-Caveat Lector- <A HREF="http://www.ctrl.org/">
</A> -Cui Bono?-
Bill Richer wrote:
>
> A: It took a full year. There is not one state -- not one -- that has
> ratified the 16th Amendment to the United States Constitution. One of the
> most amazing documents I found was in the national archives in Washington
> D.C. -- a 16-page memorandum written by Ruben J. Clark, then the attorney for
> Secretary of State Philander Chase Knox....
-[re-post]-
WHO WAS PHILANDER KNOX?
IS IT CREDIBLE THAT HE WOULD COMMIT FRAUD?
<http://www.givemeliberty.org/features/taxes/philanderknox.htm>
Understanding a crime or a misdeed involves
learning not only what was done and who did
it, but also what the motivation was. With
a clear motive, evidence of the "what" and
"who" becomes much more credible. Allegations
that Secretary of State Philander Knox was
not merely in error, but committed fraud
when he falsely declared the 16th amendment
ratified in 1913, require us to look at who
he was to understand why he would commit
such an act. The following sketch was
prepared by the We The People Foundation
For Constitutional Education and is
condensed from Bill Benson's research
report on the ratification of the 16th
Amendment, "The Law That Never Was,"
Volume II (1985), pages 122-135.
______________________________________
Philander Chase Knox was born in 1853 in western
Pennsylvania, son of a bank cashier. While attending
college in Ohio, he became closely acquainted with
William McKinley, then the local district attorney, who
was prosecuting a local tavern owner for selling
alcohol to the college students. Knox took McKinley's
advice and became a lawyer.
McKinley, having chaired the powerful House Ways and
Means Committee in Congress, was elected governor of
Ohio in 1891. Although he owed his election to support
from both business and labor, he quelled the labor
strike called by Eugene V. Debs against the Great
Northern Railroad in 1894 by summoning federal troops.
McKinley won the 1896 presidential race with a great
deal of support from Big Business, e.g., John D.
Rockefeller's Standard Oil contributed $250,000 to the
"front porch" campaign that defeated Bryan and his
populist platform of returning to the constitutionally
mandated monetary system and reform of McKinley's high
tariffs that had allowed domestic manufacturers to
raise their prices to a level that matched the
artificially-induced higher prices of foreign goods,
thus causing a severe depression. Knox helped in this
financial and political effort that was directed by the
wealthy Ohio industrialist Mark Hanna, who was
appointed to a vacant U.S. Senate seat the following
year by Ohio's governor. McKinley had already been
saved from personal financial ruin by help from his old
friend, Philander Knox, who had become wealthy as
counsel to the very wealthy.
Knox came to be regarded as one of the ablest lawyers
in the country, his repute due in no small measure to
his being counsel for Carnegie and Vanderbilt and their
corporate enterprises. He was instrumental in
Carnegie's big victory in a crucial patent case in
which the most important invention for the manufacture
of crude steel was at stake. In 1892, he defended Henry
Frick, Carnegie's steel plant manager, who was being
sued by the steel workers who had been beaten up by
Pinkertons brought in by Frick during the infamous
Homestead strike, a strike that was provoked by two of
Carnegie's presidents, one of whom was also an attorney
for J.P. Morgan. Knox also deflected prosecution and
civil suit against Carnegie in 1894 after it was shown
to Congress that Carnegie had defrauded the Navy with
inferior armor plate for U.S. warships. Morgan himself
had defrauded the U.S. Army in arms sales during the
Civil War. And Knox averted prosecution of Carnegie
after the president of the Morgan-controlled
Pennsylvania Railroad testified that Carnegie had
regularly received illegal kickbacks from the railroad.
Knox's other big client at the time, the Vanderbilt
family, was connected to Carnegie primarily through the
railroad industry.
President McKinley offered Knox the post of U.S.
Attorney General in 1899, but Knox had to decline,
because he was then and for two more years engaged in
arranging the merger of the railroad, oil, coal, iron
and steel interests of Carnegie, J.P. Morgan,
Rockefeller, and other robber barons into the largest
conglomerate in history - U.S. Steel. This immense
corporation encompassed the interests of nearly all the
robber barons in what Knox's new client, J.P. Morgan,
referred to as a "community of interest." One important
component of the conglomerate was Consolidated Iron
Mines in the Mesabi Range of Minnesota, which
Rockefeller had fraudulently swindled from the Merritt
family, who later successfully sued John D. for fraud,
but had to settle for a fraction of the award because
they ran out of money during Rockefeller's appeals.
After the U.S. Steel merger, Knox accepted McKinley's
offer to make him Attorney General, an appointment that
was personally promoted by Carnegie in a letter to
McKinley and by Morgan in a personal visit to the White
House. The appointment was strenuously and loudly
opposed by anti-trust forces, since it would then be up
to Knox to prosecute anti-trust law violations against
the very robber barons who had been his clients for
many years and who had made him a wealthy man. Sure
enough, the public outcry to investigate the big new
U.S. Steel monster that Knox had created met with
Knox's response that he knew nothing and could do
nothing, and nothing is what he did.
After McKinley's assassination in 1901, Knox continued
as Attorney General under Theodore Roosevelt. Even
though Roosevelt labeled himself as a "trust-buster,"
Knox saw to it that very little harm came to his
benefactors. U.S. Steel was unscathed, and most of the
actions that were taken against the railroad companies
were largely done with the urging of the railroad
giants themselves, who were the strongest advocates of
federal regulation of the industry, because that
regulation, with their own agents working in the
federal commissions, enabled them to gain greater
control over the industry, be protected from
competition, and maintain prices. The best-known
anti-trust case was against Northern Securities, a
railroad holding company formed by Morgan as a show of
strength for the benefit of Hill, Harriman,
Rockefeller, and their bankers, Kuhn, Loeb & Company.
The dissolution of Northern by the Supreme Court in
1904 was deemed "inconsequential" by the financial
press, since the two major railroads it encompassed had
not been of several powerful capitalists, including
Carnegie's man, former client Frick (which showed they
approved of Knox's handling of anti-trust matters as
Attorney General).
Knox, by now a multi-millionaire, was in the Senate
when the Morgan-controlled financial Panic of 1907 hit,
which led to a congressional inquiry into the monetary
and banking systems. Senator Nelson Aldrich (father of
the wife of John D. Rockefeller, Jr. and namesake and
god-father of Nelson A. Rockefeller) led the inquiry
producing the 1912 report that recommended a national
bank (controlled and owned by the robber barons) and
ultimately resulted in the Federal Reserve Act of 1913,
co-authored by Aldrich and Robert Owens. Owens later
testified to Congress that the banking industry
conspired to create financial panics like the one in
1907 in order to rouse the people to demand reform -
reform that would be directed by, and to the benefit
of, the very financial experts who had caused the
panic.
Knox resigned from the Senate and became Secretary of
State under President Taft from Ohio in 1909. He was
the most powerful figure in the Taft administration,
and drew up the lists from which Taft appointed his
other cabinet members, many of whom were intimately
concerned with the giant corporations. He was Taft's
primary confidante.
Knox became active in organizing the international
court at The Hague, and fought hard for the
Rockefeller/Morgan-inspired concept of a League of
Nations, although U.S. opposition to the Treaty of
Versailles forced him to temper his public views on the
League. He proclaimed the era of "Dollar Diplomacy,"
his legacy to U.S. foreign policy, under which the
Secretary of State's office was used to promote and
protect American commercial and industrial interests in
foreign countries, especially in Latin America, but
also in East Asia and even Europe. This period of U.S
imperialism featured the annexation of Hawaii in the
1890s at the request of American businesses there
despite the unanimous opposition by Hawaiians; the
taking of Cuba and the Philippines from the Spanish as
well as from the native rebels whom the U.S had
ostensibly come to assist in gaining their liberty
(this included the massive slaughter of a hundred
thousand Filipinos by the U.S Army in a war in which
the news media was censored. (even William Randolph
Hearst, who had helped instigate the war with Spain,
was aghast and disgusted.) Then came the Honduras
financial crisis of 1909, in which Knox brokered a deal
for J.P. Morgan & Company to make huge loans to that
country, backed by the full faith and credit of the
U.S., and for American bankers to take control of the
Honduras taxing authority (to ensure adequate cash flow
to make the loan payments). Knox's diplomatic maneuvers
resulted in the U.S. Navy being sent to support and
give victory to rebel forces in Nicaragua, who then
made arrangements, again devised by Knox, to give
control of Nicaraguan taxing authority and tax
collection to Americans. American bankers then
immediately made big loans to Nicaragua, once again
guaranteed by the U.S. government, providing a
risk-free investment environment for Knox's banker
friends.
Knox tried to conduct the same kind of activity in the
rest of Central America and much of South America as
well, and used America's claim against the Chinese from
the Boxer Rebellion to coerce China to deal with a
syndicate of Harriman and his bankers Kuhn & Loeb,
Morgan and his First National Bank, and the
Rockefeller-controlled National City Bank, instead of
with the British, French, and Germans, in a scheme to
establish a round-the-world transportation system using
American steamship and railroad lines. There was even
action by Morgan's man in that syndicate, Henry
Davidson, to supply arms to the Bolsheviks in hopes of
gaining oil and commerce concessions in Russia if they
were victorious.
At the international level, Knox has been criticized
for oafish and heavy-handed diplomacy that caused ill
will and damaged the reputation of the United States
worldwide. His conduct was more that of a huckster than
a diplomat. Domestically, Knox's influence extended to
the Supreme Court, where he succeeded in having Taft
appoint three justices who were extremely sympathetic
to the big business trusts: Devanter, Lamar, and
Pitney. The first two of these had formerly had clients
among the big corporate trusts, including the
railroads.
The 16th Amendment itself was given its decisive shove
through Congress in 1909 by Sen. Nelson Aldrich of
Rhode Island (co-author of the Federal Reserve Act of
1913), who spoke for the "community of interest' of
both Morgan and Rockefeller. This represented and led
to an astonishing reversal of attitudes among the
old-line big-business conservatives in the Senate, who
had long staunchly opposed an income tax. Obviously,
something was afoot to change their minds. It was that
the robber barons had already figured out how to avoid
the proposed income tax, especially through the
establishment and use of foundations, the number of
which grew from 18 in 1910 to 94 by 1920 and 267 by
1930. The super-rich have avoided the income tax ever
since, leaving it to be paid instead by the middle and
lower classes.
CONCLUSIONS
Deceit and fraud were, for the robber barons, standard
operating procedures - among the numerous underhanded
methods they typically employed to achieve their
objectives. Knox had protected them from fraud charges
many times. His term as Attorney General was itself a
big fraud in regard to enforcement of the anti-trust
laws, especially against former clients to whom he owed
so much of his own professional success.
Besides preying on the government with their fraudulent
activities, the robber barons employed a strategy of
locking in and stabilizing their advantageous positions
by using government authority and regulations to reduce
competition, keep prices at very profitable levels,
control labor problems, minimize risk, and generally
make themselves quite comfortable. They also expanded
their scope of operations, including financing and
extension of credit, to other countries and used
government to aid them in these adventures. Knox, of
course, was a key man, perhaps the key man, in the
Administration in all of this, both as Attorney General
and then as Secretary of State.
J.P. Morgan seems to have been the real genius and
visionary behind much of this strategy. His background
was more oriented to finance, and his financial acumen
enabled him to make inroads against the other robber
barons on their own turfs - a robber baron's robber
baron. He was regarded as more cultured and
cosmopolitan than most of the others, and perhaps that
is why he was able to envision and plan on such an
international scale. His financial perspective helped
him to see the benefits of making monetary loans to
governments and securing them with strong and reliable
methods of tax collection.
One might wonder why Knox seemed to be in such a hurry
in 1913 to declare the 16th amendment ratified. We can
see that it was because of the Federal Reserve Act of
1913. It was important to the banking interests that
would be lending money to the U.S government that there
be an assured flow of revenue, especially since the
robber barons would be removing themselves from the
income tax system. Just as an ordinary bank wants to
know that a borrower who is given a mortgage has a cash
flow adequate to meet the payments, so the banks
comprising the Federal Reserve System wanted to be sure
the federal government had a dependable method of tax
collection in place to provide ample money to pay its
debts to them. The income tax and the Federal Reserve
are inextricably tied together; it was not mere
coincidence that they happened in the same year. The
robber barons, their bankers, and Knox had developed
this concept and practiced it in Latin America, and in
1913 they were ready to apply it to the United States.
In less than a month after proclaiming the 16th
amendment ratified, Knox returned to private practice
in Pittsburgh, resigning as Secretary of State so that
the new president, Woodrow Wilson, could appoint his
own man to the post.* One gets the distinct impression
that getting the amendment through the ratification
process had indeed been his ultimate goal; he wasn't
just a disinterested public official objectively
administering the procedure. If he hadn't declared it
ratified before leaving office, there was no way to
know or control what his successor would do.
The title of this piece asks whether it's credible that
Knox would commit fraud in ratifying the 16th
amendment. We leave it to readers to decide for
themselves, but for us, it seems like a "no-brainer."
He would and he did.
*Taft's brand of republicanism had upset Roosevelt
enough that the latter ran again for President in 1912.
His third party "Bull Moose" candidacy spoiled Taft's
re-election, and Democrat Wilson won.
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