The following is all taken from: David Cannadine, Mellon: An American Life, (New York: Vintage Books, 2008); from the brief David Cannadine biography of Andrew Mellon found on the Mellon Foundation website at www.mellon.org; and, briefly, from Martha Frick Symington Sanger. Henry Clay Frick: An Intimate Portrait. (New York: Abbeville Press, 1998.)
Andrew Mellon's Early Life:
"He would be known as Andy or AW, and more than any of his elder or younger brothers, he was quintessentially Thomas Mellon's son. So much so, indeed, that in later life, when confronted by any challenging problem, his invariable reaction would be to ask: 'What would father do?'" "But it was very much a Scotch-Irish Presbyterian household, and while Andrew Mellon knew far more comfort and security than most Pittsburghers, the atmosphere was intense and serious, rather than joyful or easy. Although surrounded by a lush and bountiful garden, the house at 401 Negley, was gloomy and forbidding inside. Thomas Mellon disdained the vulgar ostentation which he feared was 'common among those grown suddenly rich,' whom he dismissed as the 'shoddyocracy,' and his house was devoid of the elaborate ornamentation, both inside and out, that would become popular among the local plutocracy in subsequent decades."
Mellon was a young boy when the Civil War broke out, and, therefore, he neither served in the Union Army nor was he in a position to support the Union cause financially or industrially. However, there were two instances when the Civil War touched close to home: "…industrial Pittsburgh would be a target for the Confederate army, and in 1862 and 1863 the threat seemed clear and present; 'our homes and property,' the Judge remembered, 'were at one time in actual destruction by the rebels.' Trenches were dug and defensive earthworks constructed; they passed close to the Mellon house, behind the orchards. Andrew Mellon was not yet ten, but he vividly recalled the workers digging and shoveling, and he stood guard over the Mellon cherry trees with an unloaded shotgun. He also remembered seeing Abraham Lincoln in February 1861, when his train stopped at Pittsburgh on the way to Washington for his inauguration. When the president-elect rose to speak, he amazed the boy as he 'un-spiraled himself, like a snake,' to a great height, and spoke in 'gentle' and well-modulated tones.'"
Judge Mellon was suspicious of schools-public and private-so he built a school house at 401 Negley, employed a teacher named Taylor, and Andrew "enrolled" at age five. Andrew's brother Selwyn died in September 1862, at age nine. "For his part, Andrew was left bereft at the particularly tender age of seven; he and Selwyn had been inseparable as the middle pair of brothers. His sense of isolation may have been intensified when, on Selwyn's death, the Judge closed down his school: having spent two years there, Andrew was sent away, perhaps to escape the diphtheria epidemic. The boy stayed with his father's sister, Elinor Mellon Stotler about five miles outside East Liberty at McKeesport, where he attended the local school, returning to 401 Negley at the age of nine. By this time, his father seems to have overcome his earlier aversion to public education, and Andrew was enrolled in a Pittsburgh school at the corner of Grant and Strawberry Streets. Father and son commuted daily together on the horse car line from East Liberty to downtown which had opened in 1859."
Mellon showed ambition and entrepreneurship at an early age: "As a child he cut grass from the meadows at 401 Negley, and he sold it to passing farmers for horse feed at five cents a bundle. Later, equipped with a donkey and cart provided by his father, and enlisting the labors of his younger brothers, Dick and George, Andrew sold fruit and vegetables from the family garden-with such success that his mother-sometimes had to visit the local shops to buy her own garden produce back." This was an interesting first "career" choice for young Andrew as both his grandfather, Andrew, and his father, before becoming a judge, were involved in farming.
Andrew Mellon Goes to College and Enters Manhood:
Mellon became a member of the Duquesne Club and, through this, he met and became friends with Robert Pitcairn, another member of the South Fork Fishing and Hunting Club.
Mellon was no nonsense, strictly business, even with family. He once loaned his brother Samuel $3,000.00. Samuel died in 1879, having only paid back $1,000.00 of the loan. Not even having given the widow time to mourn, Andrew demanded the repayment of the rest of the loan.
Mellon was very aloof and not very good with women. However, he fell in love with Fannie Larimer Jones and they were engaged to be married in 1882, but when Jones was discovered to have consumption and to be dying, he coolly (perhaps cruelly) broke off the engagement and his entire relationship, stating that he was saving everyone involved from unnecessary heartbreak. Jones did eventually die. Mellon only had one other romantic venture, which ended badly, to be discussed later.
Andrew Mellon Goes to Work:
Henry Clay Frick had Andrew and his father to thank for his wealth and, thus, fame. Henry Clay Frick made coke. Coke and coal are used in the refinement of iron ore and provides a better yield and purer form of iron. In the early 1870s, still relatively unknown, Frick wanted to expand his coke production, and needed to borrow money to build 50 coke ovens. It was to Mellon Bank that Frick went. It was known to Frick that Judge Mellon (he preferred to be called Judge even after hanging up his robe) had lost money in prior coke investments, so he was understandably nervous. Frick and Andrew were friends, but that did not necessarily guarantee that Frick would get the loan. However, "Interested in the immaculately dressed man before him, and appreciative of the steady determination of the Overholt family, Mellon agreed to lend Frick $10,000 at 6 percent interest payable in six months for building his ovens." Frick was probably the closest friend Andrew ever had; Andrew became his personal banker.
Henry Clay Frick took Andrew under his wing, especially when it came to art dealing. Though there is no documentation to support this, research seems to show that Henry Clay Frick served as an impromptu spokesman and promoter for the South Fork Fishing and Hunting Club. It can be inferred that Mr. Frick would have encouraged Andrew to join the Club, which, of course, Mellon did. "After Frick's marriage to Adelaide Childs, the couple settled at Clayton, one of the grandest homes in Pittsburgh, and Andrew was a regular visitor; for dinner, for poker, and sometimes staying the night….Frick's personal loans [from Mellon] stood at $71,000.00 in 1882, rising to $148,000 in 1885, but dwindling to $9,000 in 1887; similar credit was extended to the H.C. Frick Coke Company." Frick even gave Mellon the ability to buy and sell stocks on his behalf while the Frick's went on a European getaway in 1887.
Andrew Mellon Makes a Name for Himself in Pittsburgh:
In 1886, he created, along with Henry Clay Frick the Fidelity Title and Trust Company. "It was the second trust in Pittsburgh and the first to receive deposits, but as late as 1895, these barely amounted to one million dollars, and the company had paid no dividend before 1893. The main purpose of the trust had been to administer estates for individuals and corporations, but it was unable to represent both sides in probating a client's will. The solution was to create a second, subsidiary company, so all business, could be dealt with in-house, and in October 1889, Mellon, Frick, and other partners from Fidelity founded the Union Transfer and Trust Company, with Andrew as president and capital of $250,000." Andrew Mellon was quite taken with aluminum and when a group of men calling themselves the Pittsburgh Reduction Company asked for a loan of $4,000 to start their business, Mellon gave $25,000 and by January 1891 he became director. Andrew also entered petroleum the same year he entered aluminum. Judge Mellon didn't like the oil business, but Andrew got into it for three reasons: "The first was the discovery in 1889 of new sources of oil in southwestern Pennsylvania, near Coraopolis, in what became known as the McDonald Oil Field. The second was that among the local wildcatters and prospectors were the Galey brothers, Sam and John, friends of Andrew, and also James Guffey, with whom he had collaborated in the natural gas business during the late 1880s. The third was that William Larimer Mellon decided that oil was where his own future lay." Crescent Oil Company was another Mellon family company, which processed crude and refined oil in southwestern Pennsylvania.
Andrew Mellon incorporated something called the "Mellon System;" this was controlling every aspect of a product from raw material, refining and production, and eventually the finished product and sale of that product.
Andrew Mellon was an extraordinary judge [just like his father] of entrepreneurial talent, and among the many companies he helped to found and fund were Aluminum Corporation of America (ALCOA), Carborundum, Koppers, and Gulf Oil. He rarely interested himself in the details of such businesses, but he acquired extensive holdings, which meant that by 1914 he was one of the richest men in the United States." This judgment may have backfired, if the legend is true, that he supposedly turned down Henry Ford on a loan to build a horseless carriage. However, there is no definitive proof that this is a true story.
Andrew Mellon had many South Fork Fishing and Hunting Club connections, "…when Andrew set up the Union Trust Company, he put not only Henry Clay Frick [SFF&HC Member] and Dick Mellon on the board, but also among others, J[ames].M. Schoonmaker [SFF&HC Member], president of the Pittsburgh and Lake Erie Railroad; George Whitney, partner in the stockbroking firm of Whitney & Stephenson; Henry Phipps [SFF&HC Member], a partner in Carnegie Brothers; James B. Finley, another Coke King; and Philander Knox [SFF&HC Member]. By the end of the 1880s, the Mellons, Carnegies, and Fricks were all Knox and Reed clients.
In 1895, he sold oil operations to Standard Oil; Mellon used profit to invest in Carborundum Company, which made electric generating wire; Mellon became a director. "On July 1, 1902, Mellon National Bank came into being, immediately superseding T. Mellon & Sons, as well as absorbing the Pittsburgh National Bank, which had been owned by Frick."
Andrew Mellon's Relationship with Henry Clay Frick, The Johnstown Flood, and Beyond:
By this time in his life"…as the century neared its end, Andrew Mellon could not have afforded to emulate those East Coast 'robber barons' with their palatial chateaux on New York's Fifth Avenue, their ornamented 'cottages' in Newport, their extravagant parties, their oceangoing yachts, their retinues of servants, and their arranged marriages to impoverished but titled European aristocrats. Nor did he wish to do so. He liked travelling, but the vulgar ostentatious world of the American's Cup of East Coast high society and transatlantic cosmopolitanism, as depicted and dissected by Henry James and Edith Wharton was decidedly not to his taste. He was amazed when his nephew, W.L., bought himself an oceangoing yacht-the Vagabondia-though his surprise did not prevent him from availing himself to its comforts for vacations. For Mellon, New York was a place to do occasional business, and from which to board the ship to Europe; unlike Carnegie and Frick, he had no ambitions to own a home there, nor any wish to build himself a place in the country or a cottage on the coast. He thought such living self-indulgent, wasteful and unpatriotic; he did not like big houses, whether urban or rural; he was wholly uninterested in birds or flowers or trees or landscape; and although he could ride, he was not very good at it, and did not enjoy it. Nor did he have any fancy for the symphony or the opera or the ballet: indeed years later Paul Mellon remained doubtful whether his father could have told Chopin from Cole Porter. The limits of his indulgence were cigars and whisky [sic] at the Duquesne Club, and low stakes poker with Frick and other friends." Mellon accompanied Frick on trips to Europe in the late 1890s and began acquiring art, with Frick getting him interested in the practice. In 1899, he and Frick created the Union Steel Company with William H. Donner, formerly of Cambria Iron Company. In 1900, he entered with Frick in the Crucible Steel Company and the New York Shipbuilding Company in Camden, NJ. Thanks especially to his friendship to Frick and the business interests they entered together: "In scarcely twenty-four months, then, Andrew Mellon had amassed an unrivaled portfolio of interests across the Pittsburgh region and beyond. No longer just a small-scale, private banker, he was now a major financier and businessman, hungry for action and eager to intervene. During the same period, he was also involved in the creative organization of the local coal industry in a manner far beyond anything his father had achieved or envisaged. By orchestrating a bold consolidation of Pittsburgh's coal production, he believed he could increase profits. His plan was to combine hundreds of small companies (many previously owned by the Judge) into two large enterprises according to how they distributed their coal, which was either by rail or by river. This was easy to do, because most used one means or the other and had either railroad spurs or river coal tipples. But very few had access to both. Accordingly, Mellon resolved to create two new, consolidating companies, Monongahela River Coal (for those using the water) and Pittsburgh Coal (for those dependent on the railroad). Ostensibly they were separately managed businesses. But Mellon closely coordinated the two firms, devising different funding streams for each, in the determined belief that this would result in increased efficiency, reduced transport costs, and bigger profits." Andrew Mellon served as a pallbearer, along with Philander Knox, at Henry Clay Frick's funeral.
Andrew Mellon Falls in Love-or-A Bad Investment:
In June 1904, she threatened to divorce him for conman Alfred Curphey. When it was all said and done, Curphey managed to bilk Mellon out of $20,000. Mellon never understood why, if Nora had every tangible thing she could ever want, she was so unhappy. Nora met Curphey on a trip to Britain to visit family; Mellon paid him off; and the couple returned to Pittsburgh. The Mellon's traveled to Paris, but, "After Paul Mellon was born in the summer of 1907, relations between Andrew and Nora went rapidly downhill, though Andrew remained sublimely-or naively-oblivious to this. The immediate catalyst was the major financial crisis in October 1907, which necessitated Andrew's worried return from Paris to Pittsburgh. He had good reason to go, but Nora was furious at his once again putting business before marriage." In summer 1908, Curphey, once again, met up with Nora in Paris. She arranged to have Mellon give her an allowance of $25,000, giving most of it to Curphey. "On Easter Sunday morning , she went to church with Grace Chadbourne. On her way out, Nora told Andrew, almost as an afterthought, that Grace's husband, Thomas, his friend and a New York corporation lawyer, would be paying him a call. Chadbourne indeed appeared, and after much prevarication and circumlocution, and without evident embarrassment and concern, he finally informed Andrew that his wife had made an irrevocable decision to leave him and to obtain a divorce. She had, Chadbourne reported, been unhappy for the last two years, and could not continue as she had been doing. No mention was made of another man, only of Nora's wish to go back to live in England. For unsuspecting Andrew, 'it was a bolt out of a clear sky.'" Divorce could have meant social disgrace in Pittsburgh.
Mellon was not going to give up on her so easy, "His back against the wall, Andrew at once hired a detective dispatching him to Europe with letters of introduction from the chief of detectives in Allegheny County to the head of Scotland Yard, and also from the acting U.S. secretary of state to U.S. diplomatic and consular officials. His mission was to find out the truth of Nora's activities in Paris, in London and on the high seas. But as Nora had calculated, it was too late: while the investigations were proceeding, Andrew would have to come to terms, if scandal was to be avoided. A legal separation was agreed in the summer of 1909, preliminary to the dissolution of their marriage, on grounds of desertion, after two further years. A first trust fund of $150,000 was established for the maintenance of Paul and Ailsa, a second of $600,000 to provide Nora an income, and a third of $400,000, whose proceeds she would also enjoy as long as she did not remarry. She also received a direct cash payment of $250,000 (approximately $5 million in today's currency). It was further agreed that Andrew and Nora would have joint custody of the children on an equal and alternating basis, several months at a time with either parent, and that Nora would promptly leave for Europe to commence the two-year period required for divorce on the basis of desertion. She also gave an oral undertaking to Andrew (who failed to get it in writing) that when Paul and Ailsa were with her in Europe, she would not bring them into contact with Curphey."
Upon their divorce, things could have turned nasty between Andrew and Nora and thus, trickled down to their children, but Andrew refused to let things get this low. "Encouraged and emboldened by letters and telegrams from Curphey extravagantly proclaiming his love for her, Nora began a concerted campaign to turn her children against their father. On his daily visits to them in the morning and evening, on his way to and from work, Ailsa seemed much colder, Paul once hit him with a stick, and Nora would always remain in the room, offering caustic and belittling remarks about him. Though hurt and mortified, Andrew refused to respond in kind and he never spoke ill of his wife in his children's presence, then or thereafter." The divorce trial was held May 20-21, 1912, Nora was found guilty on July 3. Andrew, then, had authority over the children; Nora could see them, but Andrew had to give permissions. Altogether, divorce cost Mellon $100,000 or $2 million in today's money. "In any event, with custody of his children for two-thirds of each year, and responsibility for all the major decisions concerning their welfare, Andrew had his hands full….In the early twentieth century, male millionaires (indeed males in general) were not closely involved with child-rearing, but Mellon's diary from 1912 to 1915 shows that he devoted much effort and thought to the task, spending a great deal of time with Ailsa and Paul and genuinely delighting in their company. 'Glorious day with children,' is one typical entry. He rode and drove with them in the summer, he went sledding with them in the winter, he bought them dogs and ponies and birds, and he played hide-and-seek in the evenings. On Sundays, he took them to East Liberty Presbyterian Church, on other days to the zoo and the circus, and there were trips to New York and to Atlantic City, which was a rather more wholesome and exclusive seaside resort than it is now. On birthdays and at Christmas, he lavished them with presents-a ring, a watch, a camera, and perfume for Ailsa; a train set, a bicycle, a toy gun, and a typewriter for Paul-and he was unfailingly attentive to such Yuletide rituals as trimming the tree and filling their stockings. As W.L. Mellon recalled, Andrew 'entered wholeheartedly and with touching delight into every compartment of their lives.' They were at this time, the 'bedrock' of his existence." Mellon sold the drab house at 5052 Forbes Street and bought a home on Woodland Road. "[During the Treasury years] Both Ailsa and Paul (when he was on vacation from Choate) divided their time between their father's apartment in Washington and their mothers farm on the Hudson. Now that all four of them were away from the tainted Pittsburgh environment, relations between Andrew and Nora became much easier."
Andrew Mellon in Business and Pittsburgh in the 20th Century:
"…Andrew Mellon had established himself by the mid-1900s as the single most significant individual in the economic progress of western Pennsylvania."
Mellon was the founder of Donora, PA. Donora is an amalgamation of the name of the founder of Union Steel, William Donner and the name of his wife, Nora.
Well before the U.S. officially entered the conflict, Mellon banks awarded loans to European nations fighting in World War I. "As in all conflicts, finance was a crucial element in the First World War, and the Mellon banks were heavily involved in the transatlantic lending to the Allies before the United States became a belligerent. These loans were formally orchestrated by J.P. Morgan and Company, which mounted an intense effort to involve as many American banks and finance houses as possible, and Andrew Mellon was willing and able to join in. Of the $500 million Anglo-French loan that was raised in 1915, the Union Trust Company, contributed $15 million: it held $10.8 million for its own account and sold $4.2 million to its customers. This was a substantial sum, and few East Coast institutions took bigger shares. The Mellon banks also subscribed $2.5 million to the $100 million lent to France in April 1917 and $9.5 million to three large loans made to the United Kingdom between August 1916 and January 1917. As soon as the United States entered the conflict, in the spring of 1917, Mellon personally subscribed to $1 million worth of Liberty War bonds in May 1917, and in October both Union Trust and the Mellon Bank upped their subscriptions to the bonds from $5 million to $25 million. By this time, Mellon was also chairing the Red Cross War Council appeal in western Pennsylvania, launched with a dinner at which former President Taft spoke. A million dollars was immediately raised, including $50,000 from Andrew himself, as much again from Dick, and the same from ALCOA, Gulf, and Carborundum, and within a month nearly $4 million had been subscribed." Mellon benefitted from World War I, as many of his business interests provided war materiel. "As the companies prospered, Mellon's personal wealth grew more rapidly than ever, the book value of his fortune increasing from $100 million, in 1926 to $105 million or thereabouts in 1928. Of this, $12 million was in bonds, $10 million in coal lands, $3.2 million in real estate, $8 million in works of art, $12 million in proprietary accounts, and $11 million in receivables (probably the notes given by Dick when Andrew sold his gold interests). The rest was stock, most of it held in the great Mellon enterprises…."
In regards to Mellon's income, "There are many other examples of such under valuations, which simply signifies that Mellon was so rich that he had no idea precisely how wealthy he was. Some…believed that at peak of his fortune, in 1929-1930, Mellon was worth $600 million. But…a figure of between $300 million and $400 million was more likely. Unlike Rockefeller, he was never a billionaire in his own day (though he would have been worth several billion at today's values); but for each of the three years from 1926 to 1928, his after tax income was well above $5 million. "In 1930 and in early 1931, Andrew Mellon's fortune reached its zenith, and he reached the age of seventy-five. It had been a long lifetime of 'acquisition and accumulation.' In capital terms, his wealth peaked at a book value of $127 million, and his income was also the highest he ever recorded: $8.8 million after paying federal taxes, and doubtless helped by the recent cash payment from Pullman on his Standard Steel Car stock." Mellon was impacted personally by the Great Depression. "In 1930, Mellon's income after taxes had peaked at $8.8 million; in 1931 it plummeted to $712,511 and in 1932 he reported losses of $1.9 million."
Andrew Mellon Goes to Washington:
Despite a 1789 statute stating that those involved in industry could not be Secretary of the Treasury, loopholes were found, and, reluctantly, on February 1, 1921, he accepted the nomination of the Secretary of the Treasury. He left Pittsburgh on March 3, 1921, was sworn in to office on March 4, and he reported for work on March 5. "He arrived at eight o'clock, an hour earlier before most of his staff turned up for work. Such a thing had never happened in the memory of any of the treasury's night watchmen. His [Mellon as Secretary of Treasury] was to ensure that the nation's finances were prudently managed, which, as for any responsible individual , meant living within income, firmly controlling expenditure, paying off accumulated debts, borrowing only on the soundest terms, and providing carefully for the future by building a surplus. In short, Mellon aimed to run the Treasury, and to oversee the national finances, just as he had run the family bank, with few notions beyond such stewardship as to what he should be doing. And insofar as he was concerned with international economic affairs, his efforts would be focused on the matter of settling the debts which European nations owed the United States, which took precedence over all other continental considerations." Mellon's relationship with Harding was "correct rather than warm" and they often butted heads. "The national debt had been reduced from $24 billion to $22.3 billion, and at that rate it would be paid off in full by 1952. With the president's support, Mellon had fended off congressional demands for 'the bonus,' [due WWI veterans] and government spending had fallen by almost 50 percent helped by the belated transition from war to peace. The fiscal years of 1922 and 1924 had both ended with a surplus of some $300 million. But there was still plenty undone and still to be done."
When Philander Knox died, his Senate term was filled out by William A. Crow and, upon his departure, Mellon successfully supported the Senate candidacy of David A. Reed, son of James Reed, South Fork Fishing and Hunting Club member, with the understanding that David would fully support Mellon and his policies. Despite the tenuous relationship between the two men, upon the death of President Harding in August 1923, Mellon became the treasurer for the Harding Memorial Fund and donated $12,500 to the cause.
Mellon served as Secretary of the Treasury, under Republican presidents Harding, Coolidge, and Hoover, but enjoyed the best relationship with President Calvin Coolidge, who famously said, "The business of America is business." The Mellon Plan under President Coolidge: "…shortly before Armistice Day 1923 [November 11], he wrote to William R. Green, acting chairman of the House Ways and Means Committee, outlining a 'scientific tax plan,' whose details had been completed by Parker Gilbert before he departed. Once more, Mellon aimed to reduce the surtax rate from 50 percent to 25 percent as an incentive to the wealthy to shift their investments out of tax-exempt bonds and into industrial stocks. He further sought a reduction of 25 percent in the tax on earned income (as distinct from investment income), and the repeal of several nuisance taxes that fell disproportionately on those same low-earners. He also proposed to limit the deduction a business could take for capital losses to 12.5 percent, equal to the tax on capital gains, rather than the 100 percent then allowable. And he sought to create a Board of Tax Appeals independent of the Treasury which, in the event of a dispute, would serve as 'an informal court before which the Government and the taxpayers could present their respective cases, and have a prompt determination of tax liability." The Democratically controlled Congress blocked many parts of the Mellon Plan.
As Secretary of the Treasury, Mellon was faced with a double-standard. He had overtaken control of the Overholt Distillery from the Frick family, but part of his job as Secretary was to enforce Prohibition. He did so reluctantly and was often attacked for not giving up on the ownership of the distillery. Mellon believed that Prohibition enforcement was both difficult and ridiculous, but, to the chagrin of his detractors, Mellon strengthened enforcement by reorganizing the Prohibition Department and splitting the nation into 22 districts, decentralizing Prohibition enforcement. In June 1930, he had enforcement of Prohibition transferred to the Justice Department.
During his years in the Treasury, Mellon became less involved in Pittsburgh society and industry. However, "Its new chancellor [University of Pittsburgh] John G. Bowman (whom Mellon, as a trustee, had helped to appoint just before his departure to Washington), was determined to reinvigorate the university by building an entirely new campus on a neighboring site known as Frick Acres. The eventual result was the construction of the forty-two-story Cathedral of Learning, at a cost of $15 million….'It seems to me appropriate,' Mellon observed, 'that the University of Pittsburgh should be the first to adopt science and architecture to the need of modern conditions in the educational world, for Pittsburgh is associated in the public mind not only with inexhaustible sources of iron and steel, but with the energy and initiative of new undertakings.' As when assessing a new business proposition at the bank, Mellon was initially cool and skeptical, and as when buying a picture, he took his time to decide. But Bowman eventually won him over, the land was acquired, and the ground was broken for the Cathedral of Learning. By the time it was topped out in October 1929, Mellon's gift to the university was $1.6 million. Though this represented barely one-tenth of the whole cost, it was nevertheless his most substantial benefaction to date, and his first major foray into the realm of capital giving."
In 1929, Mellon undertook the design of a new, smaller dollar bill designed to use less paper that would save the federal government $2 million. When President Coolidge announced he would not run for reelection in 1928, some believed Mellon should have run for the office; he refused.
Mellon was not a supporter of Herbert Hoover, the Republican nominee and eventual president, but he agreed, at age 73, to stay on to be Secretary of Treasury under Hoover. Mellon was Secretary of the Treasury during the stock market crash of 1929, which ushered in the Great Depression. Diary entry for "Black Thursday," October 24, 1929: "Stock market crash in New York. Dinner Belgian Embassy, and go to Belgian exhibit at Corcoran Gallery later." "For much of 1930, Mellon shared the general view that the American economy was basically sound and that business would soon pick up in Europe. To be sure, the crash had occurred on his watch, denting the reputation of 'the greatest secretary of the treasury since Alexander Hamilton' and shaking the expectation that under his stewardship, things could only get better and better and better. He sought to avoid the shadow of incipient doubt by increasingly leaving the details of administration to Ogden Mills and initiating an unprecedented public relations campaign, breaking his long-standing rule of privacy and granting interviews that touched on his personal life and habits. But this was mere window dressing. More important, when the fiscal year ended on June 30, 1930, with a federal surplus of $184 million, it looked as though Mellon's analysis had been vindicated: the downturn was temporary and recovery just around the corner."
In the wake of the hardest part of the downturn, Mellon voted against giving ex-World War I, veterans their pensions, which had been originally set to mature in 1945, early. This event provided yet another Johnstown connection for Mellon. When the "Bonus Army" descended on Washington in 1932, its members were summarily kicked out of town and settled in the Johnstown area for a time, but was expelled from there too. Mellon's sincere thought was to let the downturn work itself out; everything would work itself out on its own.
In October , the Federal Reserve Board raised interest rates to 3.5 percent, in the (vain) hopes of stemming the flow of American capital abroad. This merely made matters worse domestically, as credit became more expensive. And as taxable income fell, government revenue 'slumped badly,' nullifying all Mellon's previous efforts to keep the federal budget in surplus and pay off the national debt. In December 1930 the budget deficit for fiscal year 1931-the first of his tenure as Treasury secretary-was projected at $180 million; the actual figure came in at $903 million."
The Bank of Pittsburgh, not controlled by the Mellon's despite their best efforts, failed in 1931. A rescue package was adopted and Mellon was to provide $1 million on the condition that Mellon Bank would take over control. The Bank of Pittsburgh refused; Mellon backed out of the deal; and the bank failed. "Mellon's inaction generated bitter local criticism at the time, from which his reputation would never recover, despite the money he was spending on building and the substantial donations he would soon be giving to help the unemployed. 'An extraordinary thing has happened in Pittsburgh, 'the journalist Frank R. Kent wrote in a local newspaper scarcely two months after the bank failed. 'The Mellon family is in disrepute. The shine is off them individually and as a group-not only politically but personally, in the matter of business prestige and other ways.' In the old days, Andrew and his relatives could do no wrong; but now 'the awe is gone, the worship has ended, the glamor has utterly disappeared.' Instead of being venerated, the Mellons were now 'terribly unpopular,' it was unsafe for members of the family to appear in public, and things were thrown at Mellon houses and Mellon National Bank. A reply was immediately penned by James Francis Burke ('always a good Mellon friend'), but the damage was done. And the political repercussions would be considerable, both locally and nationally. 'I was a depositor in four banks,' one Republican-turned-Democrat Pittsburgher recalled, 'and all went under' I was in bad shape. I felt we couldn't let the Republicans get away with it.' The same view would hold in New Deal Washington, and during the 'tax trial,' Mellon's failure to rescue the Bank of Pittsburgh would receive extensive attention." Hoover and Mellon quickly fell out of disfavor with the American people. Hoover usually gets blamed for doing nothing to alleviate the Great Depression, but he was actually following the advice of his Secretary of Treasury, who had good reason to do nothing-let the problem work itself out. On January 6, 1932, Representative Wright Patman threatened to impeach Mellon. Hoover made Mellon ambassador to Great Britain, Mellon accepted, and Patman's charges were dropped. Mellon only served as ambassador for seven months, due to the presidential election victory of Frankin D. Roosevelt in 1932.
Andrew Mellon's Legal Troubles:
Harry F. Sinclair, who obtained a no-bid lease, was involved in the Teapot-Dome Scandal, leading some to question Mellon's complicity in the scheme. Mellon came under attack for tax rebates awarded to Mellon companies during World War I and to ALCOA for unfair trade practices. Charges against ALCOA were dropped in 1930.
In August 1933, in the midst of FDR's early successes, Harvey O'Connor published an expose entitled, Mellon's Millon's. While not necessarily a legal problem in its own right, it paved the way for examinations into Mellon's finance and future legal problems. "The Pittsburgh newspapers refused to publish reviews of O'Connor's work, and local booksellers declined to stock it, still, the timing of the publication could not have been more damaging for Mellon, and in the radical euphoria of Roosevelt's first months the book received a great deal of public notice. To those who shared the president's dislike of bankers and big business, it offered support for FDR's denunciations, and although not sold or reviewed in Pittsburgh, it clearly benefitted from, and added impetus to, a growing hostility to the Mellon's that was developing in their hometown. To top it all, it had laid bare many details of Mellon's personal life and business career which he had always fought hard to keep secret. This was not the sort of treatment he had expected five months after ending what he looked back on as a lifetime of patriotic endeavor, financial success, creative entrepreneurship, and public service. And even some reviews which were more sympathetic to Mellon than to the book could not fail to note how rapidly and how completely his reputation had recently plummeted…Mellon was both enraged and wounded by the book. Instead of ignoring it, he went to extraordinary lengths in a vain attempt to combat it."
"Within one week of Roosevelt's inauguration, before he had even returned from London, Mellon, had learned that the Bureau of Internal Revenue was auditing his 1930 tax return." This was for questionable charitable deductions. Then, "…rumors were already circulating in Washington that Mellon's return for the following year would also be under official scrutiny. On May 5, 1933, Louis McFadden, a Republican congressman from Pennsylvania who belonged to one of the state party's anti-Mellon factions, delivered a speech under privilege in the House, introducing into the record a letter written by one David A. Olson to David Burnett, the commissioner of internal revenue. The letter charged that during the latter part of 1931, Mellon had sold 10,000 shares in Western Public Service, showing a loss of $1 million, which he had then deducted from his taxable income for that year. The document further alleged a similar deduction of $15.7 million representing a loss realized on the sale of 123,000 shares in the troubled Pittsburgh Coal Company. Both these blocks of stock, the letter continued had been sold to the Union Trust Company of Pittsburgh, a corporation 'under the control of Mr. Mellon and his associates, 'and both had been repurchased by Mellon or Mellon interests after thirty-one days. It was Olson's view that these transactions were illegitimate under the federal tax code, making the $6.7 million loss deduction wholly improper. And this was neither an accounting error nor a misinterpretation of the code: 'these transactions,' Olson concluded, had 'accomplished the fraudulent withdrawal of income taxes from the government." "But in September 1933, two agents from the Bureau of Internal Revenue went over Mellon's 1931 return, and recommended that he be given a refund of $7,507.74. Late in October, three agents of the Justice Department were dispatched to Mellon's office in Pittsburgh, to undertake a more lengthy examination of his accounts. It lasted three weeks. Mellon turned over all his records, placed his entire staff at their disposal, and practically suspended all other activity while the investigation proceeded. But after an even more thorough scrutiny of his financial affairs for 1931, these investigators also concluded that there had been nothing irregular about Mellon's tax return."
Nevertheless, it was announced in March 1934 that a grand jury would be empaneled to try Mellon on the charges of a fraudulent tax return. "The grand jury was duly seated in Pittsburgh on May 7, 1934, to consider whether there was enough evidence to indict Andrew Mellon for seeking to defraud the federal government by 'willfully, feloniously, fraudulently, and knowingly' filing a false income tax return for 1931." The grand jury found 10-2 in favor of Mellon; what's more, the jury was made up of a majority of western Pennsylvania, blue collar voters, which had supported FDR and the Democrats in the 1932 election.
Mellon was presented with a separate notice, irrespective of the grand jury, stating that he owed $1,319,080.90 in addition to the $600,000 he had already paid and with a penalty of 50 percent this meant he owed $2 million, "…the bureau sent Mellon a second deficiency letter, reporting another recalculation of his liabilities-again upwards. Upon additional investigation, Mellon was informed, his federal income tax arrears had ballooned from $1.3 million to $2,050,068.82 and, correspondingly, the 50 percent penalty had gone up to $1,025,034.41. By this latest reckoning, Mellon still owed the government more than $3 million in unpaid taxes for 1931. To be sure, this was significantly less than the figures of $6 million and $122 million that were being bandied about in the media. But even for a man of his prodigious resources, it was hardly a minor sum, and it was raised slightly higher again in February 1935. "Thus was the scene set for the infamous 'tax trial' involving Andrew Mellon and the federal government. It took place before the Board of Tax Appeals, exactly coinciding with the climax of Roosevelt's public and legislative campaign against banking and big business. The mood of the country was deeply hostile to men like Mellon, but the contest was not as uneven as this might imply: the full board comprised twelve members, and most of them had been Mellon appointees."
"The proceedings began in Pittsburgh, but in May 1935 they moved to Washington and they absorbed most of Mellon's time and effort during that period-along with a substantial sum of money, since his lawyer's fees amounted to $360,000. In all, 47 witnesses appeared, 847 exhibits were accepted in evidence, and the trial transcript amounted to 10,000 type-written pages. The proceedings would vary from high drama or comedy (as when Mellon was rebuked for smoking in the courtroom during a recess) to lengthy discussion of technical and arcane financial questions. Media interest was high throughout, and Roosevelt was kept fully informed by Jackson and Morgenthau." Mellon maintained his innocence throughout. Tax trial ended in 1936, with no verdict decided. "The Board of Tax Appeals finally delivered its judgment on December 7, 1937, a little more than three months after Mellon's death, causing his many friends, relatives, and admirers deep regret that he had not lived to learn the outcome. For its main conclusion was an unequivocal exoneration, namely that the 'petitioner did not file a false and fraudulent return for the purpose of evading taxes.'"
Andrew Mellon and the National Gallery of Art:
Mellon once returned a particular painting, which proved to be a good move because it was later shown to be a fake. Of this, "One evening at a dinner party, the wife of the Belgian ambassador noticed that the portrait had disappeared, and inquired after it. 'Mr. Mellon sent it away,' she was told…'because he did not like it.' The ambassador's wife exclaimed: 'How wonderful! To be able to say, 'Take away that Raphael. I don't like it,' who but Mr. Mellon could do that [author's emphasis]?"
"Mellon, by late 1926, became the 'architectural czar of Washington,' put in charge of placement of federal buildings in Washington, D.C." It was then that he had the idea for a National Gallery of Art.
"Until 1926, Mellon had rightly considered himself to be no more than a private buyer of art, and not a purchaser in the front rank. To be sure, his collection had expanded in recent years, but it was still relatively small in numbers and restricted in range: to northern Europe, to beautiful English women, and to restful landscapes. There were a few Italian paintings, no religious scenes, and not many portraits of men of power. It was a personal accumulation rather than a comprehensive display. But though he denied the rumors that were circulating in Washington, it is clear that sometime during the mid-1920s, Mellon did decide that he wanted to create his own national gallery." "Mellon was reaching the ages at which his father had divested himself of his wealth, and he now began to consider how he might do the same. A diary entry notes that he was thinking about 'personal corporation matter' and also about 'question of making charitable or other trust.' Here was the germ of an idea which Mellon, assisted by Donald Shepard, would now bring to fruition. He would give away his fortune in approximately equal proportions: for new philanthropic purposes (which would mean the National Gallery of Art) and for familial purposes (which meant Ailsa and Paul and eventually, their descendants), thereby ensuring that at his death, he would be far less wealthy than he had been in his prime."
"But by this time, he was undertaking through Knoedler what would turn out to be his most daring buy, his coup de maître as an art collector: a covert acquisition of twenty-one of the very finest paintings from the Hermitage-that remarkable constellation of buildings, part shrine, part palace, part art gallery, adorning the city formerly known as St. Petersburgh and now called Leningrad, which had been founded by Peter the Great in 1703. The Hermitage collection had originally been assembled by the Empress Catherine the Great, who had acquired pictures from Britain, France, Prussia, and the Netherlands during the second half of the eighteenth century. Thereafter, her successors made their own great additions, so that by the early twentieth century the Hermitage merited comparison with any of the great accumulations of European royalty, including those at the Hofburg in Vienna, the Parado in Madrid, and Windsor Castles. Few western Europeans had visited this place, but accounts of its treasures gradually emerged in guidebooks, catalogues, and newspaper articles. Estimates varied, but in all, the Hermitage collection amounted to more than two thousand items, including classical antiquities, coins, medals, and (especially) works of fine art from medieval times to the eighteenth century; approximately fifty of its paintings, representing Leonardo, Raphael, Rembrandt, Velazquez, and Titian, among others, were outstanding old masters." "When a deal was eventually struck, Mellon's money was wired, in pounds sterling, by Knoedler to Zatzenstein in Berlin, who lodged it in a blacked account after 10 percent was paid to the Russians as a deposit. At the other end of the chain, in Moscow, instructions were sent to the Hermitage to remove the pictures from the walls and to hand them over to an agent who would arrive at an appointed time. Meanwhile, the adjacent paintings would be rearranged to make it look as though nothing had been removed. The pictures were then transported by train to Berlin and handed over to Zatzenstein, who then released the balance of the payment. They were subsequently shipped to Knoedler's gallery in New York, and eventually, after cleaning, restoration, and (often reframing), they made their way to Mellon in Washington." Mellon acquired about 25 paintings for $17 million.
Mellon did not let the tax trial get him down; he took steps for the building of the National Gallery during this time, handpicking the design and location. "In November 1936, the prominent physician Worth B. Daniels diagnosed Mellon with cancer. It is not clear whether the patient was told of the seriousness of his condition: Burton Hendrick insisted he was not, and Mellon certainly refused to admit anything was wrong, even to Ailsa or David or Paul….This may well explain why Mellon had concluded the deal with Duveen which was, for him, uncommon haste and why he now pushed so hard to get his gallery scheme accepted: he did not have much time left to bring his last great enterprise to fruition."
"Despite the unremitting distractions of the tax trial, Mellon had worked out the details of the National Gallery of Art to his own satisfaction by the close of 1936: his pictures were now held by the educational and charitable trust or would soon be deposited there, he had settled the architect, the building in outline, and the structure of governance; and the remaining issues concerning the site seemed on the way to resolution. And so, with the boldness of one who knows his days are numbered, he decided to broach the subject with the president, whose support would be essential if the scheme was to be realized. Understandably, given their recent confrontation, Mellon preferred not to approach the While House directly. Instead, he elected to make his offer through Frederic A. Delano, an ideal intermediary. Delano was Roosevelt's uncle on his mother's side, Mellon knew him well as chairman of the National Capital Park and Planning Commission, and he was actively working to ensure the closure of Sixth Street [which Mellon had indicated was necessary to the building of the gallery]. Delano was due to eat Christmas dinner with his illustrious nephew, and during the course of that meal he handed FDR a personal letter from Mellon. It was written in a lofty tone appropriate to the significance of the subject, it made no allusion to the tax trial, and it addressed Roosevelt as the nation's head of state, rather than as the man who had been his vengeful enemy ever since he had assumed the presidency. It was also very carefully drafted, for Mellon was not prepared to make on his offer unless certain conditions were met by FDR and Congress." Roosevelt responded approvingly, though stating the plan would need the "necessary legislation." On December 31, 1936, Mellon and Roosevelt met over tea in the White House. The National Gallery plan was made public on January 3, 1937. "The building would be called the National Gallery of Art, it would cost between $8 million and $9 million to construct, and with Mellon's 'priceless art collection' (estimated at $19 million) housed in it, there was every hope that Washington would become 'one of the principle art capitals of the world.'"
The "necessary legislation" was passed on March 24, 1937; Mellon's 82nd and last birthday. "The gift was accepted exactly according to Mellon's wishes. It would be known as the National Gallery of Art; the Smithsonian bureau that had previously borne the name was redesignated the National Collection of Fine Arts. It would be located on the Mall, the plot bounded by Seventh Street, Constitution Avenue, Fourth Street, and North Mall Drive. The intervening thoroughfares would be closed off, and the area directly eastward across Fourth Street reserved 'for future additions' and the A.W. Mellon Educational & Charitable Trust would finance the building and furnish the collection of art to be exhibited there. In return, 'the faith of the United States' was pledged to maintain, protect, curate, administer, and operate the gallery, and 'for these purposes' Congress would appropriate 'such sums as may be necessary.' Though established as a bureau within the Smithsonian, the gallery would have its own trustees: four of them ex officio (the Chief Justice of the Supreme Court, the secretaries of state and treasury, and the director of the Smithsonian); five of them 'general trustees' from outside government who would be named initially by Mellon (with the formal approval of the Smithsonian's Board of Regent) and would thereafter elect their own successors. The board's decision would be subject to no review by any federal officer or agency other than a court of law, and the gallery would display no works of art unless ' of similar high standard of quality' to those already in the Mellon collection." Mellon did not live to see it finished.
The Death of Andrew Mellon:
Last updated: November 3, 2017