaking.

  To Europeans too the peace had seemed unbreakable. While rich Americans dreamed of Europe poor Europeans dreamed of America. In those peaceful years each could try for the fulfillment of his hopes. While the British Navy assured peace on the seas, the European order overflowed the globe. With time and money a man could travel anywhere, except for a few blank spots where the natives were unruly, or the dominions of the Czar and the Turk where passports were required, secure in life and property, without any official’s by your leave. The poorest cobbler in Przemysl or Omsk only needed the price of a steerage passage to Ellis Island to try his luck in the Promised Land.

  “If you didn’t know the world before the war,” old men told their sons, “you’ve never known what it is to live.”

  Armageddon

  During that last July of the old order only the most sophisticated students of European affairs had any inkling of the rancors and hatreds and murderous lusts fermenting behind those picturesque façades. Realization of the extent of the calamity came slowly. The assassination of the archduke was shrugged off as a continuation of the Balkan disturbances that had been relegated for years to the back pages. When the Czar’s armies were mobilized in the name of Slavic brotherhood it could be explained away as a measure to distract the downtrodden Russians from the manifold wrongs and oppressions they lived under. But when the Kaiser answered by alerting his generals and the French called their citizens to the tricolor it was plain that Europe had gone raving mad.

  In extras and fourinch headlines Americans read breathless: BELGIUM INVADED. When England declared war on Germany it seemed that every ruling group had made the decision that now was the time to settle old scores. No war could last on such a scale, the wellinformed told one another; one short summer campaign and the nations would see the folly of mutual suicide and start negotiating peace.

  It was with a certain grim satisfaction that Americans watched the bestlaid plans of the general staffs go awry. Although the French, true to their military dogma of toujours l’offensif, did just what the deceased von Schlieffen had planned for them to do by pushing up into Lorraine, the enormous flanking sweep of German armies through the northern plains of Flanders and of France, which the great strategist had imagined, failed to win the promised “victory in eight weeks.”

  General von Moltke, the lesser nephew of the von Moltke who had broken the Second Empire at Sedan, allowed himself to be distracted by the defense of Antwerp and by the Czar’s “steamroller” advance into East Prussia. He allowed armies which were supposed to make his extreme right flank invincible to be detached for service in the East.

  With the first roar of the German guns against the Belgian fortresses the French Chamber of Deputies virtually abdicated its powers. One third of the membership was called to the colors. Northern France was turned over to military government. Paul Painlevé and his cabinet pinned all their hopes on General Joseph Jacques Césaire Joffre, who had been dredged up out of obscurity by the Radical Socialists, largely because he was the best general they could find who had the right politics. He was a republican and a Freemason. Already known as Papa Joffre, he was a florid bespectacled stout man of fiftynine with the air of a bon bourgeois which appealed to the anticlerical voters of the French left. The son of a cooper in the eastern Pyrenees, his army career had been distinctly humdrum. His only distinction was having, as a young officer, successfully conducted a small expedition against Timbuctoo. He was reputed to know about railroads and fortifications. His first contribution to the strategy of the war was his conviction that the German offensive was a colossal feint and should be countered by an attack in the direction of Metz.

  Joffre’s offensive came to grief at Morhange, but the very speed of the German advance, once resistance was beaten down along the Meuse, wrecked the Schlieffen plan. Armies lost contact with their supply and with each other. Instead of enveloping Paris they drove east along the Marne and gave the brilliant military governor of the city, General Gallieni, the chance to hurry Maunoury’s troops out, some of them in Paris taxicabs, to attack the German flank. In spite of the sluggishness of the French command under Joffre and the inadequacy of the British expeditionary force, which landed under the navy’s protection, without the loss of a man to be sure, but only in time to join in the general retreat, the Germans were beaten back in five days to the line of the Aisne. Winter found both armies digging entrenchments which no general staff had planned.

  In the East the Russian masses poured triumphantly into East Prussia only to be trapped by the Germans under von Hindenburg in the region of the Mazurian Lakes. They were butchered there by the tens of thousands in a battle which the Germans named Tannenberg after an engagement the Teutonic Knights fought centuries before. Romanoff prestige never recovered from the blow, even though to the south, against the Austrians, their armies were tolerably successful.

  Meanwhile the Austrians three times invaded Serbia and three times were driven back to the Danube. The Austro-Hungarian empire was already showing signs of the strains and stresses which were to destroy it. The Serbs successfully routed the invaders but their country was left a ruin where typhus ruled.

  The war along the western front, from neutral Switzerland to the sea, became a business of trenches, deep shelters, barbed wire, mining and countermining. Instruments of oldtime siege warfare like the hand grenade and the mortar were reinvented. With the increased use of machine-guns the odds turned in favor of defense. This wasn’t war as it had been taught in the military schools.

  Vast advances and retreats left homeless populations, fleeing from burnedout towns and villages, a prey to starvation and pestilence. Densely settled regions in Belgium and northern France were left a ruin. The summer months of 1914 saw the prosperous European order turn into all the abominations of the Apocalypse. Every newspaper reader had his eyes stuffed daily with horrors. There was created in the American mind an anguished new geography of massacre. Unfamil
iar names in small letters on the map were outlined in blood. The refugee became the symbol of the age.

  A Southerner in the Treasury

  Through all the anguish of his wife’s last illness, Woodrow Wilson went on, with haggard face and firmset jaw, meeting the problems that poured across his desk. The cool promptness of his decisions amazed the people around him.

  The first thing he had to face was the threat of a panic on Wall Street.

  The United States was still a debtor country. Europeans held something like two and a half billion dollars in American stocks and bonds. They held paper for some four hundred and fifty million dollars worth of obligations due or about to come due during the balance of the year.

  In that crazy last week of July, when European banks and exchanges were closing their doors, Europeans began to sell their dollar holdings. In spite of large shipments of gold to Europe, the franc rose from 19⅓ cents to 23½ cents and the pound from $4.89 to $7.00. Thursday, July 30, the stock market had its worst day since the panic of 1907. Early Friday the news came over the Atlantic cable that the London Stock Exchange had suspended operations. Brokers’ offices were stacked high with selling orders for overseas customers.

  That same morning J. P. Morgan, Jr. telephoned Secretary of the Treasury McAdoo before officehours at his home to tell him the governors were meeting to decide whether or not to close the New York exchange. What was his advice? “If you really want my judgment,” his wife Eleanor heard McAdoo answer in a firm tone, “it is to close the exchange.”

  Sunday morning, when the newsboys were yelling “Belgium Invaded” through the rainwet streets, Mac, as he was known to the Wilson family, went early to his office at the Treasury, while Eleanor rushed to the White House to be near her dying mother. President Woodward of the Hanover National, who had been appointed one of the directors of the Federal Reserve Bank which was scheduled to open in the fall, called McAdoo from New York. The Clearing House Committee was in session and wanted his advice. McAdoo suggested that they come to Washington, but was told there wasn’t time. They expected a run on their banks when they opened for business Monday morning. They needed millions in extra currency if they were to hold off a disastrous panic. McAdoo said he would have to consult the President.

  All Woodrow Wilson knew about finance was what he had learned during his campaign for the enactment of the Federal Reserve Act. He had confidence in his soninlaw’s financial acumen. He told him by all means to go to New York immediately. The Secretary had already taken the initiative by shipping fifty million dollars of the new currency he was authorized to use in emergencies to the subtreasury in New York. Taking Eleanor along to keep his spirits up he left on the afternoon train.

  Having Mac in the family and in the administration was proving a real boon to the sorely beset man in the White House. McAdoo’s success with the Hudson tunnels had won him prestige among New York businessmen. They believed that his hunches were sound. A dourfaced sixfooter, his stringy mountaineer look had endeared him to the Wilsons. Ellen, whose shrewd feminine judgments the President had come to rely on more and more, had taken to him with real affection as a soninlaw.

  He was the Wilsons’ kind of man. He came of similar Southern Presbyterian stock. His father, another very tall man, was a Tennessee lawyer who had fought in the Mexican War and served as attorney general of his state. When Tennessee, against the wishes of so many of her citizens, seceded from the Union, he took the Confederate side.

  Mac’s boyhood was spent in Milledgeville, Georgia, in the ruined heartland of the Confederacy. As a Confederate officer his father was disfranchised and barred from the practice of law. There were seven children and no money. He tried farming and smalltown journalism. When his mother was paid fifty dollars for a novel she wrote about gentlefolk among the magnolias, Mac remembered that the money was spent in a single day buying shoes and clothes for the family.

  When Mac’s father was offered fifteen hundred dollars a year to teach history and English at the University of Tennessee it seemed like opulence. It was a chance for the children to get some education. The elder McAdoos were cultivated people, full of a literary nostalgia that made it hard for them to fight their way in the harsh reconstruction world. When young William Gibbs went to bed, worn out with fights at school, and selling papers and doing odd jobs for storekeepers, he dreamed of money.

  He started to study law as deputy clerk in the United States District Court in Chattanooga and reading nights with a friendly attorney. He was a hard worker with a mind fertile in expedients. By the time he was admitted to the bar at twentyone he had tried his hand at Democratic national politics and dabbled in various speculations and investments. He married a Georgia girl and immediately started to make money buying and selling Chattanooga real estate.

  He risked his first twentyfive thousand in a project to apply electric power to the muledrawn streetcars of Knoxville. It was a little too soon for rapid transit. The company went into receivership and young McAdoo, who had accumulated mostly debts for his pains, went north to hang out his shingle in downtown New York.

  It was a long hard struggle. When the lawbusiness was slack he sold bonds and securities. He studied railroad finance. He got the notion of bringing railroad trains into New York by tunnelling under the North River. One company had already gone broke, but a tunnel had been built halfway across about ten years before. He started promoting a company to finish that tunnel. He had a knack of convincing other men that his hunches were sound. By the time Woodrow Wilson became governor of New Jersey the tunnels were completed and profitable. William Gibbs McAdoo had become one of the great names of American enterprise.

  Mac first met Woodrow Wilson when he went to Princeton to see his collegeboy son who was laid up with diphtheria at the infirmary. He was captivated by what he called Wilson’s Jeffersonian humanism.

  Mac was a born promoter. There wasn’t much left to do in promoting the Hudson River tunnels so he took to promoting Woodrow Wilson. His promotion was so successful that he found himself promoting the United States Treasury.

  In his autobiography McAdoo tells of pestering his father, when he was a tenyearold boy, to tell him exactly how many polecats Vera Cruz smelt like when the United States troops landed there in the Mexican War. His father had told him Vera Cruz smelt worse than a crowd of polecats. “Did it smell worse than a thousand million polecats?” “Listen son,” his father had said to him, “you have a bad habit of dealing with uncomfortably large figures.”

  When as Secretary of the Treasury on August 2, 1914, he sat with his wife in the drawing room of the New York train, faced with a panic that might wreck half the banks in the country, Mac was jotting down on a yellow pad propped on his knees what his father would have called “uncomfortably large figures.”

  Years afterwards Mrs. McAdoo remembered the haggard look of the financiers that met their train at the Pennsylvania Station. “I was startled by their white faces and trembling voices,” she wrote. “Could these be America’s great men?”

  The Secretary of the Treasury was hustled over to the Vanderbilt Hotel where a group of bankers was anxiously awaiting him. McAdoo with his long stride and his selfassured somewhat rustic manner, exuded confidence. The news that fifty million dollars in fresh currency was already in New York quieted the bankers’ nerves, but they complained its use was restricted by the present law. New legislation was needed. No sooner said than done. By midnight McAdoo was back on the sleeper to Washington sketching out the necessary bill on his yellow scratchpad.

  At breakfast he brought the President up to date. At his news conference that morning Wilson took the reporters into his confidence with the friendly reasoning man to man tone he could assume when he needed to: “It is extremely necessary … that you should be extremely careful not to add in any way to the excitement … So far as we are concerned there is no cause … America is absolutely prepared to meet the financial situation and to straighten everything out without any material difficult
y. The only thing that can possibly prevent it is unreasonable apprehension and excitement … I know from … the Secretary of the Treasury … that there is no cause for alarm. There is cause for getting busy and doing the thing in the right way …”

  While Woodrow Wilson transmitted soothing balm to the press of the nation McAdoo hurried to the Capitol to confer with the chairman of the Senate committee on banking. Senator Owen of Oklahoma was a member of the team that had put over the Federal Reserve Act. He understood immediately that what was needed was stopgap legislation to tide over until the reserve system was operating. The Treasury must be authorized to increase the amount of emergency currency issued under the Aldrich-Vreeland Act. Congress, under his direction, “did the thing in the right way” so expeditiously that the bill went through both houses and was at the White House ready for signature on the following day.

  The run on the banks stopped immediately. There were few extraordinary withdrawals and only five small bank failures.

  The next job was to staunch the drain on gold. The chief New York banks had already made an agreement among themselves to ship no more out. Later in the week McAdoo called a meeting of international bankers and exporters at the Treasury. A nationwide gold pool was established to meet obligations as they fell due. The amount was oversubscribed right there.

  The mere gesture had the effect of reducing the drain. Only some hundred million dollars’ worth of gold bullion left the country.

  Already war orders were coming in. By fall the exchange situation had reversed itself completely, and American bankers were talking about extending credits to the English and the French. In January 1915 the gold pool went out of business for lack of customers.

  A few months before the bankers had been viewing national control of the moneymarket with all sorts of apprehensions. Now they were calling for the help of the federal reserve system before its organization was complete. Meanwhile, American victims of the breakdown of European banking were sending out desperate appeals for help. Congressmen, state governors, cabinet members were bombarded with cables. Stranded American travellers swarmed around every embassy and consulate in Europe. They couldn’t cash their letters of credit. They couldn’t change their money. In London the hotels wouldn’t give change for a five pound note for fear of having to give up gold currency. At the same time hotel-keepers and restaurants were demanding immediate cash payment for everything.