Andrew W. Mellon
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| Andrew W. Mellon | |
|---|---|
 |
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| 11th United States Ambassador to the United Kingdom | |
| In office February 5, 1932 – March 20, 1933 |
|
| President | Herbert Hoover |
| Preceded by | Charles G. Dawes |
| Succeeded by | Robert Worth Bingham |
| 49th United States Secretary of the Treasury | |
| In office March 9, 1921 – February 12, 1932 |
|
| President | Warren G. Harding Calvin Coolidge Herbert Hoover |
| Preceded by | David F. Houston |
| Succeeded by | Ogden L. Mills |
| Personal details | |
| Born | Andrew William Mellon March 24, 1855 Pittsburgh, Pennsylvania, U.S. |
| Died | August 26, 1937 (aged 82) Southampton, New York, U.S. |
| Resting place | Trinity Episcopal Church Cemetery Upperville Fauquier County, Virginia |
| Nationality | American |
| Political party | Republican |
| Spouse(s) | Nora McMullen (1878–1973 m. 1900–1912 divorced) |
| Relations | Richard B. Mellon (1858–1933) (brother) |
| Children | Paul Mellon (1907–1999) Ailsa Mellon Bruce (1901–1969) |
| Parents | Thomas Alexander Mellon (1813–1908) Sarah Jane Negley (1817–1909) |
| Alma mater | Western University of Pennsylvania (University of Pittsburgh) |
| Profession | Banker, politician |
| Religion | Episcopalian |
Contents
Early life
Mellon was born in Pittsburgh, Pennsylvania on March 24, 1855. His father was Thomas Mellon, a banker and judge who was a Scots-Irish immigrant from County Tyrone, Northern Ireland; his mother was Sarah Jane Negley Mellon. He also had a brother named Richard B. Mellon. He was educated at the Western University of Pennsylvania (now the University of Pittsburgh) and graduated in 1873.[1]Financial prodigy
Mellon demonstrated financial ability early in life. In 1872, he was set up in a lumber and coal business by his father and soon turned it into a profitable enterprise. He joined his father's banking firm, T. Mellon & Sons, in 1880 and two years later had ownership of the bank transferred to him. In 1889, Mellon helped organize the Union Trust Company and Union Savings Bank of Pittsburgh. He also branched into industrial activities: oil, steel, shipbuilding, and construction. It has been reported that each day Mellon "had his hair trimmed in the anteroom outside his second-floor office, he would peer down into the marble lobby of the Pittsburgh bank his father had founded. When an important customer walked in, he would jump out of his chair, run down a flight of stairs and greet the visitor."[2]Three areas where Mellon's backing created giant enterprises were aluminum, industrial abrasives ("carborundum"), and coke. Mellon financed Charles Martin Hall, whose refinery grew into the Aluminum Company of America. He became the partner of Edward Goodrich Acheson in manufacturing silicon carbide, a revolutionary abrasive, in the Carborundum Company. He created an entire industry through his help to Heinrich Koppers, inventor of coke ovens which transformed industrial waste into usable products such as coal-gas, coal-tar, and sulfur. He also was an early investor in New York Shipbuilding Corporation.[2]
Mellon eventually became one of the wealthiest people in the United States. In the mid-1920s, he was the third highest income tax payer in the US behind only John D. Rockefeller and Henry Ford.[1] During this period, while he served as Secretary of the U.S. Treasury Department, his wealth peaked at around $300–$400 million in 1929–30.
Mellon was a member of the South Fork Fishing and Hunting Club, whose earthen dam failed in May, 1889 and caused the Johnstown Flood. Mellon was a member of the Duquesne Club. Along with his closest friends Henry Clay Frick and Philander Knox, also South Fork Fishing and Hunting Club members, Mellon served as a director of the Pittsburgh National Bank of Commerce.[3]
Career
Fundraising
During World War I he participated in many fundraising activities for such as the American Red Cross, the National War Council of the Y.M.C.A., the Executive Committee of the Pennsylvania State Council of National Defense, and the National Research Council of Washington.Secretary of the Treasury
Andrew Mellon was appointed Secretary of the Treasury by new President Warren G. Harding in 1921. He served for ten years and eleven months; the third-longest tenure of a Secretary of the Treasury. His service continued through the Coolidge and Hoover administrations. Along with James Wilson and James J. Davis, he is one of only three Cabinet members to serve in the same post under three consecutive Presidents.President Harding, in his inaugural address on March 4, 1921, called for a prompt and thorough revision of the tax system, an emergency tariff act, readjustment of war taxes, and creation of a federal budget system. These were policies Mellon wholeheartedly subscribed to, and his long experience as a banker qualified him to set about implementing these programs immediately. As a conservative Republican and a financier, Mellon was irritated by the manner in which the government's budget was maintained, with expenses due now and rising rapidly, with the failure of income or revenues to keep pace with those expense increases, and with the lack of savings.
In 1926 Mellon was involved in drafting the Mellon-Berenger Agreement to set the amount of French debts to the United States arising from loans during World War I and define the repayment schedule. The agreement was named after him and the French Ambassador Henry Bérenger who signed the agreement in April 1926 subject to ratification by the French parliament. The agreement greatly reduced the amount owing, but was felt to be as much as the French would be able to pay.[4]
Mellon was a key negotiator on Germany's war debt, even traveling to Paris in the summer of 1931 to conduct talks on it. He referred to fears that Germany may strike out against its debt plight with: "everything will work out all right".[5]
Mellon plan
Mellon came into office with a goal of reducing the huge federal debt from World War I. To do this, he needed to increase the federal revenue and cut spending. He believed that if the tax rates were too high, then the people would try to avoid paying them. He observed that as tax rates had increased during the first part of the 20th century, investors moved to avoid the highest rates—by choosing tax-free municipal bonds, for instance. As Mellon wrote in 1924:[6]The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.If the rates were set more reasonably, taxpayers would have less incentive to avoid paying. His theory was that by lowering the tax rates across the board, he could increase the overall tax revenue. This is similar to the Laffer curve.
Andrew Mellon's plan had four main points:
- Cut the top income tax rate from 77 to 24 percent – predicting that large fortunes would be put back into the economy.
- Cut taxes on low incomes from 4 to 1/2 percent – tax policy "must lessen, so far as possible, the burden of taxation on those least able to bear it."
- Reduce the Federal Estate tax – large income taxes tempted the wealthy to shift their fortunes into tax-exempt shelters.
- Efficiency in government – lower tax rates meant few tax returns to process by few government workers; cutting the actual size of paper bills to fit into wallets saved expenses in paper and ink.
By 1926 65% of the income tax revenue came from incomes $300,000 and higher, when five years prior, less than 20% did. During this same period, the overall tax burden on those that earned less than $10,000 dropped from $155 million to $32.5 million.[7]
Mellon also championed preferential treatment for "earned" income relative to "unearned" income. As he argued in his 1924 book, Taxation: The People's Business[8]
The fairness of taxing more lightly incomes from wages, salaries and professional services than the incomes from business or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it. In the other, the source of the income continues; the income may be disposed of during a man's life and it descends to his heirs.
Surely we can afford to make a distinction between the people whose only capital is their mental and physical energy, and the people whose income is derived from investments. Such a distinction would mean much to millions of American workers and would be an added inspiration to the man who must provide a competence during his few productive years to care for himself and his family when his earning capacity is at an end.[9]Mellon's policies helped reduce the overall public debt (the national debt skyrocketed from $1.5 billion in 1916 to $24 billion in 1919 because of World War I obligations) from $33 billion in 1919 to about $16 billion in 1929,[10] but then the Depression caused it to rise again because of reduced revenue and increasing spending. The top tax rate went to 80% by 1935 and the federal government increased excise taxes in an attempt to make up for the lost revenue.[7]
Great Depression
This "weeding out" was accomplished through refusing to lend cash to banks (taking loans and other investments as collateral), and by refusing to put more cash in circulation. He advocated spending cuts to keep the federal budget balanced, and opposed fiscal stimulus measures. In 1929–31, he spent much of the time overseas, negotiating for repayment of European war debts from World War I. In 1928 Mellon issued a denial to allegations made by a speaker for the Democratic Party in North Carolina that he held an interest in a liquor distillery, and that he was the largest distiller in the world prior to Prohibition. In a letter written to the Republican executive committee of Mecklenburg County, North Carolina, Mellon admits having stock in a distillery, but that he had disposed of all interest in the company prior to becoming Secretary of the Treasury.[12]
Impeachment proceedings
In January 1932, 25,000 jobless men from Pennsylvania (Cox's Army) marched to Washington to petition Congress and Hoover to start a job program. Hoover, fearing Communist agitation, ordered an investigation. The investigation discovered that the march was financed by Mellon. Mellon's motives may be difficult to understand, but the action undermined Hoover's faith in his Treasury Secretary. This, coupled with the impeachment hearing (below) led to Mellon's resignation.[13]In January 1932, Rep. Wright Patman (D-TX), an F.D.R. New Deal supporter, and others introduced articles of impeachment against Mellon,[14] with hearings before the House Judiciary Committee at the end of that month.[15] After the hearings were over, but before the scheduled vote on whether to report the articles to the full House, Mellon accepted an appointment to the post of Ambassador to the Court of St. James and resigned as Treasury secretary in February. He served for one year as ambassador and then retired to private life. Representative Louis Thomas McFadden (R-PA) invoked Mellon's appointment while an impeachment was pending in his subsequent attempt to impeach President Hoover.[clarification needed]
Personal life
In 1900, Mellon, then 45 years old, married Nora Mary McMullen (1879–1973), a 20-year-old Englishwoman who was the daughter of Alexander P. McMullen, a major shareholder of the Guinness Brewing Co. They had two children, Ailsa, born in 1901, and Paul, born in 1907. Their marriage ended in a bitter divorce in 1912, which was granted on grounds of Nora Mellon's desertion and her adultery with Capt. George Alfred Curphey, an English soldier, and other men. Mellon did not remarry, though in 1923, his former wife married Harvey Arthur Lee, a British-born antiques dealer 14 years her junior.[16] Two years after the Lees' divorce in 1928, Nora Lee resumed the surname Mellon, at the request of her son, Paul.[17]Philanthropy
During his retirement years, as he had done in earlier years, Mellon was an active philanthropist, and gave generously of his private fortune to support art and research causes. In 1937, he donated his substantial art collection, collected at a cost of $25 million and valued at $40 million, plus $10 million for construction,[22] to establish the National Gallery of Art on the National Mall in Washington, D.C. The Gallery was authorized in 1937 by Congress.
Washington, D.C.'s Andrew W. Mellon Auditorium and Andrew Mellon Building were both named in Mellon's honor as was the National Gallery of Art during its early years.
Andrew Mellon was made a Freemason in 1928, and raised in 1931.
The Mellon tax trial
The administration of President Franklin D. Roosevelt subjected Mellon to intense investigation of his personal income tax returns. The US Justice Department empaneled a grand jury, which declined to issue an indictment. Roosevelt hated Mellon, as the embodiment of everything he thought was bad about the 1920s; Mellon vehemently denied the charges. A two-year civil action beginning in 1935, dubbed the "Mellon Tax Trial", eventually exonerated Mellon, albeit several months after his death.Death
Mellon died on August 26, 1937, in Southampton, Long Island, New York, and was buried at Trinity Episcopal Church Cemetery, Upperville, Virginia.Legacy
The Andrew W. Mellon Foundation, the product of the merger of the Avalon Foundation and the Old Dominion Foundation (set up separately by his children), is named in his honor, as is the 378-foot US Coast Guard Cutter Mellon (WHEC-717).Books
- Mellon, Andrew W., Taxation: The People's Business
In popular culture
Andrew W. Mellon appears in the HBO drama series Boardwalk Empire, in the fifth, eighth and twelfth episodes of the third season, in his capacity as Secretary of the Treasury. His character is played by Carnegie Mellon alum James Cromwell.See also
- Mellonomics.
- In Sunlight, In a Beautiful Garden, a novel by Kathleen Cambor about the Johnstown flood.
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