Andrew Mellon

American businessman

• Born: March 24, 1855
• Birthplace: Pittsburgh, Pennsylvania
• Died: August 26, 1937
• Place of death: Southampton, New York

Through a combination of caution and shrewd investment, Mellon became one of the three richest persons in the United States. He was called “the greatest Secretary of the Treasury since Alexander Hamilton.”

Early Life

Andrew William Mellon was born to Sarah Jane (née Negley) Mellon, the daughter of a distinguished landed family in the Pittsburgh area, and Thomas Mellon, the son of an Ulster immigrant. Andrew started life as a poor farm boy and ended it as a millionaire. Andrew was the fourth son, one of six brothers and two sisters. The children were all educated, according to the dictates of their father, in a private school on the Mellon estate. Andrew’s education trained him solely for business. In 1870, he attended Western University in Pittsburgh. At the age of eighteen, Andrew and his brother Richard were able to set up in the real estate business. In the Panic of 1873, the family bank, T. Mellon and Sons, survived on its founder’s reputation for rectitude. In the period that followed, the family interests were swollen by vigorous foreclosures. By this time at work in the bank, Andrew met Henry Clay Frick, whom Thomas had stood by in the panic and who was, by 1878, the undisputed king of coke. The two young men became friends and set off on a grand tour of Europe in 1879. Together, they visited Ireland, London, Paris, and Venice. Andrew’s views were broadened. On his return, his father handed over to him the running of all of his affairs his interests in real estate, traction, coal, foundries, and the bank.

By the 1880’s, Mellon was short and slight, elegant in appearance and manner. The most striking feature about the man was his deep-set, chilly blue eyes. While he has been called handsome by his biographers, Mellon was painfully shy. Because of his withdrawn temperament, Mellon abhorred public occasions and jealously guarded his privacy. People who spoke to him found him polite, even courtly. When he spoke, which he did rarely, he stammered slightly and spoke so softly that his listeners had to strain to hear his words. Throughout his business career, he was content to let his younger brother and partner Richard take care of the personal contacts whenever possible, while he played the role of strategist, planner, and ultimate arbiter. He was a lonely man, and a certain wistfulness surrounded him. He was probably never close to anyone, not even the coke king, whom he always addressed as “Mr. Frick.”

Life’s Work

Through the 1880’s, Mellon steadily expanded the businesses established by his father. T. Mellon and Sons increasingly became the bank for industry in the Pittsburgh area.

In 1889, Mellon’s first big opportunity came when he was asked for a loan for a new industrial process. In return for the loan, Mellon took a substantial share in the company and financial control. The Pittsburgh Reduction Company would become the Aluminum Company of America (Alcoa), and, as a result of its exclusive patent rights, tariff walls, the ever-expanding uses for the product, and a phalanx of subsidiary companies engaged at all levels and in all spheres of aluminum marketing, production, and uses, came to exercise a total monopoly of the market in North America and a share in the division of the world market. Mellon became extremely rich.

Other parts of the Mellon portfolio were developed. Andrew formed Union Trust in 1899. Within ten years, the financial power of Pittsburgh was centered in it. From 1898 to 1902, there came a flood of mergers in the city, many of them engineered by Mellon, almost all of them financed by him. He garnered fees, shares, and huge new bank deposits. With the crash of 1903, many of the Mellon-promoted mergers failed. Mellon held the mortgage bonds and foreclosed. Thus, even in times of economic adversity, he increased his fortune.

In 1899, following Frick’s resignation from Carnegie Steel, Mellon and he created Union Steel and made it into a vertically integrated company, with its own ore supply, transportation, furnaces, rod and wire mill, and associated companies in shipbuilding, railroad car construction, and structural steel. The Mellon-Frick steel interests were used as a lever against the attempt by United States Steel to establish dominance in the steel industry. These efforts paid off when United States Steel offered the outrageous price of seventy-five million dollars to acquire its menacing rival.

In January, 1901, at Spindletop, near Beaumont, Texas, the largest oil gusher in history to that time burst out of the ground. The claim was owned by a Pittsburgh company. The oil strike was so large that the company ran out of money and went to Mellon for help. He agreed to finance the new J. M. Guffey Petroleum Company and retained 40 percent of the stock. The company was later renamed Gulf Oil. By 1904, the company had become the largest independent oil company in the world, controlling pipe lines, a tanker fleet, and oil refineries. In 1906, Guffey was ousted and W. L. Mellon, Andrew’s nephew, was named to serve as head of Gulf’s diverse oil interests.

The year 1914 saw the completion of the inner core of the Mellon portfolio. It came with the acquisition of the Koppers Gas and Coke Company and was accompanied by patents for coke by-products that were extremely important for war production. Fifty-seven subsidiary companies were spawned from this one concern, including control over utilities up and down the East Coast.

Besides these important and very wealthy companies directly controlled by Mellon, family interests were powerful in the Pullman companies, Bethlehem Steel, Westinghouse, and many other major concerns. By 1920, Mellon family interests were estimated at $1.69 billion.

In 1920, Mellon underwrote a $1.5 million deficit in the campaign fund of the Republican National Committee. For this, President Warren G. Harding named Mellon to his new cabinet as secretary of the treasury. Thus began a political career for Mellon. At the time, Mellon’s name was virtually unknown outside Pittsburgh.

Tax reform was needed. In 1923, the Mellon Plan was unveiled. It envisaged huge tax cuts for the wealthy. Stocks boomed on Wall Street, but the plan was rejected in Congress and became the major issue of the 1924 presidential election. With the sweeping victory of Calvin Coolidge, Mellon’s prestige was never higher. In February, 1926, a tax measure was signed that set taxes for the wealthy at a lower rate even than that envisaged in the Mellon Plan. Andrew Mellon was dubbed “the greatest Secretary of the Treasury since Alexander Hamilton.” A period of rapid expansion in industry and escalating stock speculation followed. In 1927, Mellon was even thought of as a possible candidate for president and was referred to by Democrat leader John Garner as “the most powerful man in the world today. . . . He has dominated the financial, economic and fiscal relations of the United States for the past five years.”

When the Mellon political machine in Pennsylvania faltered, however, his presidential aspirations were thwarted. Instead, Herbert Hoover was nominated and became president, though Mellon retained his position at the Treasury. When the Wall Street crash came in 1929, the glamour of the Mellon name was lost, as he predicted a swift end to the recession and was blamed, along with Coolidge and Hoover, for the catastrophe that had overcome the country. In 1932, there was a move to impeach Mellon, and embarrassing revelations were made about his tax returns and the practices of his companies. Reluctantly, he accepted the post of ambassador to the Court of St. James and headed for London. The Mellon Plan was discarded.

Following Hoover’s defeat in the presidential election that same year, Mellon was reduced once more to private citizenship. He spent his time quietly in Pittsburgh but had to make frequent trips to Washington to defend himself against continuous attack by supporters and officials of Franklin D. Roosevelt’s New Deal administration.

Mellon’s charitable bequests were few indeed. In 1914, he set up the Mellon Institute, which served principally as a set of useful laboratories dealing in practical research projects for his numerous companies and for others who paid the appropriate fees. In 1936, he donated his art collection to the nation and built the National Gallery of Art in Washington, D.C., to house it. He died August 26, 1937, while visiting his daughter in Southampton, New York.

Significance

Andrew Mellon’s major achievement was the creation of a fortune that was to be largely self-sustaining and self-increasing. The key to this accomplishment was diversity. As a banker with access not only to his father’s millions but also to the deposits of companies in the nation’s leading heavy industrial district, Mellon was able to greet eagerly yet cautiously each opportunity placed before him. He used money to make money, he speculated discreetly, he manufactured and manipulated stocks, and he used the legal system to further his interests. Moreover, Mellon supervised minutely the growth of his infant enterprises and had the gift for selecting able subordinates whom he trusted to manage his corporations. His executive ability was unquestionably outstanding.

The question of why, at the age of sixty-five when he was among the three richest men in the country and still shrank from the hurly-burly of human contact Andrew Mellon should have chosen to embark on a political career must remain something of a mystery. For nine of the twelve years he spent in office, his prestige and reputation were enormous. He represented business control over the political system at a time when business could do no wrong. For his last three years as secretary of the treasury, and for the remainder of his life, Mellon suffered from public opprobrium, vilified as the embodiment of corporate greed, one of the principal culprits responsible for the Wall Street crash.

Bibliography

Canandine, David. Mellon: An American Life. New York: A. A. Knopf, 2006. First full-scale biography of Mellon, providing a balanced and comprehensive chronicle of his life and career. Includes information about his stint as secretary of the treasury and philanthropy.

Finley, David Edward. A Standard of Excellence: Andrew W. Mellon Founds the National Gallery of Art at Washington, D.C. Washington, D.C.: Smithsonian Institution Press, 1973. This is the account of Mellon’s only truly altruistic public gesture, begun only a year before his death. Written by the first director of the gallery.

Holbrook, Stewart H. The Age of the Moguls. Garden City, N.Y.: Doubleday, 1953. Reprint. New York: Arno Press, 1981. Contains one chapter on Mellon, chapter 4 in part 4. Best brief account of Mellon’s life; owes much to O’Connor’s work. Best on the inner core of Mellon’s business interests.

Koskoff, David E. The Mellons: The Chronicle of America’s Richest Family. New York: Thomas Y. Crowell, 1978. Mellon’s life is covered in the first three sections of the book. Suffers from too close an identification with the subject matter, as when opponents of Mellon are described as the “villains of the story.” Yet the book is readable and contains much information (much of it taken from O’Connor), not all of it showing Mellon in a favorable light. Best modern discussion of Mellon in a very sparse field.

Love, Philip H. Andrew W. Mellon: The Man and His Work. Baltimore: F. Heath Coggins, 1929. First biography of Mellon, written at the height of his public career before the Wall Street Crash ruined his reputation. Highly favorable to its subject and tends to treat all opposition to Mellon, all politics and politicians, as vindictive and sacrilegious.

Mellon, Andrew William. Taxation: The People’s Business. New York: Macmillan, 1924. Reprint. New York: Arno Press, 1973. Published to explain and popularize the Mellon Plan for tax reductions. Mellon attempts to answer his critics and to explain why it is in the nation’s interest to cut by half surtaxes on the wealthy and to base all other taxes on this group not on their ability to pay but on their willingness. Good for Mellon’s thought.

O’Connor, Harvey. Mellon’s Millions, the Biography of a Fortune: The Life and Times of Andrew W. Mellon. New York: John Day, 1933. Written before Mellon’s death, this biography infuriated its subject. Well researched; tries to follow all of Mellon’s myriad financial dealings and their effects, a supremely difficult task. O’Connor’s work has formed the basis of much of what little has been written about Mellon since. On publication of the book, the author, a radical journalist, was arrested at his home in Pittsburgh as a “suspicious character,” apparently at the bidding of Mellon or that of a zealous subordinate. Still the best account available.