This is an exclusive excerpt from the new book Goliath: The 100-Year War Between Monopoly Power and Democracy, by Matt Stoller, out this month from Simon & Schuster.

Inauguration day, March 4, 1921, was cold and clear. A new president, Warren Harding, stood outside the Capitol in a velvet collar and a dark coat, flanked by approving wealthy men in silk hats. This was their president, their guy. Finally. After twenty years of absurd reform and fights over “progressivism,” first from the odious egomaniac Teddy Roosevelt, and then the catastrophic Woodrow Wilson, the people had come to their senses and returned power to society’s natural rulers.

The theme of the campaign Harding had run to devastating effect was “a return to normalcy,” which he conveyed in his very persona. Harding was not particularly competent, and he knew it. He once described himself as “a man of limited talents from a small town.” For his inaugural address, the new president gave a stilted speech illustrative of his commitment to mediocrity.

But at his inauguration, the wealthy backers of the new president clapped at his financier-friendly phrases as if it were poetry. Harding was their dream, a candidate whose very lack of talent had appealed to a nation looking for calm.

The triumph over progressives was total. Harding had restored the old coalition of 1896, winning sixteen million votes to the Democratic nominee’s nine million, 60.3 percent to 34.1 percent. The GOP even penetrated the Confederate South, taking Tennessee, and safe Democratic states such as Arizona and Oklahoma. Not a single Democrat won a Senate or governor seat anywhere outside the South. In 1912, Wilson had started with House and Senate majorities; now the Republicans would have a super-majority of 303–121 in the House, and 70–26 in the Senate.

After his inaugural speech, Harding introduced the man who was to run the Treasury Department, a man who would become far more important than the president who hired him. Andrew Mellon had a quiet demeanor, rail-thin bearing, and beautifully manicured hands. His habit of taking long vacations, his age, his manners, and his soft-spoken shyness might have been mistaken for weakness and frailty in someone else. Mellon may have been born rich, but he was not soft. He was a hard man, a banker, an emperor of money, an owner of several companies later included in the Fortune 500. He would help lead the restoration of rule by private financiers.

President Warren G. Harding formally appointed Mellon under the pretense that a plutocrat like Mellon was so rich he couldn’t be bought. The real reason was that a Mellon Bank had lent $1.5 million to Harding’s campaign in 1920. Mellon had become bored with being a mere tycoon. As one of his enemies put it, “Mellon needed a change, and the Grand Old Party needed the cash.”

Mellon’s appointment was probably illegal. A statute from 1789 prohibits the treasury secretary from engaging in commerce or trade, an absurd expectation for a man with such industrial power. The founders had also written a law blocking the treasury secretary from holding bank stocks, another absurdity. Mellon overcame these legal restrictions by pretending to sell his assets to his brother. The rules existed for good reason: a man clothed in public power should not use that power for private ends, though Mellon did exactly that throughout the 1920s. Mellon explained the need to raise tariffs to protect domestic industrial monopolies to Harding even before the election. Harding dutifully mentioned tariffs in his inaugural address.

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Mellon left even the other millionaire politicians shocked at the scale of his reach. In one cabinet meeting, the discussion turned to whether the government should shut down a government war plant, or refurbish it with additional investment. Mellon observed he owned a similar plant, which cost $12 million, roughly the same value as the one the government was considering closing. He had the same dilemma, to spend money maintaining an unprofitable but valuable plant. “I scrapped mine,” he said.

In another, someone brought up the Chinese Eastern Railway. The president whispered to his attorney general, “Now we’ve got him. Surely he wasn’t in on this.” Harding asked if Mellon had any interest in the railroad. “Oh yes,” came the casual answer. “We had a million or a million and a half of the bonds.”

“He’s the ubiquitous financier of the universe,” marveled Harding.

Harding, so healthy at his inauguration, became consumed by corruption scandals, and ended up dying within three years of taking office. Mellon, by contrast, would remain treasury secretary for eleven years, under three presidents. Or, as progressive senator George Norris put it in a common joke of the era, “three presidents served under him.” The decade might have started with Warren Harding’s presidential victory, but the political economy of the 1920s would be structured by Andrew Mellon.

Mellon’s Millions

When Harding hired Mellon, he was installing the most powerful private banker in the country into the most powerful public office in the country.

Mellon was the perfect symbol of an administration hoping to return to the pre-1900 era. Mellon’s life and career bridged the conservative robber baron politics of the nineteenth century with increasingly large federal government structures of the twentieth. He was born just before the Civil War to a wealthy, austere father, Thomas Mellon, a judge and real estate developer. His gloomy Pittsburgh mansion was in the tony East End of Pittsburgh, a town so smoggy from pollution that someone described it as “Hell with the lid off.”

Judge Mellon was deeply suspicious of democratic politics and lower classes asserting power. During the Civil War, he held no strong views on slavery, but the imposition of high taxes on the wealthy during the war enraged him. Public schools drew his ire; he believed children would study harder if they had to pay. Labor unrest among lower classes, he believed, needed to be met with violence, and may even “require blood to purify.”

Judge Mellon imparted this ideology to his son. In the Mellon household, “the air was heavy with the imperative to acquire.” According to one in-law, “they had absolutely no fun … It was work, work, all the time. The one thing they understood, the end of all their efforts, was money.” Judge Mellon insisted that his children learn accounting, at a private school he had set up for them. Judge Mellon also helped launch his son in his career. Judge Mellon was the first lender to a young man on the make, Henry Clay Frick. Frick in turn became a best friend and mentor to Andrew.

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Andrew, the smartest of the boys, inherited his father’s empire in his twenties. For most of his life, he had a solitary routine. Rising early, he took the train to work, spent the day at the bank, lunched at a private club, and then brought documents home at night for study, “after a silent supper with his parents.” He read little, enjoyed little music or plays, and did no sports. Mellon grew to become neurotic, secretive, and soft-spoken, suspicious of taxes and the press.

Judge Mellon was just a banker, but Andrew Mellon became a mini–J. P. Morgan, from whom he learned investment banking. He would take stakes in promising companies, lend to them, and fit them into the “Mellon system” as buyers or suppliers. He had a cadre of loyal associates to move about his various enterprises, as management consultants would a hundred years later. “Mellon men” were tough, loyal, and competent. Most were Scotch-Irish Presbyterians (no blacks, Jews, or Catholics allowed), and would, if they met Mellon’s standards, become wealthy too. If not, they would be marginalized (“cut their throat” is one description). “When I send for a man,” Mellon would say, “I want him to come.”

Unlike other tycoons, he did not specialize in one area. At one point, five Fortune 500 companies owed their lineage directly to Mellon: Alcoa, Gulf Oil, Mellon Bank, Carborundum, and Koppers. He controlled a network of ninety-nine banks. He had interests in coal, steel, chemicals, oil, sleeping cars, railroads, building construction, utilities, magnesium, and airplanes.

Mellon even commandeered the use of an entire element of earth— aluminum—through his control of the monopoly aluminum producer Alcoa. This power gave him control not just over aluminum, but over sectors of the economy that depended on it, such as the increasingly vital aerospace industry. The technology to create aluminum emerged too late for the first generation of financiers, but Mellon, who learned from the earlier generation, used all their tricks, and then some. No one firm had ever dominated a metal industry as Alcoa had aluminum for so long a period, from the 1890s until the 1940s.

× Expand Associated Press The Cabinet of President Calvin Coolidge, including Treasury Secretary Andrew Mellon (front row, second from right), seen here in 1929

Beyond commercial control of an element of the earth, and all that went with it, Mellon’s empire was unavoidable for ordinary Americans in myriad other ways. The Mellon system was a set of industrial and financial enterprises that aided each other and had interlocking boards of directors and even personnel. Coal unearthed on Mellon lands would find its way into Mellon steel mills, which would help build Mellon ships to carry Mellon oil, all financed by Mellon banks. Being a part of the Mellon system meant customers, credit, financing, and prosperity, but also control. Being outside of it meant a constant battle with the Mellon interests.

If you lived in Pittsburgh, Milwaukee, or Minnesota, you bought Mellon coal; in Philadelphia or New England, you purchased Mellon coke; in Boston or Brooklyn it was Mellon natural gas. Mellon’s Union Trust bank financed utilities all over the country; his Koppers company with its expertise in gas and coke ovens helped organize them. The combination of Koppers and Alcoa gave Mellon a strategic advantage in controlling much of the private electric utility industry. Koppers and Alcoa, together, dominated utilities in Texas, Kansas, Iowa, Nebraska, Missouri, Illinois, Indiana, Ohio, West Virginia, Wisconsin, Oklahoma, and throughout New England.

The South was the most exploited region. The “richest deposits of the iron, coal, and limestone that form the basis for the steel industry” in the South were organized by Mellon and his business colleagues. As a result, Birmingham was subordinated to Pittsburgh based on an artificial mechanism for pricing steel. Rich deposits of bauxite, the critical ingredient for aluminum, were concentrated in the South, and they became owned or controlled by Alcoa. With Mellon interests came the Frick model of labor relations, which used ethnic divisions to strip workers of power. One of the worst race riots in American history, in East St. Louis in 1917, started outside an aluminum facility, as white workers on strike faced 470 black strikebreakers recruited from the South. The local authorities stood aside as white mobs murdered over two hundred African Americans.

Mellon held stakes in steel, plate, glass, paint, and iron ore. Mellon men sat directly on the boards of railway lines such as the Northwestern, the Omaha, the Norfolk and Western, and the Pittsburgh & Lake Erie. American Locomotive and Standard Steel Car, which both made cars for railroads, were Mellon companies. Air brakes made by Westinghouse, owned partly by Mellon, stopped these trains. Timber for railroad ties, bridges, and canal locks were built by Mellon-controlled McClintic-Marshall, fired by coal from Mellon’s Pittsburgh Coal Company. Mellon’s industrial empire sold inputs to the automobile industry, from aluminum to nonshatter glass through Pittsburgh Plate Glass.

Mellon was also an important player in the oil industry. To enter it, Mellon had battled the wealthiest man alive, John D. Rockefeller. Oil brought Mellon interests deep into the heart of Texas, and eventually Mexico and Colombia. Mellon became a proprietor of Gulf Oil, the largest oil company outside of Standard Oil.

World War I generated massive demand for not only aluminum and oil, but chemicals to use in warfare—which were made by Mellon companies. Toluol, naphtha, benzoyl, and ammonia, as well as ships made by the Mellons’ New York Shipbuilding Company, and armor made by Bethlehem Steel, sent rivers of cash back to the Mellon empire. By the end of the war, Andrew Mellon was an officer or director of more than sixty companies.

Mellon was also the “financial angel” of the Pennsylvania Republican Party, so powerful that when his ill-considered marriage fell apart in a scandalous split, he had the state legislature pass a law giving judges the right to deny women a trial by jury in divorce cases. Local newspapers, afraid or in thrall to the Mellon family, reported little on the matter.

King Andrew

Mellon never had as much control over the private financial system and industry as the elder Morgan did. However, after his appointment as treasury secretary, Mellon did have one source of power Morgan did not: a large administrative state, and in that difference lay his power. Mellon, more than Morgan, would fuse government and business to make the world safe for monopolists. Throughout the 1920s, Mellon ran the Treasury Department, set tax and government debt policy, and sat as the chairman of the Federal Reserve.

Many of Woodrow Wilson’s achievements offended Mellon, but Wilson’s most rank achievement was the income tax on the wealthy. For the eleven years he was at the Treasury, Mellon sought to reduce that tax any way he could. He pestered Congress to lower the top individual rates, to lower rates for corporations, and to end that most odious of taxes, the one on inheritances. That tax would have blocked Mellon’s father from bequeathing Andrew the beginnings of an empire. Mellon won substantial reductions in the Republican Congress, but a combination of progressive Republicans and southern Democrats blocked him from a full victory.

When he couldn’t win through Congress, he could win through administration, and through his control of the Bureau of Internal Revenue, the forerunner of the Internal Revenue Service. Under Mellon, the Bureau of Internal Revenue changed the way it calculated tax liabilities incurred during World War I. As a result, billions of dollars of refunds, some to Mellon companies, flowed back to corporate America. The bureau was especially malleable in these years, because it had just started collecting income and corporate taxes. In 1916, Americans filed roughly 450,000 income tax returns. By 1921 the number had jumped to eight million. This surge allowed Mellon to decide a host of policy questions around accounting, as corporations demobilized factories and a suite of nationalized industries returned to private ownership. He would even set up a special tax court to interpret and make tax law.

Virtually every large corporation in the country received large rebates, including forty Mellon-affiliated companies or people. Mellon personally received a $400,000 tax refund, the largest awarded to a single individual. Gulf Oil got $3 million. Mellon even had men from the bureau preparing his own returns. These refunds achieved more than just cash in Mellon’s pocket. William Randolph Hearst, whose newspapers had decried Morgan’s spiderlike control years earlier, received $1.7 million of tax refunds. The Hearst papers were so grateful for Mellon’s financial wizardry that they talked up Mellon for the 1928 Republican nomination.

Mellon was a savvy bureaucratic infighter. In perhaps his most bitter feud of the era, with Republican senator James Couzens, the wealthiest member of the Senate, Mellon had the Bureau of Internal Revenue investigate Couzens and leak information about his tax returns. Few Democratic senators dared support Couzens because of the structure of the developing system for taxing corporate and personal income. Senators often had to ask the Bureau of Internal Revenue for decisions on technical questions, on behalf of constituents or corporations. As reporter Frank Kent put it, “not one of them knows when he will be forced to go there and ask for more. Almost any question can be decided by the bureau in three or four different ways—all legal. One of these ways saves a man or a firm a lot of money, and the other doesn’t.” Couzens later said, “Give me the control of the Internal Revenue Bureau and I will run the whole darned country … The Commissioner of the Bureau has the power to perpetuate a political party in power indefinitely … It is a power that no man should be allowed to exercise in secret.” And yet, Mellon did. There was, Kent wrote, no longer a Democratic or Republican Party, but instead, “a Mellon party and a small non-Mellon party.”

Mellon could also see to it that his industrial empire flourished in the era through other mechanisms. He blocked antitrust action against Alcoa. The FTC didn’t bother to look into Gulf Oil, or any of Mellon’s other vast holdings. Mellon didn’t just ward off attacks, but negotiated with foreign leaders for oil concessions for his own oil company, both in Colombia and in Kuwait. And the great tax reductions he pushed through Congress, which slashed his own tax bill, ended up slashing into the stock market, pushing up the value of the stocks he held.

Mellon could even hold up the entire political system to serve his own interests. In 1930, Democrats attacked the merits of the high protective tariff on aluminum imports, attempting to reduce the duty from five cents to two cents a pound on crude aluminum. The bill narrowly passed the Senate. Suddenly, New York Democratic senator Royal Copeland made a plea to reverse course and go back to the five cents a pound rate; the jobs of ten thousand workers in New York were at stake. If the tariff dropped to two cents a pound, Alcoa would move production to Canada.

Progressive senator George Norris noted that Copeland “frankly admits that it is on account of fear of the power of this corporation to bring distress, poverty, and unemployment to the American toiling masses” that he supported the Mellon monopoly tariff. Copeland replied that the “people of this country are at the mercy of this monster monopoly, no matter what we do.” The higher tariff held.

This might be unfair, but fairness didn’t matter. Treasury Secretary Mellon told voters that there were immutable economic laws that could not be evaded. “Just as labor cannot be forced to work against its will, so it can be taken for granted that capital will not work unless the return is worth while.” Great wealth not only shouldn’t be curtailed through government policy, in fact it couldn’t be.

Mellon promoted his philosophy in a 1924 best-selling book called Taxation: The People’s Business. Anything that taxed the wealthy was full of “menace for the future,” threatening the very stability of society. He went further. “Our civilization,” he wrote, “is based on accumulated capital, and that capital is no less vital to our prosperity than is the extraordinary energy which has built up in this country the greatest material civilization the world has ever seen.”

Mellonism

Placing power in the hands of business seemed to work. After a brutal recession of the early 1920s, economic growth soared. The unemployment rate for 1925 dropped to 4 percent, on its way to a peacetime century low of 1.9 percent in 1926. A giant financial bubble was undergirding economic growth, but it was easy to overlook that in the haze of prosperity and the continued spread of next-generation industrialization technologies.

At first little known, the Republican-dominated press gradually gave Mellon more and more credit for the boom times, especially after the horrific economic experience of 1919–1920. Millions of Americans soon revered him. He was commonly known as the best secretary of the treasury “since Alexander Hamilton.” Indeed, it was Mellon who placed Hamilton, America’s original proponent of monopoly, on the $10 bill.

“Never before, here or anywhere else,” wrote The Wall Street Journal, “has a government been so completely fused with business.” The Federal Trade Commission, created by Wilson, was in the Mellon years led by W. E. Humphrey, a man who proudly announced it would no longer serve as a “publicity bureau to spread socialist propaganda.”

It seemed like an endless sea of prosperity. Just not for everyone.

× Expand Associated Press View of the massive mansion of Andrew Mellon in Pittsburgh, Pennsylvania, in April 1935

Life in the mines was only the most brutal manifestation of the other market of the Mellon decade, with inequality driven by low wages among workers and farmers. Crop prices were low throughout the decade, and Mellon and the Republicans blocked relief and farm supports. “Farmers have never made money,” said Calvin Coolidge to the Farm Loan Board. “I don’t believe there is much we can do about it.” A series of court decisions weakened the ability of workers to strike, and employers across the country sought to eliminate unions. The American Federation of Labor fell from 5 million to 3.6 million members from 1920 to 1923 and continued falling through the decade. Productivity jumped by 30 percent, but wages were up by just 8 percent in the decade. As one foreign visitor to the United States remarked in 1928, “America is an employer’s paradise.”

There was also stark regional inequality. Most assets, such as 90 percent of money-producing patents and over 90 percent of all dividends and interest payments, were held in the North, starving the South and the West of capital. Of the top 200 corporations, 9 were in the South, 11 in the West, and 180 in the North. Chain stores, insurance companies, banks, railroads, oil companies, industrial outfits—all owned and used the resources and markets of the South and West, and then shipped the profits north.

No region suffered more than the South. Since the end of the Civil War, the South was commonly known as the nation’s chief economic problem. The richest state in the South ranked lower in per capita income than the poorest state outside the region. Farmers, half of whom were tenant farmers, had the smallest farms in the nation. They couldn’t afford crop rotation, so the land eroded. Sixty-one percent of all the land damaged by erosion was in the South, with 22 million acres of fertile soil in South Carolina alone washed away.

The South put its tax burden on the poorest through the sales tax, and “the vigorous opposition of interests outside the region which control much of the South’s wealth” beat back efforts to oppose it. Outsiders exploited the natural resources of the region, leaving little for the people themselves. Mellon’s empire extended into the region. He built Gulf Oil off the profits of the legendary Spindletop oil strike in Texas that created the term “gusher.”

Roughly 10 percent of the children in the South worked, accounting for three fourths of all child labor in the entire country. The most productive workers of the region simply left the region. By 1928, 30 percent of households in the South were headed by women past middle age. Fifteen percent of South Carolinians were illiterate, and 1,500 school centers in Mississippi lacked school buildings.

There was also a perpetual health crisis. Two million people a year were infected by malaria, which cut industrial output by a third; railroads throughout the region listed malaria as a business challenge, and utility companies “had full-time mosquito-fighting crews at work during the year.” That same study noted that 1,467 coal miners and 1,232 ore miners died every year from tuberculosis. Prosperity, marbled with poverty.

In the final week of the 1928 election, Mellon gave a radio address to promote Herbert Hoover, the GOP nominee. “Russia is an example of what happens when credit values are destroyed,” he said, attacking the new communist state and linking it with the policy ideas of the Democrats. In the Soviet Union, the standard of living had collapsed, and “large corporations” had “ceased to operate.” By contrast, he said, in Italy “the Bolshevik menace was met and vanquished.” Mussolini had not only rescued “Italy from any possible danger of economic and social collapse,” but had “improved the well-being of the people of the country.” The Italian government, unlike the Soviet one, “operated in accordance with established economic laws.”

For misery, voters could elect Democrats. For prosperity, they should place their faith in big business leadership. In the boom times of the 1920s, many Americans had become docile, placid, increasingly tolerant of living under big business masters, less and less interested in high ideals.

An insidious form of corporatism was gaining power over not only America’s industrial sinews but the heart of the people. Many leaders attacked the corruption, the machine guns in the mines, the poverty in the South, the links to fascism both implicit and overt, Prohibition, deals with fascists, and the monopolization of essential goods and industries. But many other Americans, intellectuals weaned on the centralization of the war and its aftermath, were losing faith in traditional democratic balances. Nearly a generation had passed since the heyday of populism, and millions of Americans had known only centralized control, by the state during the world war, and by the monopolists since. After decades of antimonopoly crusading by aggressive politicians, pledging to stand up to big money, and failing spectacularly, this was the aftermath. The monopolists were in control.

The last presidential election of the decade was similar to the first one, ending with a smashing Republican victory. Republican nominee Herbert Hoover took forty states, in a third straight GOP landslide. Two days after the election, a reporter asked Mellon if prosperity would continue. “There is no reason why,” he said, “a steady improvement in our standard of living … should not continue indefinitely,” if, he continued, “conservative and well-tried economic principles continue to be followed.”

The Impeachment of the Old Order

It was raining outside, a heavy, soaking rain, matching the gloom in the air. Congressmen crowded the well in the U.S. House of Representatives. There had just been a quorum call, a legislative maneuver designed to get members of Congress into the room, basically the party leadership taking attendance. Congressmen chatted, hanging off the old desks, about baseball, families, elections, the Hoover administration, women. But the economic crisis, the political crisis, was on everyone’s mind.

A man stood and addressed the chamber. “On my own responsibility as a member of this House,” said Congressman Wright Patman, “I impeach Andrew W. Mellon, Secretary of the Treasury of the United States, for high crimes and misdemeanors.” With these words, on January 6, 1932, Patman began the next great campaign to destroy monopoly power in America.

Patman had been threatening impeachment of Mellon for the past year, but few believed him. Now he spoke for an hour, laying out his case in crisp terms that revealed his training and experience as a county prosecutor. Members of Congress scrambled to understand the charges, and the peculiar process of an impeachment, with “page boys moving like shadows about the chamber, rushing for law and reference books.”

He unveiled the charges, one by one. He started with an old anti-corruption statute prohibiting the secretary of the treasury from being involved with commerce or seagoing vessels. The charges grew more incendiary. Mellon had, as treasury secretary and thus boss of the Bureau of Internal Revenue, given his own companies tax refunds. He held bank stocks while serving as chair of the Federal Reserve. He also owned a massive distillery while enforcing Prohibition, and illegally traded with the Soviet Union. Patman even noted that Mellon had had the Treasury Department launch a magazine dedicated to the use of aluminum in architecture, while controlling the Alcoa aluminum monopoly. The basic accusation was self-dealing; Mellon had been transacting his own business at the Treasury Department, and had retained control, if not formal ownership, in over three hundred corporations engaged in global commerce.

Most of the accusations against Mellon weren’t new. The charges, and many others, had floated around Mellon since 1921, when Harding first appointed him secretary of the treasury. His brother, Richard King Mellon, had always been his junior partner, a director of almost every company from which Mellon had claimed he had divested. The feigning of disinterest was absurd.

In May of 1929, four progressive senators fulminated that Mellon “control[s] some of the most gigantic financial operations in the world,” that “most of the products of these corporations are protected by our tariff laws, and Mr. Mellon has direct charge of the enforcement of these laws.” He should be disqualified from holding his office, they wrote, because of the law against the treasury secretary having an interest in the business of trade or commerce. “It would perhaps be impossible to find in the United States a single citizen who has a greater interest in the business of trade or commerce.” But in the boom days, these arguments hadn’t worked.

The crash revealed the true cost of cynicism and self-dealing. Not only were Patman’s fellow congressmen now ready to take his impeachment charges seriously, senators in a nearby committee room were examining Mellon’s use of his office to extract oil concessions from the Colombian government for an oil syndicate put together by J. P. Morgan and his own company, Gulf Oil. Perhaps more important, outside the Capitol Dome, fifteen thousand unemployed people were demanding action. Theirs would not be the last large-scale protest of the economic emergency. Mellon’s political shield, a vibrant prosperous economy, had been shattered.

× Expand Associated Press As U.S. ambassador to the Court of St. James’s, Andrew Mellon offers congratulations to Amelia Earhart as the famous aviator arrives in London on May 22, 1932.

This time, it was Mellon’s opponents who had an army. This time, Mellon, and the entire apparatus he represented, his entire globe-spanning machinery of business, finance, and politics, was in trouble. The moneychangers system of rule over the economy had failed.

A week after Patman’s initial statement, the Judiciary Committee began hearings. Many members of Congress agreed with Patman quietly, but would not take on the power of Mellon. Why throw away their careers, as Patman had obviously just done? “It has been said that it is hard to convict a million dollars in the criminal courts,” said Patman. “It can also be said that it will be hard to impeach a billion dollars.”

But in the Judiciary Committee—the closest forum to a trial the Democrats could muster without control of the executive branch— Patman drew blood. Mellon was forced to admit that when he had sold his bank stocks to gain eligibility for the Treasury position, he had sold the stock to his brother. Mellon was represented by a former solicitor for the Bureau of Internal Revenue, and a high-powered Pittsburgh attorney. But they were no match for the populist from Cumberland Law School, who had been obsessed with Mellon for years.

Mellon claimed that he had terminated all connection with his businesses “as completely as if I had died.” This statement was a lie. Mellon’s lawyer argued that Mellon had little to do with Alcoa, aside from his family relationship with his brother and former partner Richard, a key official in the company. But in 1924, there had been a merger between Alcoa and a company with substantial hydropower assets in Canada, which both aided Alcoa in producing more aluminum and blocked the entrance of a potential competitor. The head of Alcoa had brought Mellon into the negotiations because of his prestige as a financier and the treasury secretary. The negotiations took place in a private railroad car. Mellon’s lawyer admitted that Mellon had been in the private car with all of the key negotiators. But, he said, Mellon looked out the window the whole time and didn’t take part or pay attention to any conversations. Suddenly, impeachment seemed plausible.

At the same time as the impeachment hearing, on the other side of the Capitol, California Republican senator Hiram Johnson spent two hours cross-examining Victor Schoepperle, National City’s vice president responsible for Latin America loans, the man in charge of loans made to Colombia after the government had granted the oil concession to Mellon’s Gulf Oil. Schoepperle denied it. Two hours later, after lunch, Schoepperle mysteriously changed his story. It turned out the State Department had encouraged the bank to make the loan, mentioning the concession as a key reason. Two days later, Johnson put into the record information Patman had gotten from Colombia, including a newspaper interview where Olaya relayed a conversation with Mellon about the country’s fiscal crisis. Mellon, Olaya said, told him to “settle your pending questions on petroleum” and implied loans might be forthcoming.

The explosive news destroyed Mellon’s reputation and finally spurred the administration into action to address the economic downturn. Three days after the end of the Judiciary Committee hearing, Hoover established the Reconstruction Finance Corporation, a government bank that could lend to failing railroads and banks. The public interpreted this as a corporate bailout. Comedian Will Rogers mocked Hoover, noting “you can’t get a room in Washington … Every hotel is jammed to the doors with bankers from all over America to get their ‘hand out’ from the Reconstruction Finance Corporation.” The bankers, it seemed to Rogers, had “the honor of being the first group to go on the ‘dole’ in America.”

On February 4, 1932, less than a month after Patman filed his articles of impeachment, Mellon resigned. Hoover appointed him ambassador to England, where he would attempt to work out loans accrued during the war. Patman called this a presidential pardon. As he “goes to England with his bag of gold that has been wrenched from his innocent victims in America,” said Patman, “our people may enjoy a sigh of relief and turn their thoughts to rebuilding our Nation for the benefit of the plain people—the ones who build our country in time of peace and who save our country in time of war.”

Copyright © 2019 by Matt Stoller. From Goliath: The 100-Year War Between Monopoly Power and Democracy, published by Simon & Schuster. Reprinted by permission.