Diving into “Rothbard’s Wall Street, Banks, and American Foreign Policy”

Content: This paper summarizes an outstanding essay written by Murray N. Rothbard in 1984, which appeared the first time in World Market Perspective and later under the same title as a monograph produced by the Center for Libertarian Studies in 1995. It focuses on and reveals the close alliance among politicians, bankers and big enterprises in the United States between 1861 and the middle of the 80ies. It is our conviction that this is a must read for everyone interested in understanding the origin of the actual system we live in today and why our world is developing the way it does. At the end of this short summary, you will find the link to download the whole essay.

“Businessmen or manufacturers can either be genuine free enterprisers or statists; they can either make their way on the free market or seek special government favors and privileges. They choose according to their individual preferences and values. But bankers are inherently inclined toward statism.” – Murray N. Rothbard

Introduction[amazon asin=1610161920&template=*lrc ad (right)]

J.P. Morgan, Rockefeller, Lehman Brothers, Chase, Du Pont. These are some of several high-profile families in the American business community. They range from investment firms and large-scale industry manufacturers to top notch corporate lawyers – but more importantly, they are the market makers, shakers and movers, and have been the powerhouses of US finance since the 1890s, and deeply entrenched in US political history. This comes in as necessary and detrimental when we look at today’s policy making, and try to interpret decisions made by the FED or when we try to understand the United States’ foreign policy towards the Middle East. We need to understand who is behind them, but also who the beneficiaries of these decisions are. In Wall Street, Banks and American Foreign Policy, Murray N. Rothbard reveals that the financial and political stakeholders are one and the same, a web of connections that goes back to families of financiers still present in today’s world. In this book, he highlights the role of political capitalism and crony capitalism in the United States by tracing the historical references and connections in the United States’ financial and political decision making.

For the purpose of this article, we divide the book into three phases where we see gradual retreat of US policy from its traditional isolationist policy, to indirect intervention pressured by the US financial community.

Rothbard’s Themes

In Wall Street, Banks and American Foreign Policy, Rothbard highlights a number of themes through his historical narrative of the story of the Establishment (Wall Street) in US policy making. Rothbard was a traditionally strong advocate of a laissez-faire economy, which calls for free and voluntary exchange, and where the role of the individual and his choices are central to its existence. In this book, Rothbard illustrates the convergence of the US economy from a free market of free and voluntary exchanges, particularly up to the 19th Century, to state capitalism. According to Rothbard in his article Capitalism versus Statism (published in 1972), statism is “one or [amazon asin=B00N59J5BS&template=*lrc ad (right)]more groups making use of the coercive apparatus of the government – the state – to accumulate capital for themselves by expropriating production of others by force and violence”. We find this gradual convergence occurring over two phases in the 20th Century, with the turning point being WWI as the US advocated a militarist approach to the war (as opposed to the previous ‘peaceful’ and non-interventionist approach) – up to the final stage where this becomes institutionalized with the creation of the Federal Reserve. Rothbard traces this convergence back to the strong influence of Wall Street players and family corporates, particularly the Morgan family – as we will reveal later in the article.

Some may regard this as a conspiracy while others may say it is simply business. At the end of the day, money talks. The corporate state overrides partisanship: Regardless of what party is in power, corporate relations/interests have been maintained through financiers’ holding of key government positions, particularly during the Johnson and Kennedy eras. Rothbard summed up his view of the financial powerhouses, stating “bankers are inherently inclined toward statism”, Rothbard argues that whether they are commercial bankers or investment bankers underwriting government bonds, they will continue to find their interests in encouraging deficit. Ultimately, it is the taxpayers who will be charged the bill to repay the government debt. As a result, both will constantly seek to influence and direct government policy towards the same ends. Rothbard does a magnificent job in tracing the familial, business connections, and friendly circles that fostered the creation of these financial powerhouses, and facilitated in securing the implementation of their plans for US policy making.

Phase I: First Steps on the Road to the Empire: Latin America and Asia

The very beginning of Rothbard’s story goes back to 1861, when the names Cooke and Chase emerged as an alliance in the new Lincoln administration, “a creature of government privilege” thanks to the friendship between businessman Jay Cooke and Ohio Senator Salmon P. Chase and good lobbying skills, which secured Chases’ appointment as Secretary of the Treasury and granting Cooke the monopoly in underwriting government [amazon asin=1610395239&template=*lrc ad (right)]bonds. Together, they created a centralized banking system, where “national banks could only expand in proportion to the federal bonds they owned – bonds which they were forced to buy from Jay Cooke”.

Eventually, Cooke’s financial powerhouse collapsed and gave way to the rise of the new financial powerhouse and rival to Cooke, the Morgans, via Drexel, Morgan and Co.. This firm later emerged after 1873 as the leading investment firm of the United States, who had particular influence among members of the Democratic Party.

The Morgans became deeply entrenched in US policy making, to the extent that the War and Navy departments under President Grover Cleveland in the late 1800s were dominated by bankers, particularly affiliates to the Morgan family thanks to Cleveland’s close ties. It was this administration that geared the United States foreign policy from one of non-intervention to one calling for ‘aggressive’ economic and political expansion abroad – starting with Latin America. Their main target was Great Britain, who had dominated economic interests in the region. This policy shift to create the US Empire was directed by then Secretary of State, Richard Olney, who happens to be as Rothbard reveals, a longtime Morgan-associate. According to Rothbard, the Morgan’s drive and strategy was as follows:

“At the heart of the new policy were America’s leading bankers eager to use the country’s growing economic strength to subsidize and force-feed export markets and investment outlets that they would finance, as well as to guarantee Third World government bonds”.

Although this phase could be broadly classified as one of ‘indirect’ intervention, it becomes obvious that Cleveland and Olney had a rather aggressive approach to oust the British from Latin America. This included illegal use of force by the US Navy in 1894 in Rio de Janeiro to break the blockade created by the British-backed rebellion, which was then followed by the stationing of US Navy warships in the area. All means were considered as a [amazon asin=1568584792&template=*lrc ad (right)]worthy option to resort to – later targets were Nicaragua, the now Dominican Republic, and Venezuela, where the US was on the brink of war with Great Britain, encouraged by promised concessions in gold fields by Venezuela.

Another intervention took place in Cuba where the US sided with the rebels to secure its commercial interests in the region, which overrode its financial interests with Spain. This great “success” in Latin America, where they managed to oust imperial powers such as Great Britain and Spain, was a great boost for the political elite to take the next step in building the US Empire.

So the eyes now turned to Asia, where Russia, Germany and France had been building up economic and commercial concessions near China. “With Britain leaving the field free to the US in Latin America, the US could afford to link arms in friendly fashion with Britain in the Far East”, according to Rothbard, who added what was at great stake was the incentive for railroad concessions (consisting of a consortium of big names, such as the Rockefellers, Loeb and Co, and other experts affiliated to the Morgans). However, Olney’s team failed to secure concessions for a railway across Manchuria and the Peking-Hankow Railway, the former was granted to Russia, and the latter went to a Belgian syndicate backed by France and Russia. As a consequence, the United States turned to creating a new ally in the region – Japan. The Japanese successfully kicked the Russians out of Manchuria. In return, then President Theodor Roosevelt recognized Japan’s dominance in Korea and Manchuria.

Theodore Roosevelt – The Morgan’s foothold in the White House! But how did the Morgans manage to make their way to the presidential seat? Well, by striking a simple deal between the Democrats (the camp they align to) and the Republicans (backed by the Rockefellers).

Rothbard illustrates this agreement very nicely: The United States had an economic rift between its two key parties – while the Republicans advocated high tariff and inflationist trend, the Democrats called for free trade, hard [amazon asin=0990463109&template=*lrc ad (right)]money and for maintaining the gold standard. In the advent of the 1896 Presidential elections, the Morgans said they would back the Republican nominee, McKinley, provided that the Republican would support the gold standard. Not only that, but they were promised a seat in the presidential ticket, the Vice-Presidential seat would be given to a Morgan man. Garret A. Hobart, director of various Morgan companies, including the Liberty National Bank of New York City, became Vice-President. The death of Hobart in 1899 left a “Morgan vacancy” and eventually Theodor Roosevelt received the Vice-Presidential nomination.

Rothbard traces Roosevelt’s family network, and associates by providing evidence of his strong connection to the Morgan family. As an example of his ‘Morganship’, Rothbard says “[it] is not surprising that virtually Teddy’s first act after the election of 1900 was to throw a lavish dinner in honor of J.P. Morgan”. Through him, more and more Morgan men entered the White House, and held key positions, particularly after assuming the Presidency.

Phase II: WWI – War Means Business:

The United States suffered from a harsh recession in the years preceding WWI. But by then, it was no longer a US Empire, rather a ‘Morgan Empire’, which suffered greatly due to the drastic economic situation. The family was fully focused on banking for the railroad business for decades. They lost a great deal with the decline and, eventually, their New Haven Railroad Company went bankrupt.

Much was at stake for the Morgans. To them, WWI was a godsend, particularly with Woodrow Wilson as President. According to Rothbard the family “deliberately ensured” Wilson’s election. After all, Wilson was on the board of the Morgan-company Mutual Life Insurance Company and had a strong connection with members of the Morgan circle.[amazon asin=0912453001&template=*lrc ad (right)]

The war meant a lot to the Morgans; it would be a revival both from a political and financial standpoint. They used their longtime connections with Great Britain and the Rothschild family and to a great success, J.P. Morgan & Co. became the fiscal agent of the Bank of England, and the sole underwriter for the British and French war bonds, as well as a big player in the financing and channeling of war materials and munitions to the Allies. Rothbard quotes a business writer at the time saying “War, for Europe, is meaning devastation and death; for America a bumper crop of new millionaires and a hectic hastening of prosperity revival”. To that end, the Morgans were highly committed to helping the Allies win the war, and have the US joining them. Their influence helped create the Aerial coast Patrol in 1915 to search the skies for German planes, and the National Security League, which gave the US the big push to enter the war. This comes to no surprise when we take a look at some of the names in this League; Roosevelt, Guggenheim, the DuPont munitions family, Carnegie Steel and US Steel Family representatives, and of course J.P. Morgan himself.

With the ‘prosperity’ enjoyed by US businessmen, particularly the Morgans, Rothbard presents the argument that the peace settlement of Versailles, was no other but “setting the stage” for the next World War, through the dismemberment of Germany and Russia, who would seek to retrieve their lost territories once they recover, and by taking advantage of the power vacuum in Eastern Europe through the creation of British client states. It may be the case that the stakeholders, the large war financiers, did not have a direct say in the setup of the peace agreement, yet again, the Morgans created many friends and loyalists along the way. It comes as no surprise that former banker and US Vice President Charles Dawes (Dawes Plan 1924 – 1929) and Owen Young (Young Plan 1929 – 1932), President of the Morgan company General Electric, were responsible for the German post-war reparation plans, financed by an investment banking syndicate headed by J.P. Morgan and Company.

Phase III: Let’s institutionalize the Regime!

After discussing the stake of the many large financiers in the war, the question to ask is which system did facilitate it? The Federal Reserve was created in 1913 exactly for this reason: to inflate the economy and create credit out of thin air to finance the war. The Fed was the most important invention of the regime, but not the only one.

The regime believed this war collaboration needed to be translated into permanent institutions. The resulting institution, founded in 1921 was: The Council on Foreign Relations (CFR). Rothbard provides a thorough and detailed track record of its creation, but in essence it is an offshoot of the British Round Tables, with its objectives specified to meet US financial and political supremacy. This think tank is one of a kind; its members were a number of businessmen, bankers, lawyers and intellectuals

– but again, Morgan-dominated until the Rockefellers reigned after World War II. However, as we mentioned before, it is still one regime, regardless of who came first. As Rothbard put it, both families put their priorities straight and struck the deal for WWII: “The Morgans got their way in Europe, the Rockefellers theirs in Asia”.

But the CFR was not enough, what they needed was another institution that focuses on the international outlook. This drove the creation of the Trilateral Commission in 1973, financially endorsed by the CFR and the Rockefeller Foundation. Both the CFR and later Trilateral Commission continued to play a detrimental role in orchestrating a series of events in the second half of the 20th Century. During Eisenhower’s rule, CIA director and former Standard Oil lawyer Allen W. Dulles organized the covert overthrow of the Mossadegh regime and fostered the restoration of the Shah in 1951. Concurrently, the CIA engineered a counter revolution in Guatemala to secure the interests of United Fruit Company. Even Kennedy and Nixon were no different.

The Johnson era, however, was more belligerent after the appointment of some hawkish figures, such as McNamara and Rush, who aggressively pushed for the escalation of the Vietnam War. It is ironic, however, to find that the very same men who pushed for the war, turning against it and calling for the disengagement from Vietnam altogether in 1968. Rothbard quoted Pulitzer Prize-winning journalist and author David Halberstam saying “let him (Johnson) know that the

Establishment – yes, Wall Street – had turned on the war… It was hurting the economy, dividing the country, turning the youth against its best traditions”.

It is all a vicious cycle, falling back to the original masterminds who set up the agenda more than 100 years earlier.


Rothbard wrote this book in the year of Reagan’s presidential race. He concludes by paraphrasing White House aide Jack Valenti about Lyndon Johnson: “The Trilateralists and the financial power elite can sleep well at night regardless of who wins in 1984”. Presidents come and go, but the Establishment is here to stay, secured by the three major institutions it invented and that foster the key objectives of the power elite. Rothbard only went to 1984 – but his concepts are still relevant, and can be further used to explain the dynamics and drivers of events since 1984.

Questions include the following:

– What interests were behind the war on Afghanistan 2001, Iraq 2003 or a possible US assault on Syria? Crony Capitalism is an ‘ongoing process.’ It was more than obvious in the George W. Bush era when we draw the ties between his connections with the oil industry and the international community, particularly the Middle East.

– 2008, with the enactment of TARP and government bailouts, writers such as David Stockman, former budget official in Reagan’s administration, called it the “triumph of crony capitalism”.

Our understanding of Rothbard’s book will enable us to take the discussion a step further, and question (or maybe help solve) some of many ‘mysteries’ of recent years in US policymaking, on both domestic and international levels.

Download the book in digital format on Mises.org.

Rapperswil, November 2013

Reprinted with permission from Global Gold.