Lessons for Obama: How FDR Fended Off The 1%’s Attacks Against His New Deal Reforms

Editor’s note: This is the third in a series of articles examining the history, activity, secrets and identity of the 1% in the US. See the previous two articles here and here.

Many of the same ultra-right families of the richest 1% in the U.S. currently attacking New Deal reforms protecting working families are the same families who attacked President Franklin Delano Roosevelt in the 1930s for introducing these reforms. Then and now, the targets include old age pensions (Social Security), more progressive taxation on the rich, and the right of employees to bargain collectively with their employers for improvement in wages and work conditions.

President Roosevelt, however, responded differently to their attacks than President Obama. Here I discuss how, first by looking at a powerful family which, more than any other, led the attacks on FDR: the du Ponts of Delaware. They were the founders of the largest chemical company in the U.S.: E.I. du Pont de Nemours & Company, otherwise known simply as Du Pont. Keep in mind that they are not mere throwbacks to the 1930s. Ultra-conservative in their politics, and one of the richest families in America, the du Ponts were the primary financial backers of Newt Gingrich when he launched his “Contract with America” against President Clinton in the 1990s. As head of the du Pont-founded Government of the People Action Committee (GOPAC), Gingrich helped capture control of Congress for the Republicans in 1994 and propelled himself into the powerful seat of Speaker of the House – just a few heartbeats from his current goal, the White House. In 2005, one-time presidential hopeful and former Delaware governor Pierre S. du Pont IV, the founder of GOPAC, awarded Gingrich the “Pete du Pont Freedom Award.”

Introducing the du Ponts

The du Ponts are no average rich family. Since their arrival in America after fleeing revolutionary France as the aristocratic former Keepers of the King’s Gunpowder, the du Ponts have long been among the worst examples of the 1%. Never having moved beyond industry to high finance, they never developed a sense of  “nobles oblige” toward the 99% like the more enlightened Rockefellers, who not only used their oil industry profits to move into banking, but also favored liberal reforms for working people, earning moderate-to-liberal Republicans the term “Rockefeller Republicans.” (Mit Romney is the latest incarnation of that category. His father, George Romney, former president of American Motors and governor of Michigan, was seen by many as a stalking horse candidate for New York Governor Nelson Rockefeller when he briefly entered the race for the 1968 Republican nomination against Richard Nixon.)

The du Ponts, on the contrary, have been tethered since their arrival in 1800 to industrial relations and were always anxious to control their workforce. They never could understand Franklin Roosevelt’s recognition of employees’ collective bargaining rights, including the basic right to strike, as a means of staving off labor unrest and preserving the capitalist system. Rather, they saw FDR’s reforms as a threat to the capitalist system even though they happily profited off the reformed system while seeking to undermine it and turn the clock back to a more autocratic society.

Until the 1980s they were the richest family in America. Despite their enormous $10 billion fortune (last counted in 1984 dollars, when I updated my book on them), their charities, with the sole exception of the broadcast awards and children’s hospital funded by the estate of family rebel Alfred I. du Pont, have been among the most meager in public giving. The du Ponts have nothing like the Rockefeller Foundation or even the Pew Memorial Fund. [1]

The oldest industrial dynasty in America, the du Ponts were the original leaders of what became the Military-Industrial Complex. From their first war contract from President Thomas Jefferson and especially after raking in huge profits from the Civil War, they gradually took over smaller gunpowder companies to build the 19th century’s Gunpowder Trust. During World War I their plants supplied 80% of the munitions fired by the U.S., Britain and France. They charged the U.S. government such high prices for gunpowder that an outraged Secretary of War Newton Baker publicly labeled them a “species of outlaws.”

With their $250 million in war profits (that’s in 1919 dollars) they expanded into chemicals and plastics. They took over General Motors, which became a captured market for Du Pont paints and tires from Uniroyal, which they also took over. During the 1920s they actively campaigned against disarmament conferences while secretly selling munitions to warlords in China and Latin America. By the early 1930s, they were selling munitions to the rising Nazi party. They took over Germany’s largest car manufacturer (Opel), and signed secret cartel agreements with Germany’s I.G. Farben for synthetic oil and rubber processes. Their 80-room mansions and huge estates built in the rolling hills north of their Wilmington, Delaware, Du Pont Company headquarters became known as America’s “Chateau Country,” and were seen as prime examples of the Roaring Twenties’ greed and extravagance.

What is not widely known, however, was their involvement in buying into the leadership of the National Democratic Committee, using Prohibition as their entry point. They believed prohibition against drinking was the cause of increased crime in the cities.[2] Led by former Du Pont Company president Pierre S. du Pont II, they maneuvered to take the helm of the anti-prohibition movement which was then spearheaded by the Democratic “wet” candidate from New York, Governor Al Smith. Du Pont Company treasurer John J. Raskob soon became Chairperson of the Democratic National Committee and set about turning the Democratic Party into a modern urban-based political machine modeled after New York City’s Tammany Hall. Even though Smith lost the 1928 election to the Republican “dry” candidate, Secretary of Commerce Herbert Hoover, the 1929 Crash improved the prospects for the Democratic Party. Du Pont’s Raskob kept building the urban machines, and Smith’s successor as governor of New York, Franklin D. Roosevelt, became the chief beneficiary. By 1932, the “Squire from Hyde Park” had emerged as a serious contender for the White House.

To get Wall Street’s backing, Roosevelt, a former Wall Streeter himself, accepted many of the conservative ideas of the “Swope Plan” of General Electric’s Gerard Swope. The Swope Plan called for suspension of antitrust law enforcement which, under cousin Teddy Roosevelt, had aimed at curtailing the growth of monopolies (then called “trusts.”) The Swope Plan promoted the reorganization of the economy along “corporatist” industrial cartels that fixed wages, prices and production. This had been originally pioneered by Benito Mussolini’s Fascist Party in Italy, and was very popular among big businesspersons in their desperation to get their economic system growing again.

After Roosevelt’s landslide election in 1932, the Swope Plan became the blueprint for the New Deal’s National Industrial Recovery Act of 1933. As far as the du Ponts were concerned, so far so good. The new law established the National Recovery Administration (NRA), the government agency for national economic planning. Pierre S. du Pont II joined Swope on the NRA’s Industrial Advisory Board and took a seat on the National Labor Board. In December 1933, two months after the NRA broke some major labor strikes, Pierre accepted election as its Chairperson.

The du Ponts should have been happy, but they weren’t. One thing they hadn’t bargained for was Roosevelt’s support for collective bargaining rights of independent unions. The Swope Plan had instead called for “company unions,” labor organizations controlled by the company rather than by the workers.

Independent union leaders convinced Roosevelt that if he wanted the NRA to work, labor peace was essential. Unless he was prepared to try to crush independent organized labor as Mussolini and Hitler had done, he would have to support workers controlling their own labor unions. This compromise became the labor basis for the NRA and National Industrial Relations Act of 1934, more known as the Wagner Act after its chief sponsor, the U.S. Senator from New York, Robert Wagner, Sr.

FDR’s support for workers’ collective bargaining rights was the straw that broke the back of the Roosevelt-Du Pont alliance. Raskob, who had been summarily replaced as Democratic National Chairperson by the new president, already suspected Roosevelt was a “radical.” Pierre du Pont soon resigned from Roosevelt’s NRA and the du Ponts prepared to bring down this “traitor to his class.”

Joining them were their banking allies from J.P. Morgan & Company. They had their own reasons for wanting to bring down Roosevelt: Roosevelt’s decision to take the United States currency off the gold standard to widen the availability of credit. This move struck at the heart of the Morgan banking control over Wall Street. The Morgans had used their access to gold since the Civil War to raise capital in Europe for U.S. treasury notes and industries in which the Morgans and their associates invested, while taking huge commissions from American entrepreneurs. These practices gave J.P. Morgan enormous wealth and a stranglehold over Wall Street’s credit markets.

Now, with Roosevelt taking the U.S. currency off the gold standard and backing the Glass-Steagall Act that would prohibit commercial banks from using the public’s deposits for stock market speculation, Morgan bankers decided to not only publicly attack Roosevelt; they even launched an attempt to seize the White House, allegedly with du Pont assistance.

Roosevelt Faces a Planned Coup

They turned to General Smedley Butler, former Commandant of the Marine Corps and twice winner of the Congressional Medal of Honor. Butler was probably World War I veterans’ most popular hero. Butler, unlike General Douglas MacArthur, Colonel Dwight Eisenhower and Major George Patton, had not participated in the bloody suppression of of World War I veterans who marched on Washington in the summer of 1932 to demand their wartime bonuses pledged by the U.S government. Butler’s popularity attracted the attention of the Morgan crowd. They hoped General Butler would lead another march on the White House, this time modeled after Mussolini’s infamous march on Rome with armed veterans.

In August, 1934, Butler was visited at his Newton Square, Pennsylvania home by Gerald MacGuire. Butler knew that MacGuire was a lawyer in the Morgan brokerage office of Grayson M.P. Murphy and an official of the American Legion. MacGuire told Butler that Murphy, a funder of the Legion’s early organizing, wanted to see the veterans “cared for … We don’t want the soldiers to have rubber money or paper money.” MacGuire and his Morgan-backers wanted Butler to deliver a drafted speech to that effect at the American Legion convention and support a resolution calling for a return to the gold standard. They were sure Butler would then be elected the Legion’s new National Commander.

Butler insisted on meeting some of “the principals” involved. Shortly thereafter, Wall Street broker Robert Sterling Clark visited Butler and identified himself as one of MacGuire’s backers. “I’ve got thirty million dollars,” Clark explained. “I don’t want to lose it. I’m willing to spend half of that thirty million to save the other half.” If the General would give that gold speech, he was sure the soldiers would support a return to the gold standard. Butler declined. A year later, MacGuire was back to tell him that a “communist menace” was endangering America. The country now needed a complete change in government.

A “militantly patriotic veterans” organization, like the fascist Croix de Feu (Cross of Fire) operating in France, was the only kind of organization that could force a change in Washington, Murphy explained. MacGuire had been sent to Europe in the spring of 1934 to survey how appeals to nationalism among war veterans were used to build the Fasci in Italy, the Nazi party in Germany and the Croix de Fue movement in France. In France Col. De la Rocque had organized this movement into paramilitary units modeled after Mussolini’s Black shirted Fasci and Hitler’s brown shirted Storm Troopers to violently attack labor halls, striking workers, and even Socialist members of parliament. As the Depression deepened in 1934 and sales and the stock markets continued to decline, many French big businessmen, like their American counterparts, feared for the survival of not only their own businesses but of the wage system that made goods and services profitable for them, and some, including munitions manufacturers like General Maurin, began to fund the Colonel’s rightwing veterans movement. “The Croix de Fue is getting a great number of recruits,” MacGuire wrote Wall Street broker Robert Sterling Clark from Paris. General Butler could lead such an organization in a veterans march on Washington. “We have three million dollars to start with on the line,” MacGuire told Butler, “and we can get three million more if we need it.” Such a show of force would probably result in the overthrow of the government without resort to violence.

“Mr. MacGuire proposed that the Secretary of State and Vice President would be made to resign, by force if necessary,” Butler later testified to a Congressional committee, “and that President Roosevelt would probably allow MacGuire’s group to appoint a Secretary of State. Then, if President Roosevelt was ‘willing to go along,’ he could remain as President. But if he were not in sympathy with the fascist movement, he would be forced to resign; whereupon, under the Constitution, the Presidential succession would place the Secretary of State in the White House … He told me he believed that at least half of the American Legion and Veterans of Foreign Wars would follow me.”

Butler was amazed at the audacity of the proposal but played along to uncover details. “Is there anything stirring yet?” he asked.

“Yes, you watch,” the broker replied. In two or three weeks, you will see it come out. There will be big fellows in it. This is to be the background of it.” Exactly two weeks later, on August 23, 1934, the American Liberty League publicly announced its existence. Its treasurer was Grayson M.P. Murphy, MacGuire’s boss. One of its directors was a du Pont. The du Pont family and its associates were the League’s largest funders, with donations and loans ultimately topping $276,000.

Appalled, Butler contacted Philadelpia Record reporter Paul Comly French, who traveled to New York to interview MacGuire at Murphy’s offices. Posing as a sympathetic friend of Butler, French got MacGuire to open up. “The whole movement is patriotic because the Communists will wreck the nation unless the soldiers save it through fascism,” MacGuire reportedly told French. “He said it would not be any trouble to raise a million dollars,” French later testified before the McCormick-Dickstein Special House Committee on Un-American Activities, which was investigating fascist influences in the country. “He said he could go to [Morgan lawyer] John W. Davis or Perkins of the National City Bank, and any number of persons to get it. … Later, we discussed the question of arms and equipment, and he suggested that they could be obtained from the Remington Arms Company through the du Ponts.”  Du Pont Company had just bought Remington Arms.

On November 20, 1934 General Butler exposed the entire scheme in sworn testimony in a closed session of the House Special Investigating Committee. He suggested that if the Committee wanted to get to the bottom of this, they should subpoena testimony from Grayson M.-P. Murphy and those who had also been approached, including General Douglas MacArthur, former American Legion Commander Hanford MacNider, and leaders of the American Liberty League, notably the du Ponts.

The Committee called none of these, but did get corroborative testimony from James Van Zandt, National Commander of the Veterans of Foreign Wars, who admitted he knew of the plot. MacGuire said he had been “misunderstood.” But MacGuire’s letter to Clark from Paris confirmed MacGuire’s survey of European fascism. The Committee released its report on February 15, 1935, confirming the plot.

French’s report was printed by the Philadelphia Record, and the story was carried by the New York Post and a few other papers, but the stir of interest was quickly smothered by MacGuire’s denials and ridicule carried by The New York Times and Time, the national magazine ruled over by Morgan friend Henry Luce. J.P. Morgan Jr., just off the boat from Paris, refused to say a word, but Morgan partner Thomas Lamont was quoted by Time: “Perfect moonshine! Too utterly ridiculous to comment upon.”

Why did the Committee not subpoena the testimony of the Wall Street principles named by General Butler and French? Why, despite a Congressional report that confirmed a plot to overthrow President Roosevelt with a fascist coup d’etat, were no investigations made, much less indictments sought, by Roosevelt’s Justice Department on federal treason charges? ACLU Director Roger Baldwin put out a statement: “Imagine the action if such a plot were discovered among Communists! Which is, of course, only to emphasize the nature of our government as representatives of the controllers of property. Violence, even to the seizure of the government, is excusable on the part of those whose lofty motive is to preserve the profit system.”

But Roosevelt in taking no action may have had another motive other than class loyalty or forgiving the desperation of frightened fellow Wall Streeters. Fear of Wall Street’s anger also did not seem to rule his judgment. Indeed, he would have no hesitation during the 1936 presidential campaign in denouncing the Liberty Leaguers who backed Republican candidate Alf Landon as “economic royalists.”  Landon himself would comment after his landslide defeat that the League’s support was a “kiss of death” for his campaign.

Unlike Obama, Roosevelt had the personal confidence of Old Wealth to fight back during his first administration with headline-making congressional investigations into stock speculation before the 1929 Crash, secret banking excesses in fueling the speculation, and tax evasion. He struck back with speeches that drew a class line and gave average people hope for justice and the future, with spending policies that gave employment and saved homes. In 1935 Mussolini’s invasion of Ethiopia with airplanes and mustard gas killed some 500,000 Ethiopians, earning condemnation and economic sanctions from the League of Nations. The blush was off the Mussolini rose for the House of Morgan. In early 1936, Roosevelt’s Democratic-controlled Congress heaped shame on the du Ponts by exposing their war profiteering in the Senate Munitions Hearings, earning them infamy as unpatriotic “Merchants of Death.”

But his greatest weapon was what the House Investigating Committee had learned and kept most of its testimony sealed. Roosevelt held a Sword of Damocles over the heads of his misguided corporate enemies that he never had to use. It was his own personal insurance policy.

President Barack Obama, by his own doing, does not have such an advantage. During his first two years in office, when he had a Democratic majority in both houses of Congress, he did not pursue investigations into charges of war crimes leveled at former President Bush and former Vice President Cheney for illegally authorizing torture in Afghanistan to obtain false confessions of Iraq’s alleged ties to 9/11. Using torture to obtain false confessions to get Congressional and popular support for the invasion of Iraq could have been subject to legal inquiry by both the Justice Department and Congress. But fear, not courage or the Constitution, triumphed. In fact, according to Christopher Edley, Dean of the UC Berkeley Law School and a high-ranking member of President-Elect Obama’s 2008 transition team, the mere fear of a military coup by the Pentagon’s powerful generals if Obama pursued war crimes in Iraq and Afghanistan was enough to convince the Obama team to dismiss any serious consideration of prosecution of the higher ups responsible for the torture policy. This was the origin of Obama’s famous refusal to pursue prosecution: “We need to look forward, as opposed to looking backwards.”

Now, with his presidency confronted by a serious Republican challenge by corporate raider Mitt Romney, it appears that President Obama is beginning to take the gloves off as election season heats up. He needs to, if he hopes to remobilize his disappointed voter base. But with Texas’s Rick Perry backing out of the Republican primaries and throwing his weight behind du-Pont-backed Newt Gingrich, we may be seeing a repeat of the 1930s, with just as much drama and intrigue.

Next: Did Roosevelt’s policies really work to end the Great Depression?

See previous articles:

Introducing The 1% and Their Target: The Middle Class

Secrets of the 1%: FDR’s Attempt to Reform the 1%’s Wall Street

© Gerard Colby.

Gerard Colby is the author of Du Pont: Behind The Nylon Curtain (Prentice Hall, 1974), Du Pont Dynasty (Lyle Stuart, 1984), and with Charlotte Dennett of THY WILL BE DONE, The Conquest of the Amazon: Nelson Rockefeller and Evangelism in the Age of Oil (HarperCollins, 2005). He was the lead contributor to Into the Buzzsaw: Leading Journalists Expose the Myth of a Free Press (ed. Kristina Borjesson), winner of the National Press Club’s first Arthur Kruse Award for Press Criticism. He has taught international economics, political science and the history of Latin American political economy at various colleges, has lectured throughout the U.S. and Brazil, and has done investigative journalism for national and local news services for over 30 years. From 2004 to 2009 he served as President of the National Writers Union, Local 1981 of the Technical, Office and Professional Division of the United Auto Workers.


[1]This and other cuts are done to make easier reading which would otherwise get complicated. For instance below, you would have to explain the Sherman and Clayton Antitrust Acts which would then divert the reader from the main points.

[2] Section on prohibition cut – takes too long to explain and hurts the flow of the narrative.