Eugene Meyer, forgotten elite

Apr 26, 2023

Since there’s a lot of discussion about what constitutes an elite at the moment, let me tell you the story of Eugene Meyer, financier, government official, newspaper man, and all-round top-crust elite of the early twentieth century. Eugene is much forgotten today, but he serves as an example for us—both in how to be a better elite, and in how to accept that no member of the elite is ever as truly elite as you want them to be. Meyer also happens to be something of a late bloomer. He flourished young and quite spectacularly, but then he opened up whole new careers for himself. In my Late Bloomers book I am planning a chapter about his daughter, Katharine Graham, much more of a late bloomer than her father, though hugely influenced by him.

Expectations were high for young Eugene. Born in 1875, the son of a merchant, he was a wayward boy whose sister once equipped herself with a cat-o’-nine-tails to try and keep him in order. He tripped her up and carried on with his juvenile ways. When he won third medal in a swimming competition he showed it proudly to his father who told him, “The world is full of people who stand third. They don’t amount to much.” Eugene took that to heart. Had he not been Jewish, and thus constantly fighting against the prevailing anti-Semitism of Washington, he would surely have run for President.

After some drinking and carousing, Eugene got his act together at Yale and graduated with honours. He went to Europe to improve his languages before starting as an investment banker at Lazards, where his father had become a partner. The energetic young man found Lazards dull, full of old men who weren’t going to die soon enough to satisfy his ambitions.

His father paid him $600 not to smoke before he was twenty-one and Eugene had invested this in railway stock. Betting that there would be a boom when McKinley won the 1900 Presidential election, he sold his stock and bought options in railway shares. This would hugely increase his gains if the market bounced after the election as he would be able to buy the expensive shares at his much cheaper option price. Four months after McKinley won, Eugene made $50,000, a ten-fold increase. He quit Lazards, to much paternal chagrin, and bought a seat on the New York Stock exchange where he started making himself and his clients plenty of money by purchasing undervalued stocks. By the time he was forty, he was worth something like $50 million.

He learned to stay calm when others panicked and had a sharp eye for a bargain. He also had an audacious personality. One day when it was assumed he was going to go broke because of some bad holdings, he walked into the stock exchange and started buying furiously, against the expectations of his predatory colleagues who had expected him to take his losses. This bravura confidence provoked the naysayers to start buying too and he ended the day secure. Little did the other traders know, his employees were quietly selling everything he bought to prevent him going broke. It was all a show—and it worked.

Meyer’s life plan had been to get rich and leave finance aged fifty, do public works for a decade, then retire. He was forty-two when America entered the First World War in 1917. He sold his firm and offered his services to the government. He worked for one dollar a year. Meyer used his financial expertise to advise on war purchases. He excelled and Woodrow Wilson named him to the head of the War Finance Corporation. Meyer was the very opposite of a war-time profiteer. After the war, Meyer extended the Corporation’s scope, made loans to railroad companies, and lent to farmers caught in the post-war slump. Until it was abolished in 1924, the corporation made loans to vital industries worth $700 million. So successful was he in this, and several other roles, Calvin Coolidge made him head of the Federal Farm Loan Board in 1927. This bi-partisanship continued throughout Meyer’s career, despite his firm Republican opinions.

Now comes his high point in government. In 1930, Hoover appointed him Governor of the Federal Reserve and, later on, head of the Reconstruction Finance Corporation, another body that gave loans to distressed industries. The RFC was Meyer’s idea: he wanted to avoid the problem of failing banks worsening the Depression. Meyer intervened in cotton markets to reduce surplus and stabilise prices and pushed for reforms to the banking sector. But Meyer’s legacy here is complicated. During the Depression, the Fed made a serious failure. By raising interest rates too high, they exacerbated the downturn of 1929. It’s debatable how much to blame the Fed for this: not everyone thought monetary policy caused the Depression at the time. Economists have come to that view subsequently.

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When Meyer took over, he tried to keep monetary policy expansionary. He advocated for open market purchases, that is, for the Fed to buy bank securities such as bonds, and therefore provide much-needed money to the market. Other members of the Fed opposed this plan. Meyer discovered at the start of his term that America’s assets were long-term and its liabilities short-term. They owed money tomorrow but lacked funds today. Gold supplies were at risk of running out. He tried to persuade Hoover about the urgency of this problem, but Hoover didn’t listen. Meyer urged other branches of the Fed to lower the interest rates for loans between banks, which eased the situation. But he was so concerned with maintaining the Gold Standard that he delayed his scheme for open market purchases. In the meantime, banks failed and the public hoarded currency. Later in 1931, Britain left the Gold Standard and Meyer put the rates back up. But he still didn’t implement open market purchases. This was a mistake that made the crisis worse.

Meyer then used his influence to have parts of the Glass-Steagall Act written to allow the Reconstruction Finance Corporation—the other organisation he ran—to make the market purchases. The purchases were not successful at first and internal opposition at the Fed ended the policy too soon. In 1933, there was another banking crisis. Meyer tried to get Hoover to impose a bank holiday; Hoover refused. (It wasn’t until Roosevelt was elected that a banking holiday was put in place.) Despite this, Meyer declined to re-start market purchases and raised interest rates again. He wanted an expansionary policy, but was unable, and perhaps unwilling, to face down opposition within the Fed.

This was a global crisis, and the role of other central banks, not least in France, made a huge difference to the course of the Depression. But Meyer comes out of this with a mixed record. The whole point of the Fed is to provide money to the banking system at times of crisis. Overall, in the early 1930s, the Fed made things worse—not just worse than they were, worse perhaps than they would have been without the Fed.

Eugene retired in 1933. His health suffered from the stress of running two organisations. He was nearly sixty, and had done what he set out to do: get rich and perform public service. Within a couple of weeks he was at loggerheads with his wife (it was not a happy marriage) who snapped at him one day when he critiqued her housekeeping, “You’d better go and buy the Washington Post.” This was a long-held ambition of Meyer’s and he bought the Post at auction, saving it from bankruptcy. It was his first experience of journalism.

The Post was on a long decline and was poorly managed. Meyer funded its losses for many years. Without him, his son-in-law Phil Graham, and especially his daughter Katharine, the Post wouldn’t be the paper we know today. Meyer hired talent, reshaped the editorial pages and improved reporting quality. There was a new circulation and advertising drive. Later on, with Phil Graham in position, the company expanded, buying a rival paper in Washington, then Newsweek, and television and radio stations. Meyer spent decades investing in the Post and nurturing its growth. He saw it as an act of public service. All the while, he continued to serve in federal positions, appointed by seven Presidents in total. He even broke the story of Edward VIII’s abdication, based on gossip he picked up at lunch. In 1946, Truman made him the first head of the World Bank.

Although the Post often criticised Roosevelt and the New Deal, Meyer was interested in building a major outlet, not a partisan beating stick. His focus on hiring top talent and improving journalistic quality was the basis of the Post’s expansion from a small town rag to the second paper in America, one that competed with the mighty New York Times. It was this careful nurturing and impartiality that Katharine Graham inherited. She was the one who had the nerve to publish the Pentagon Papers, revealing huge scandals about the conduct of the Vietnam War, despite her initial support for that war, and the financial risks of publication. She allowed the paper to pursue the Watergate story while she was under threats from the White House—she was a Meyer and played the long game, staying calm while others panicked, as her father had learned to do in the financial markets. Katharine, like Eugene, was obsessed with news and gave her journalists the freedom and support to do their work.

Meyer was never quite central to the history of his times—he was surrounded by big historical beasts—and is a marginal figure today. But he was one of the people who shaped the modern world. As Elizabeth Zoe Vicary says in American National Biography, “his lasting historical importance rests on his transformation of the Washington Post from a poorly written, financially ailing paper into an influential, profitable, and widely read publication.” His wealth left him free to do good work in the name of public service. There are many parallels and echoes with Meyer and modern elites that you can find in his story. Perhaps the most important is that without his talents and drive, twentieth-century journalism might have lacked one of its more important and persistent newspapers.

Meyer’s biography, which is fairly uncritical, is called Eugene Meyer by Merlo J. Pusey.