The American Nation A History of the United States, Combined Volume (14th Edition)

The Harding Scandals 667

than $66,000 a year, apparently not
realizing that economic expansion
required greater mass consumption
as well. Freeing the rich from
“oppressive” taxation, he argued,
would enable them to invest more in
potentially productive enterprises,
the success of which would create
jobs for ordinary people. Little won-
der that Mellon’s admirers called
him the greatest secretary of the
treasury since Alexander Hamilton.
Mellon succeeded in balancing
the budget and reducing the national
debt by an average of over $500 mil-
lion a year. So committed were the
Republican leaders to retrenchment
that they even resisted the demands
of veterans, organized in the politi-
cally potent American Legion, for an
“adjusted compensation” bonus.
That the business community
heartily approved the policies of
Harding and Coolidge is not surpris-
ing. Both presidents were uncritical
advocates of the business point of
view.“We want less government in business and more
business in government,” Harding pontificated, to
which Coolidge added, “The business of the United
States is business.” Harding and Coolidge used their
power of appointment to convert regulatory bodies
like the Interstate Commerce Commission (ICC) and
the Federal Reserve Board into pro-business agencies
that ceased almost entirely to restrict the activities of
the industries they were supposed to be controlling.
The ICC became almost the reverse of what it had
been in the Progressive Era. The Federal Trade
Commission, in the words of one bemused academic,
seemed to be trying to commit hara-kiri.

Purinton,Big Ideas from Big Businessat
http://www.myhistorylab.com

The Harding Scandals

At least Mellon was honest. The Ohio gang used its
power in the most corrupt way imaginable. Jesse
Smith, a crony of Attorney General Daugherty, was
what today would be called an influence peddler.
When he was exposed in 1923, he committed suicide.
Charles R. Forbes of the Veterans Bureau siphoned
millions of dollars appropriated for the construction
of hospitals into his own pocket. When he was found
out, he fled to Europe. Later he returned, stood trial,
and was sentenced to two years in prison. His
assistant, Charles F. Cramer, committed suicide.

ReadtheDocument

Big oil’s plans to drill in the Teapot Dome oil reserves led to a major scandal in the Harding

administration. (See also Re-Viewing the Past, There Will Be Blood, pp. 668–669.)

Daugherty himself was implicated in the fraudulent

return of German assets seized by the alien property

custodian to their original owners. He escaped

imprisonment only by refusing to testify on the

ground that he might incriminate himself.

The worst scandal involved Secretary of the Interior

Albert B. Fall, a former senator. In 1921 Fall arranged

with the complaisant Secretary of the Navy Edwin

Denby for the transfer to the Interior Department of

government oil reserves being held for the future use of

the navy. He then leased these properties to private

oil companies. Edward L. Doheny’s Pan-American

Petroleum Company got the Elk Hills reserve in

California; the Teapot Dome reserve in Wyoming was

turned over to Harry F. Sinclair’s Mammoth Oil

Company. When critics protested, Fall explained that it

was necessary to develop the Elk Hills and Teapot

Dome properties because adjoining private drillers were

draining off the navy’s oil. Nevertheless, in 1923 the

Senate ordered a full-scale investigation, conducted by

Senator Thomas J. Walsh of Montana. It soon came out

that Doheny had“lent”Fall $100,000 in hard cash,

handed over secretly in a“little black bag.”Sinclair had

given Fall over $300,000 in cash and negotiable securi-

ties. (For more on Doheny and Fall, see Re-Viewing the

Past,There Will Be Blood, pp. 668–669.)

Executive Orders and Senate Resolutions on

Teapot Domeatwww.myhistorylab.com

ReadtheDocument