“1. Men of Action” in “America’s Cold Warrior”
CHAPTER 1 Men of Action
Paul Nitze valued the distinction between people who generated ideas and those who took action. The son of a prestigious University of Chicago professor, he grew up in comfort amid an environment of bright minds. Working on Wall Street in the 1930s, he lived well even as much of the country suffered through the Great Depression. Ennui led him back to his alma mater Harvard to pursue a doctoral degree in sociology. Dropping out after two semesters, Nitze retained a complicated relationship with academia. In subsequent years, he bemoaned its insularity yet also wanted to be accepted as a strategic thinker with a unique understanding of the “real world.”
A key figure during Paul Nitze’s formative years was Clarence Dillon, the Wall Street titan who cofounded the New York investment firm Dillon, Read & Co. Nitze respected Dillon as a man who took action. Unlike professors, “action men” such as Dillon bore responsibility for the significant decisions of war and peace. Accordingly, Nitze aspired to gain proximity to them and gain their approval. Forged in the era of the Great Depression and then the outbreak of World War II, Nitze’s worldview was that great people made big decisions that shaped history.
Nitzes and Hilkens; Baltimore and Chicago
From an ancestral home outside Magdeburg, Germany, Charles Nitze—Paul’s grandfather—came to the United States for a “grand tour” shortly after the American Civil War ended in 1865. Settling in Baltimore, Maryland, Charles became general manager of Robert Garrett and Sons, an investment bank that financed the Baltimore and Ohio (B&O) Railroad.1
The year 1876 saw the one-hundredth anniversary of the Declaration of Independence, the birth of Charles and his wife Elizabeth’s son, William A. Nitze, and the founding of Johns Hopkins University, an institution with which the Nitze family would become associated. Eighteen years later, William Nitze graduated from Johns Hopkins with a focus on early French literature, receiving his PhD from Columbia University three years after that. In 1901, William Nitze married Anina Sophia Hilken, whose family also traced its roots back to Germany.
On January 16, 1907, Anina gave birth to Paul Henry Nitze. “The name Nitze is inherently a Slavic name, not a Germanic name,” Paul much later recalled, and a name his father claimed was derived from “Nike,” which meant victory.2 A Russian nurse attended to Nitze and taught him German—he would later recall having learned to speak German before English.3 Besides the numerous German relatives, Nitze’s family tree included a great uncle who attained the rank of general for the Confederacy during the Civil War.
In 1909, Professor William Nitze became head of Romance languages and literature at the University of Chicago, which the industrialist John D. Rockefeller had established a decade and a half after the founding of Johns Hopkins. The Nitzes lived at 1220 East 56th Street, two blocks north of the campus. In recollections of his youth, Paul seldom touched upon his relationship with his father.4 Instead, he cherished the relationship with his mother, Anina, who was “by far the greatest influence in my life” and “loved me beyond any normal maternal love.” Mother and son kept regular and candid correspondence as the latter grew older.5
City and country taught Paul about life. He relished the memory of how his mother dressed him up in Russian suits that a friend in Riga, Latvia, had sent her and how, after getting beat up on the way to school, he joined a local gang for protection.6 While the streets of Chicago in the 1910s provided an introduction to “power politics,” the woods of Colorado, where the family bought a ranch and spent summers, led Nitze to appreciate nature’s restorative qualities. To help Paul’s sister Elizabeth recover from an illness, William and Anina took the family to the pristine area near what would become Aspen.
When Paul Nitze was seven, his father took the family to Austria for a summer vacation that coincided with the immediate aftermath of the assassination of Archduke Ferdinand in Sarajevo on June 28, 1914, a shocking event that nevertheless did not merit the cancellation of travel plans. After mountain climbing in Tyrol, the Nitzes headed to Germany.7 Upon their arrival in Munich, where a bomb had just exploded at the train station, the family took up lodging only to learn that Germany had declared war on Russia. From a hotel window, Paul watched as onlookers cheered on German troops marching in the street.8 The family was in Munich when England declared war on Germany on August 4 and spent the rest of the month in Frankfurt with relatives of Anina.9 Not until September 1914 could William Nitze book a trip on a Dutch steamship back to the United States.
Paul Nitze always remembered spending time at the Lake Surrick Club in Chicago shortly after returning home from Europe at the start of World War I.10 The club’s members included distinguished professors from the University of Chicago—several of whom had already won a Nobel Prize—and representatives of the wealthiest families of the Windy City. “And the thing I couldn’t get over was the fact that there was a group that I thought was the most admirable men one could imagine, and they were having no impact upon the things that were going on in the world that seemed to be the most tragic and the most important,” Nitze later recalled. “And at that point, I rather felt that I didn’t want to follow in the footsteps of those people, admirable as I thought they were, because they did not have a real impact upon affairs.”11 Nitze had grander ambitions than replicating his father’s career and social circle. “I wanted to get into some other field where one could be closer to the levers of power, to put it frankly, the levers of influence.”12
In sixth grade at the prestigious Chicago Lab School, Paul Nitze played, in a school production, the role of future German foreign minister Walther Rathenau lamenting the terms of the Versailles Treaty.13 With this impersonation, he achieved the same outcome as the academics of his father’s circle, who discussed the flaws of the postwar settlement. “They were, in my estimation, as distinguished a group of scholars as had ever been brought together, but it was evident that they were powerless to influence events.”14 Nitze took pride in what he regarded as his rebellious streak. He also benefited from the stimulating intellectual community around the University of Chicago. His neighbor and best friend was Professor Robert Millikan’s son, Max Millikan, who would eventually serve as assistant director of the CIA and director of the MIT Center for International Studies.15
Outside the classroom and his school-age friends, Paul Nitze saw glimpses of the busy social world his parents and sister inhabited. His outspoken mother befriended Clarence Darrow, the renowned lawyer who defended controversial clients such as Nathan Leopold and Richard Loeb, a classmate of Nitze. She enjoyed the music of Richard Strauss and passed on to Nitze a lifelong appreciation for Johann Sebastian Bach. In 1922, Nitze’s sister, Elizabeth Hilken, married Walter Paepcke, a businessman of German heritage who would go on to found the Container Corporation of America. Around that time, fifteen-year-old Paul Nitze passed the college entrance exams and decided to enroll at the University of Chicago. His father discouraged the idea because of his age and not wanting his peer group to pigeonhole him as the son of a professor.16
Hotchkiss and Harvard
Nitze did not become (possibly) the youngest undergraduate at the University of Chicago. Instead, he headed to Hotchkiss, the elite boarding school in Connecticut, where his classmates included future deputy secretary of defense Roswell “Ros” Gilpatrick. The entry for the second football team in the 1923 yearbook listed Nitze as 5 feet, 8 inches tall, weighing 143 lbs, and headed to Yale, which Paepcke had attended. Having already covered much of the schoolwork, Nitze focused on extracurricular activities. “The main thing on my mind was my peers and having fun with them and getting along with them,” as he later put it.17 The cocky teenager started the “sequester club” for those students who had received demerits. In addition, he pursued physical acts of daring, such as ski jumping, and once knocked himself unconscious.18 According to the 1924 yearbook, Nitze played for the second football and class baseball teams and also participated in the St. Luke’s and Pythian Societies, the Literary Board, the Opera Club, the Dramatic Association, the Mandolin Club, the Banjo Club, the Musical Association, the choir, and the Debating Union.
Nitze possessed confidence and ambition. “Think of the vast multitude of stars, of their tremendous size, of their inconceivable age, and the possibility of life on some of their planets,” he wrote in an article for a student publication during his time at Hotchkiss. Such thoughts could easily lead one to feel insignificant and ask: “what difference can the actions of a single human being make in the period of a lifetime?” The answer offered by the sixteen-year-old Nitze was to “keep in mind that for us the world is everything and that each one of us is the center of his small universe [and] not such an unimportant thing after all.”19 Making “the most of his life, he may accomplish things which will not only bring him his reward but which will be given an infinite amount of happiness and comfort to the rest of the world.”20
Such musings from an angst-ridden teenager are hardly a sign of genius. From a young age, however, Nitze strove to achieve. He was fixated on breaking out from his inherited habitat and playing against type as a professor’s son. “I finally got the feeling that all this life that I had been part of in Chicago and Hotchkiss was in a way artificial and separated from the real world,” he would later put it, “and that what I really wanted to do was to get away from all this and dive into the real world.”21
Through Henry Hilken, his grandfather in Baltimore, Nitze got a summer job on the SS Lutzo, a German freighter that French forces had captured during World War I and had only recently returned to the North German Lloyd shipping line.22 Young Nitze, yearning for a world outside of a cloistered academic setting, found it helping take apart the ship’s engine while the vessel idled in the middle of the Atlantic Ocean or swimming in the bilge water to retrieve a dropped bolt.23 For this seventeen-year-old, the experiences of Nobel Prize laureates on the faculty of the University of Chicago could not have compared to those of the ship’s fourth engineer, Otto Knocke, who shared tales of escaping from a French prisoner of war camp, inventing a new kind of textile machine, and then losing a fortune during the hyperinflation of 1921–23.24
After deboarding at the end of the summer, Nitze prepared for undergraduate education in the Ivy League. While most of his Hotchkiss friends went to Yale, where Nitze had been expected to wind up, he chose Harvard—not “wholly satisfied with the lack of true intellectual interest” on the part of his peer group bound for New Haven.25 Whatever expectations Nitze had for Harvard, the faculty apparently underwhelmed him. “I couldn’t have been more bored with the mercantilists and all this kind of nonsense that bore nothing on today’s economic world,” he later described the course he took on the history of economic thought. “And so I didn’t do much of the reading, and I didn’t attend any of the lectures, and I didn’t attend any of the section meetings, and the most beautiful girl had suggested that I go down to Newport for the weekend on the day of the final examination, and I did that rather than taking this final examination, so I didn’t take the final examination.”26 Nitze received a zero for the course.
After forays into mathematics and physics and then history and literature, Nitze gravitated back to economics. Again, it came back to “some bearing upon the levers of influence.” The “economic area” got at “what makes men tick … [a]nd not only really just in the business world but beyond that. It has a bearing on how people behave and why.”27 The zero in the history of economic thought notwithstanding, Nitze improved his grades and wound up fine academically. He wrote a senior paper on the theory of rate regulation of public utilities and earned the distinction summa cum laude.28 In the oral examination, according to Nitze’s recounting, the professor knocked down his final grade to a cum laude (from magna cum laude) because Nitze refused to back down on the point of disagreement. Such a moment—whether apocryphal or not—captures the self-assuredness with which he approached everyone.
Nitze pursued extracurricular activities with vigor. He played halfback on the football team and rowed crew. His crew pals included Frederick “Freddie” Winthrop Jr., a descendant of John Winthrop, the first governor of Massachusetts.29 When it came time to be asked to join the elite Porcellian eating club, which had famously recruited Theodore Roosevelt and rejected Franklin Roosevelt, Winthrop insisted that he would only participate if Nitze were also selected.30 In meetings of the Porcellian, Nitze dined with alums such as a future senator and the incumbent Speaker of the House of Representatives. He also made a lifelong friend in Charles “Chip” Bohlen, who, after college would join the foreign service and go on to serve in ambassadorships to the Soviet Union and France. Nitze had planned to follow friends to do graduate work in England. Yet his efforts to make up for the zero in the history of economic thought led him to physical exhaustion during his senior year when he was hospitalized for infectious jaundice.31 He came down with hepatitis after he and Winthrop canoed from Boston to New York in April.
A presence in Nitze’s life during subsequent months of recovery and college graduation was his first serious girlfriend, Mary Ames, a member of a prominent Boston family. In November 1928, Nitze was driving Ames from her parents’ house in downtown Boston to a party in Back Bay. When crossing from Beacon Street to Charlesgate West, he slammed on the brakes—but not soon enough to avoid hitting a couple walking across the street. The man suffered a broken leg, and the woman died a few hours later. At the cost of a lump sum, Nitze avoided prosecution. He broke up with Mary Ames shortly after graduation.32 His life could have gone differently: he might have been imprisoned. Instead, he felt he had successfully managed a crisis.
Europe and Wall Street
Nitze decided to leave Boston. Walter Paepcke set him up with a job with the Philadelphia branch of the Container Corporation of America. Nitze soon left that position to work for a new box factory in Bridgeport, Connecticut.33 He initially enjoyed learning about cost accounting but quickly grew bored.34 “Bridgeport was not exactly my kind of town.… It was time to move on.”35 At this moment, he rejected the notion of an ordinary existence of relative comfort. A supervisor told him that he might one day become the company’s vice president. Nitze professed horror at this prospect for his life.
Drawing again on family connections—this time his father, William—Nitze received an introduction to William Bacon, a Chicago banker who, based solely on the understanding that Nitze spoke German, sponsored him to go to Germany in the spring of 1929. Given the high valuation of the US stock market, Bacon wondered whether Germany had better buying opportunities. En route to Europe, Nitze stopped in New York City to meet with Clarence Dillon.
Dillon took Nitze to lunch at a private dining room where one of his proteges, James Forrestal, interrupted them to describe plans for a megamerger to counter a deal in the works by rivals at the much larger J.P. Morgan.36 “This introduction to Forrestal left a deep impression upon me,” Nitze later recounted. “I saw him as a man who understood the world of Wall Street and its power politics, was quick to understand what needed to be done next, and was prepared to do it.” It was Nitze’s “first exposure to a man of action … a man fully engaged in the ‘practice’ rather than the theory of politics.”37 Dillon and Forrestal proved to be indispensable to Nitze in the long term. After this first meeting, Dillon gave Nitze letters of introduction to the banking houses of Germany, including Oppenheim and Company, in Cologne.
In Europe during the summer of 1929, Nitze enjoyed an abbreviated version of the expatriate experience. On the street in Paris, he encountered a friend from Chicago who brought him into a circle of other Americans living there. These included Pat Morgan and his wife, the writer Whitney Cromwell, who had known James Joyce and Ernest Hemingway in the fabled setting of Paris in the 1920s. Nitze moved in with Morgan and Cromwell and assisted them in producing a new American opera. During this time, he briefly considered becoming an art dealer.
Nitze left his bohemian friends after a few weeks and arrived in Germany, where the twenty-two-year-old relied on his letters of introduction from Clarence Dillon to gain entrée into elite circles.38 In preparing his report on economic conditions—the ostensible purpose of his European journey—Nitze cultivated a professor of labor relations at the University of Berlin, traveled throughout the Ruhr Valley to see German industry up close, went to East Pomerania to learn about its agriculture, and inspected textile mills in Saxony. In Berlin, he attended sculpture exhibitions. Reconnecting with his Paris friends in the Netherlands, upon finishing up in Germany, Nitze was denied a visa to the Soviet Union on the grounds that he was not an artist.
Upon his return to the United States later on in 1929, Nitze met again with Dillon, who was gloomier than before and insistent that an economic depression—not just a recession—lay on the horizon. In response (and, again, with no sense of obligation to the firm in Chicago that sponsored his trip), Nitze showed Dillon his report concluding that Germany was overextended and highly vulnerable to an economic downturn. Dillon invited Nitze to join him at his weekend home in New Jersey, to which a chauffeur drove them in Dillon’s Rolls Royce.
A few days after Nitze returned to Chicago and started work for William Bacon (who showed little interest in his report), he received a telegram from Dillon offering him a job. Nitze “was likely the last man hired on Wall Street for many years thereafter,” he would quip later.39 The ensuing stock market crash and Great Depression must have conveyed to Nitze that Dillon—as opposed to the professors he had observed from afar at the University of Chicago and then in the classroom at Harvard—understood the world. Dillon had already reduced the size of his workforce from four thousand to fifty—in preparation for the upcoming crash—and then hired him as employee fifty-one to commence work on October 1, 1929. Young Nitze’s ego could hardly have suffered.
Nitze’s first test in his new position came three weeks later. On that “Black Tuesday,” October 29, Dillon ordered him to close out the firm’s position in the Aluminum Company of America and absorb a steep loss. “This was the first of many opportunities I had to witness Clarence Dillon’s keen, analytical mind combined with a radical and brutal decisiveness in taking the course of action from his analysts,” Nitze later recounted. “When faced with a particular problem, he would be very objective, almost leisurely, about gathering information that might be pertinent.” However, when he had determined “the important logic chain involved in the situation, he would suddenly switch from being an analyst to a man of action who would execute his decision without hesitation and with no looking back.”40 These practices—in particular, objective analysis followed by decisive action—were ones that Nitze sought to emulate throughout his career. Deciding to settle in New York City, he stayed at the Harvard Club and then in an apartment on East 43rd Street.41
Nitze represented Dillon, Read to maximize returns on new and ongoing investments. In one case involving the transfer of two investment trusts from New York to New Jersey to avoid paying a new state tax, Dillon appointed Nitze as secretary of both of them. In this capacity, Nitze kept minutes for board meetings that included financiers ranging from Frederick Ecker, the respected head of the Metropolitan Life Insurance Company, to Charles Edwin Mitchell, the director of National City Bank, who would later be convicted of tax evasion and whose encouragement of speculative practices may well have contributed to the great crash of 1929.42
“As I look back at the people on those two boards—there must have been a combined membership of seventy-five—perhaps a third of them were wise, competent, and honorable men,” by Nitze’s account, and “another third were basically incompetent, and the remaining third were crooks or barely within the law.”43 Nevertheless, the experience was “quite an education for a young man to be exposed to the machinations of the barons and wizards of Wall Street,” and one that left him with “little awe and more confidence in my own abilities and judgment.”44
Buoyed by this confidence the headstrong Nitze did not immediately endear himself to the firm’s older associates and partners. “I soon become Mr. Dillon’s fair-haired boy and he would often ask me to check out the carefully constructed negotiations and plans of a partner to give him my recommendation before he would give his approval,” Nitze later recalled. “As far as Dillon was concerned, I could do no wrong. As far as the partners were concerned, I was the most objectionable young whippersnapper on Wall Street.”45
Dillon appointed Nitze a director in a handful of companies he sought to pool together to construct a transcontinental railroad to surpass the achievements of the titans of nineteenth-century US industry. Nitze was twenty-four years old when all these companies went bankrupt in 1931. That same year—by which his “confidence knew few bounds”—Nitze attempted to broker a deal in which Dillon, Read would wrest control of the United Light and Railways Company (a forerunner of the Maryland Transit Administration) away from another financier, Cyrus Eaton.46 But, unfortunately, that deal fell apart when Secretary of the Treasury Andrew Mellon intervened to protect Chase National Bank, whose largest shareholder was John D. Rockefeller.
“I went in to see Mr. Dillon and reported to him what had happened to my brilliant idea,” Nitze later recalled. “He listened to what I had to say but said nothing. From that moment on I was a non-person. He no longer recognized my face, he didn’t know my name. For three years I was a non-person at Dillon Read as far as the old man Dillon was concerned.”47 However, with this initiation of the old man’s disappointment, Nitze saw his standing with the rest of the firm improve. The other partners had all experienced such treatment by Dillon and took him on as one of their own. Nitze now looked to James Forrestal as his primary mentor. Dillon never actually cast Nitze off. As with the other associates in the firm, he put aside memories of past failures when associates made money for the firm.
Neither failed deals nor the worsening of the Great Depression curtailed Nitze’s ambition and good cheer about his surroundings. “I notice some people are gayer now than they have been,” he wrote his mother in the spring of 1931. “There seems to be more of a Berlin atmosphere about. Things are just about so bad that they have ceased to worry.”48 While Nitze worried about “rioting and general unpleasantness” within the year, should the downturn continue, he was personally thriving. In July, he formed an independent venture with two partners to use a British machine called the “aquarator” to compete with large beverage companies. Nitze and his partners concocted an elaborate campaign alleging that CO2 caused stomach problems and temporary sterility—and that consumers should purchase an “aquarator” instead of Coke or Pepsi. They soon conceded defeat.49
In 1932, Nitze started dating Phyllis Pratt, with whom he “was immediately smitten, for she was lovely, gay, and blessed with a sunny smile that would light the darkest corners.”50 When she first invited him over to dinner with her parents, Nitze debated the causes of the Great Depression with a family friend of the Pratts who turned out to be a governor of the Bank of England.51 “Overproduction is not the problem,” Nitze explained to Sir Montagu Norman, whom the Wall Street Journal had once called “the currency dictator of Europe.”52 “The world needs much more than is being produced,” the headstrong younger man went on to say. “The problem is lack of ability to pay because of a worldwide competitive search for economic security through excessive banking liquidity.”53 No harmful consequences ensued from that exchange. Phyllis married him in December.
One month earlier, Phyllis’s mother, Republican congresswoman Ruth Pratt, lost in a general election in which New York governor Franklin Delano Roosevelt defeated President Herbert Hoover. Roosevelt’s New Deal drew scorn on Wall Street. “The character of my work at Dillon, Read changed somewhat after the passage of the Securities Act in 1933,” Nitze acknowledged.54 That legislation saddled companies with liability for putting out statements featuring material misstatements of facts. As an investment bank that placed securities and bonds, Dillon, Read needed to ascertain that everything listed on the offering was true. While that may seem a reasonable expectation, in the case of an offering for Cleveland Electric, a deal Nitze had worked on, investors did not seem to care about having complete transparency.55 When it came to the Skelly Oil Company, the Securities Act meant that Dillon, Read needed to figure out which assets belonged to the head of the company and which belonged to the company itself.56 The Securities Act, it seemed, required a modest amount of due diligence and honesty in financial transactions and thereby created more work for bankers like Nitze. This came at the expense of profit-making activities.
New Dealers treated Nitze and his Wall Street cohort as a political punching bag. In the fall of 1933, the Senate Committee on Banking and Currency called on Dillon, Read to testify about stock exchange practices as part of hearings featuring its hard-charging chief counsel, Ferdinand Pecora. Choosing to forget the United Light and Railways Company fiasco two years earlier, Dillon took Nitze to Washington, DC, and tasked him with assembling a black book full of “issue” papers covering each transaction that might come under scrutiny.57 As it turned out, the two transactions about which Pecora hammered the firm were ones for which Nitze had not prepared because he saw no evidence of potential malfeasance—suggesting that there were other cases where there was—and leading him to regard the whole endeavor as political grandstanding. “I haven’t had so much fun since Freddy and I canoed from Boston to New York,” Nitze wrote his mother afterward.58
“In two weeks of investigation I learned more about banking, senators, newspaper men, and human nature than in any average year,” Nitze would later put it. “We had an entire floor at the Carlton with nine lawyers, eight stenographers and … worked late into every night with many differences of opinions and a good deal of feeling being shown at times. It is amazing how a couple of weeks working together brings everyone together.”59 He clearly relished the experience of going up against a hostile congress and came back unscathed.
Nitze worked on at least one deal with James Forrestal that had global implications. Upon its discovery of oil in Bahrain, Standard Oil of California obtained a concession from Saudi Arabia to drill in that kingdom—even though oil had not yet been discovered there. In these early stages, neither venture turned a profit. A competitor, Texaco, had built up a marketing network in Africa and Asia, yet it was expensive to ship petroleum from the United States. With Nitze by his side, Forrestal concocted a plan by which the two oil behemoths would pool their resources “east of Suez” through a joint venture, the California-Texas Company. The terms included equal stakes in the California Arabian Standard Oil Company, which would later become the mammoth Arabian American Oil Company.60
Nitze also worked closely with Dillon, Read associate William Draper on public bond offerings for infrastructure projects that significantly changed the landscape of the modern United States. These included collaborating with New York powerbroker Robert Moses in the financing of the Triborough Bridge, the Whitestone Bridge, the Queens–Midtown Tunnel, as well as with local officials in California in the construction of the Golden Gate Bridge and San Francisco–Oakland Bay Bridge.61
By 1936, Nitze, twenty-nine years old, was making $25,000, the equivalent of $541,079.14 in 2023.62 He occasionally invested some of his wife’s money in bond offerings.63 In 1935, he invested in a lab for two French scientists to develop a vitamin–mineral product in exchange for exclusive distribution rights in the United States. The first product, Visynerall, proved to be a financial success. A diabetes pill followed. In 1966, Nitze and fellow investors would sell their stake to cosmetics giant Revlon in a deal valued at $100 million.64
Nitze made deals at Dillon, Read. He had an appetite for risk and never suffered any long-term damage. He and others in his immediate circle risked losing high sums of money and even running afoul of the law. When it came to who got caught, politics clouded legal jurisdictions. Prosecutors and judges tended to be elected—or at least appointed—by democratically elected officials. Nitze had a somewhat jaundiced view of all this. The United States presented boundless opportunities to succeed, fail, and start all over. Government intervention seemed to depend on how politicians thought they could best get reelected. Or, in the case of Andrew Mellon, to protect his friend John D. Rockefeller—one titan helping another. “Men of action” knew more about growing businesses and building bridges and highways than purported experts who wrote books that occasionally got it right. John Maynard Keynes’s General Theory, published in 1936, signified that academics had caught up in understanding what Nitze and his friends were sure that they already understood about the causes of the Great Depression.65
Return to Europe, Harvard, and Wall Street
In 1937, Paul, Phyllis, and their children set sail for Germany. In Hamburg, they picked up a Ford and drove it to Berlin. There Nitze was supposed to meet up with an old business associate whom the Gestapo had hauled off and shaken down. In Munich, the Nitzes stayed for six weeks with their old friends, the Duke of Leuchtenberg (a relative of the late Tsar Nicholas II), and his wife, the daughter of a Russian provincial governor before 1917. During this stay, the Nitzes saw Hitler deliver a speech in Rothenburg, the medieval Bavarian town that the Nazis put forward as a model German community.
“I never saw anybody who scared me more than those young Germans being trained in the Jungendkorps,” so Nitze recalled the youth brigades encouraged by the Nazis to make pilgrimages into the town. “They were thin, arrogant, disdainful looking.”66 His hosts, the Leuchtenbergs, mocked the Führer and regarded him as a temporary aberration. Nitze professed to take the Nazis more seriously. Gone were the unemployment and defeatism from earlier in the decade. “Germany was an entirely different country. It was humming, and I believe that a majority of the Germans were fully behind Hitler … it was scary.”67
Sometime after the Nitze family returned from Germany, Nitze reevaluated his professional aspirations. His visit to Germany and rereading of Oswald Spengler’s The Decline of the West led him “to feel an inadequate understanding of the world social and political scene and felt myself confused and inadequate in trying to estimate what was apt to happen in the future.”68 The “scariness” of Nazism notwithstanding, he seemed more interested in understanding the grand ideological experiments of the 1930s than in combating them. Nitze also believed he had demonstrated on Wall Street that he could do the job well—even though he claimed not to have made “any real money for myself.”
Nitze made the equivalent of half a million dollars a year. His wife stood to inherit a modest fortune. Fascism was rising in Europe, and the Great Depression lingered at home. At the start of the fourth decade of Nitze’s life, he sounded bored. Dillon, Read made him a vice president in 1937, a year that saw a sharp contraction (the so-called Roosevelt Recession) in which business slowed. It is plausible that Nitze and his colleagues saw opportunities dwindle amid an economic downturn during the second term of a president who beat up on Wall Street.
In the fall of 1937, Nitze reenrolled in Harvard, this time as a graduate student in sociology. He became entranced by a professor named Pitirim Sorokin, a Russian exile who detested communism.69 He also reread Spengler’s magnum opus, which he considered a great book with misguided conclusions—even though he could not fully articulate why they were wrong. He enrolled in classes on Plato and comparative religions.70 While Nitze had not cared much—at least up to that point—about distinguishing himself as a scholar and receiving academic accolades, he set a challenge that would sustain his attention through the rest of his life: to come up with an original idea that would impress academics.
During his fall and spring semester at Harvard, in which he took seven graduate courses and wrote papers for four, Nitze kept at least a finger in Wall Street. He got involved in enterprises that he had seeded while at Dillon, Read, but that the firm neglected to nurture during his absence. After he unceremoniously abandoned the pursuit of a PhD and returned to New York City in the summer of 1938, he formed Paul Nitze and Company, setting up a small shop with one partner and one secretary. Specializing in public utilities, he dealt with Secretary of the Interior Harold Ickes on matters of rural electrification. Such business brought him to Washington to testify before Congress to justify why he commanded such high consulting fees for deals that split up or combined public utilities, at least some of which US taxpayers had subsidized. His business affairs also brought him back into collaboration with James Forrestal—by this point the president of Dillon, Read—and Clarence Dillon, who remained the firm’s chairman.
Nitze worked himself to exhaustion. In 1939 he came down with a streptococcus infection and took the family to Florida for a summer of recuperation. Upon his return to New York, Nitze asked if he could rejoin Dillon, Read to work directly for Forrestal. When Hitler’s Germany invaded Poland on September 1, the Nitzes were visiting William and Anina’s Colorado ranch high up in the Rocky Mountains.71 Paul hurried back eastward and resumed his activities at the firm. He did not then see World War II as the United States’ fight. At a dinner party in New York City, he allegedly stated that Hitler’s Germany was no more rapacious than the British Empire. That assertion—so clearly consistent with Nitze’s affinity for verbal jousting—would come back to haunt him.
While the United States maintained its neutrality during this first year of the war in Europe, President Roosevelt sought to assist the United Kingdom within the strictures of the neutrality acts and the limits of public opinion. To pull off such feats as the destroyers-for-bases deal, he needed to bury the hatchet with Wall Street. In June 1940, FDR sent an intermediary to meet with Paul Nitze to determine whether James Forrestal would agree to join his administration as a special administrative assistant to the president. To Forrestal, Nitze appealed as much to logic as patriotism. If the job worked out, Forrestal would find himself in a position of considerable influence—a “can-do” man for the president. If it did not, he would return to Dillon, Read. Forrestal agreed to go to work for FDR. A few weeks later, while in Louisiana putting together a gas deal, Nitze received a telegram: “Be in Washington Monday morning. Forrestal.”72
Nitze obeyed this order. He arrived the next day to seek out Forrestal’s office in the building next to the White House. It was then called the State–War–Navy Building; today it’s the Old Executive Office Building, home to the offices of the National Security Council (NSC) staff. Forrestal put Nitze to work. “The government could not pay me, so I was to remain on the payroll of Dillon, Read,” as Nitze put it in his memoir. “In this wholly illegal fashion my career in Washington began.”73
Washington, DC
Nitze was hardly a “millionaire” by the terms of the era, and he needed the salary. But, more to the point, the government would not pay him until it could run a thorough background investigation. A reasonable person involved in that process might well have posed questions about his family history. His uncle and namesake, Paul Hilken, had been an accomplice in the German plot responsible for the July 1916 Black Tom explosion in New York Harbor—the most significant act of industrial sabotage in US history.74
Nitze lived with Forrestal and worked directly for him until August 1940, when he became undersecretary of the navy and Nitze briefly returned to New York City. Then, summoned again to Washington by another Dillon, Read, partner, William Draper, Nitze went to work on the Selective Service Act of 1940.75 Meanwhile—and omitted in Nitze’s memoir—he was undergoing a background investigation for government employment. According to a November 5, 1940, letter from Federal Bureau of Investigation (FBI) director J. Edgar Hoover, Coordinator of Inter-American Affairs Nelson Rockefeller had requested the investigation into Nitze for a position on the Advisory Commission to the Council of National Defense.
A preliminary report cited a “reliable confidential informant who has furnished valuable information to [the FBI] in the past,” which claimed, “Since the beginning of the Nazi regime [Nitze’s] political thoughts have been leaning more and more along those lines and he has expressed feelings of admiration for totalitarianism and considerable contempt for the processes of democracy.” In addition, the source described a secondhand (if not thirdhand) account of the New York City dinner party incident. “It seems that he expressed himself so forcefully, although not under the influence of drink,” on that occasion, “that a somewhat unpleasant impression was left with the others who were present.”76
The final report, which Hoover sent Rockefeller on January 16, 1941, included testimony from Forrestal on Nitze’s behalf. Nitze was “a highly intelligent individual” and “an exceedingly able and energetic business man,” who was also “aggressive [and] the ‘pusher’ type,” according to Forrestal. He was also “100% American.” Nitze had confided in Forrestal his uncle’s role in the Black Tom affair yet had also affirmed that, should the United States find itself at war with Germany, he, Nitze, “would be willing to fight for the United States.” Forrestal professed awareness of the dinner party incident, yet insisted that Nitze’s remarks had been misconstrued.77 Along with a report on Forrestal’s interview, Hoover included a summary of the endorsement of the US attorney for the Southern District of New York, John T. Cahill, who “considered Nitze a brilliant individual [who] possessed a good background, his only fault being that he is inclined to be argumentative at times.”78
Such testimony from elite figures paved the way for Nitze’s joining the team coalescing around President Roosevelt as the United States prepared to enter World War II. The FBI investigation also opened the door to troubling insinuations about his parents. Whether or not Nitze was fully aware of statements given about them, he would later encounter suspicions about holding lingering sympathies toward Germany.
At no point in his memoir did Nitze mention any controversy surrounding himself or his parents as he took up roots in Washington. Indeed, he admitted to having been a strict neutralist and an “America Firster.” Given his self-assuredness and enthusiasm to put forward his “logic chains” and never back down, it is reasonable to assume that he indeed raised the case of Germany versus England at a dinner party in the late 1930s. He did not travel to the United Kingdom during his ventures abroad in the 1920s and 1930s—though he lamented how many of his classmates had been able to study at Oxford while he recuperated from physical ailments of his own making—yet it is impossible to conclude that not spending time there made him “anti-British.”
Nitze’s View of the World
Nitze was pro-United States and also pro-European. Politicians failed to impress him. Neither did many academics or titans of industry that others held in high regard. Clarence Dillon and James Forrestal did, and it did not hurt Nitze’s estimation of them that they took him on as a protégé. He was nominally a Democrat. But, as mentioned above, his mother-in-law, Ruth Pratt, was a two-term Republican congresswoman who lost in the election of 1932 that sent FDR to the White House. “I also supported Roosevelt,” Nitze contended in his memoir. “I had come to the conclusion that Herbert Hoover and his economic advisers lacked understanding of the way the domestic economy—and its relation with the international economy—worked.”79 Fairly or not, he blamed the Hoover administration for turning the 1929 Wall Street crash into a worldwide depression.
Nitze remained a registered Democrat until 1937 when he became a Republican. Nitze’s accounting for this switch—his principled objection to FDR’s court-packing—meshed with his early impressions of Franklin Roosevelt, whom he had previously encountered on Wall Street and considered a lousy investment banker. Nitze’s disdain for party machines was apparent in Connecticut as well as New York City. He had no real political allegiance—though it is unfair to conclude, in the end, that he was anything other than a patriotic American.
Paul Nitze believed in democracy. For him, the United States—with its existing institutions of popular sovereignty, freedom of expression, and free enterprise—was a better place to live than in a totalitarian regime. And Nitze had little reason to complain. He was an elite white male who could walk through any door and whose fortunes rose whether or not a Republican or Democrat resided in the White House. He had grown up in comfort and received a first-class education. Between his father’s affiliation with the University of Chicago and the alumni network of Harvard University, Nitze never found himself more than one step removed from the most critical person in a particular field or enterprise. His networks facilitated his European adventures and connected him to Clarence Dillon, who set him on a course to prosperity. Paul thrived during the Great Depression and could not say that capitalism had failed him. At the same time, he was dubious about how democracy played out in practice. His interactions with grandstanding politicians during the 1930s failed to inspire confidence in him that they could make a positive difference in the lives of ordinary US citizens.
Power matched with the United States’ ideals could overcome all challenges, he was led to believe. “Paul, you are overly discouraged,” Dillon told Nitze after France fell to Nazi Germany in June 1940. “The situation is extremely serious but not hopeless. Let us analyze it together. In this war, modern technology, as exemplified in the tank and the airplane, is of enormous importance. In the long run, Detroit can outproduce the Ruhr. The question then is one of time.” So long as the French fleet did not fall into the hands of Nazi Germany, Dillon went on to say, Great Britain would prevail. That was precisely why Dillon had just called his friend Lord Beaverbrook to beseech Prime Minister Winston Churchill to bomb the French fleet at Mers el-Kebir, Algeria. Which was precisely what British forces did. Was Dillon responsible for this action? Probably not. However, Nitze’s read of the situation was that this was how significant matters of war and peace got decided.80
To Nitze, the distinction between men of action and ineffectual academics could not have been more apparent. He set upon a formula: go somewhere, see for yourself, assess and analyze and devise a plan for individuals in power. Repeat this sequence until power comes to you.
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