Creating a baseline to measure the wealth, and building turmoil, of the current Gilded Age.
It is hard to imagine a more stark and tangible manifestation of the original Gilded Age than the large estates built along the Long Island Sound in the region that would later become known as the Gold Coast. Yet, you may be surprised that such opulence was not limited to robber barons or captains of industry. In fact, some of the very best real estate was owned by their lawyers.
Above is a photo of the main residence of Paul Cravath’s Veraton estate, which was built in 1905. Shortly after completion, the lavish property was profiled in Town & Country magazine, which noted that Veraton “consists of over 600 acres of lawn, gardens, woodland, farmlands and paddocks. … The residence and outlying buildings are so placed that every advantage of beauty and utility has been obtained.” See “One of Long Island’s Stateliest Homes,” Town & Country (Nov. 30, 1907) at 12.
Remarkably, the luxury and grandeur of Cravath’s Veraton estate was significantly overshadowed by his law partner, William D. Guthrie, who had built his Meudon estate five years earlier on an adjacent property. The main residence, which Guthrie located on one of the highest bluffs in the area, was an 80-room mansion inspired by a château outside of Paris constructed for King Louis XIV.
Below is an aerial shot of the Meudon estate:
The terraced gardens behind the main residence convey the opulence of the era. The below-left photo was taken shortly after the home was built in 1900; the below-right photo, which reflects a more mature landscape, was taken in the early 1930s (approximately two years before Guthrie’s death):
Recalls Edith Hay Wyckoff, the editor and publisher of the Locust Valley Leader for more than 50 years, “The William Guthrie estate in Lattington was the first to go. People came rushing in to buy land, and an era started to pass.” Joseph Durso, “Chronicling Splendor and Its Dissolution,” NY Times, Aug 30, 1998. Observed Sally Bandow, a Leader staff writer, “By the end of the 30’s, all the frills became unwieldy. By the end of the 40’s, most of the splendor had vanished from the North Shore.” Id.
After a series of fires at his Veraton estate, Cravath eventually relocated his country residence to Still House, a slightly smaller home that was nonetheless admired for its lush landscape and architectural detail. The Still House was also around the corner from the exclusive Piping Rock Club, where Cravath was a founding member. Guthrie, in contrast, stayed at Meudon until his death in 1935. Although much of the surrounding property was carved up by developers, his widow remained in the main residence until the mid-1950s. “Around 1959, Meudon’s stone facade was bulldozed into the surrounding hillside,” wrote Susan Hilberg in her history of North Shore estates. “A mansion built to last a century or two, was gone 55 years after it was built.” Hilberg, supra at 8.
Today, the last vestiges of Meudon might be mistaken for the archaeological ruins of a bygone civilization. Or maybe they are.
The cycles (or rhymes) of history
Although the extravagant real estate of Cravath and Guthrie is a powerful hook for a legal audience, I’m not writing this post as a celebration of the wealth of Gilded Age lawyers. Rather, over the last couple of years, I’ve delved into the history of the Gilded Age (and Gilded Age lawyers) as a way to understand and influence the present. Cf Edward O’Donnell, “Are We Living in the Gilded Age 2.0?,” History Channel, Jan 31, 2019; David Huyssen, “We won’t get out of the Second Gilded Age the way we got out of the first,” Vox, Apr 1, 2019.
I’m drawn to this topic less by the inequities of wealth distributions per se than the political instability and polarization that follow when the wealth distributions become truly extreme. Note that I write this post during the public hearings for the January 6th Commission, which is faithfully documenting an attempted coup of the United States government that would not have been possible without a rampant populist fervor that continues to this day.
Five years ago, I started Legal Evolution as a vehicle for chronicling the emergence of a new and dynamic one-to-many legal sector. See Post 001. I was very interested in building bridges between law schools and legal education, which were graduating too many underemployed lawyers, and NewLaw, Legaltech, and the Legal Operations movement, which were poised for explosive growth and thus in need of a reliable source of well-trained entry-level talent. Today, however, I’ll humbly confess that all of this was premised on the unstated assumption of political stability and relative economic prosperity (the “unstated assumption“).
The purpose of this essay is to begin the process of unraveling this unstated assumption, as it needs to be replaced with something that is sturdy, informed, and realistic — in other words, something that can be fully squared with the present day. I’m not writing this to shame or judge other lawyers. But as a tenured law professor, I have more time, freedom, and security than many of my legal profession peers. Thus, as I dig for firmer ground, I’m willing to share my work.
Today’s task is to construct a historical baseline of the original Gilded Age lawyers, including how they navigated the political backlash that rose up against their clients, first in the form of aggressive antitrust enforcement and later in the form of New Deal Legislation. In hindsight, it was a remarkably soft landing: in addition to avoiding foreign invasion or civil war (a common outcome throughout history when wealth becomes too concentrated), it set the stage for decades of political stability and economic growth, albeit this prosperity has become a serious risk factor we face today. See Mancur Olson, The Rise and Decline of Nations at 38-41 (1982) (the longer a society is stable, the greater the proliferation of interest groups that move it toward gridlock, stagnation, and decline).
In a subsequent essay later this summer, I’ll use this baseline to start constructing my studier, more informed, and more realistic view of the world, which is a precondition to making a difference.
In recent months, I find myself coming back to the following text, which every law student is assigned in their ABA-required legal ethics course:
… As a member of a learned profession, a lawyer should cultivate knowledge of the law beyond its use for clients[ and] employ that knowledge in reform of the law … . In addition, a lawyer should further the public’s understanding of and confidence in the rule of law and the justice system because legal institutions in a constitutional democracy depend on popular participation and support to maintain their authority.
¶ 6, Preamble, ABA Model Rules of Professional Conduct.
NB: This is an essay about a privileged class of lawyers who served very wealthy people from approximately 1890 to 1940. Their direct and indirect actions had a large impact on broader society, much of it negative. As usual, I include lots of photographs to make the essay more interesting. But in this case, because of the subject matter, they are all white men. The goal is to learn from this era, not to repeat it. wdh.
Guthrie and Cravath
The era of the white-shoe lawyer arguably began on May 1, 1899, when Paul Cravath, then a 37-year-old corporate lawyer, lateraled into the Seward law firm, thus becoming the law partner of 40-year-old William Guthrie in the firm that would eventually evolve into Cravath Swaine & Moore.
In many respects, it was a marriage of giants, as both men had already built large practices, with Cravath focused mostly on corporate finance and business reorganizations and Guthrie specializing in trial work.
During the mid-1890s, Guthrie distinguished himself as one of the nation’s leading litigators by successfully persuading the U.S. Supreme court in Pollock v. Farmers’ Loan & Trust Company to strike down the 1894 federal income tax as unconstitutional — a state of affairs that would persist until the ratification of the 16th Amendment in 1913. The Cravath firm history candidly acknowledges that Guthrie developed the legal theory on his own, went to great pains to find the right test cases, solicited funding from the firm’s many wealthy clients who would benefit, and procedurally outmaneuvered other lawyers who could have gotten there first. See Robert T. Swaine, The Cravath Firm and its Predecessors 1819-1948, Vol I at 518-36 (1948) (section on the Income Tax Cases). Indeed, it was a remarkably shrewd investment for both Guthrie and the firm. Although the cases generated only $25,000 in fees, the resulting national attention proved to be a “gold mine” that generated “between $500,000 and $1,000,000” in desirable new legal work. Id at 520.
Although it’s hard to top the striking down of a federal law that Congress and the states would later need to fix with a constitutional amendment, Cravath’s early career could be fairly described as extraordinary.
During the early 1890s, Cravath defended George Westinghouse’s company in hundreds of infringement claims involving Thomas Edison’s incandescent light bulb patent. Although Cravath was mostly losing in court, the broader Westinghouse strategy was to stall until Edison’s patent expired in 1894. Even more daunting, however, was the so-called War of (Electric) Currents, with Edison lobbying for mass adoption of his direct current (DC) system, which had the virtue of safety, against Westinghouse’s alternating current (AC) system, which had the enormous technical advantage of long-distance transmission.
In 1891, Cravath helped Westinghouse raise money to stave off bankruptcy, thus enabling him to participate in a spectacular lighting exhibition at the 1893 Chicago World’s Fair. In the meantime, in 1892 Edison was ousted from control of his own company (Edison General Electric) because one of his largest investors, the Gilded Age financier J.P. Morgan, had grown weary of the costly legal battles with Westinghouse. To bring the disputes to a formal end, Cravath brokered a cross-licensing agreement in which Westinghouse and GE shared royalties from their interlocking inventions. See John Oller, White Shoe: How a New Breed of Wall Street Lawyers Changed Big Business and the American Century at 11-15 (2019) (noting that “the Westinghouse experience taught Cravath that representation of a corporate client involved neither law nor strictly business, but a mixture of the two. The law needed to be respected but also melded to the client’s business and public relations needs.”).
Remarkably, all of this transpired before Guthrie and Cravath became partners. Having admired, and referred work to each other, for more than a decade, and having highly complementary practices, they joined forces when Cravath’s partner went to teach at Columbia and the Seward firm’s leading corporate partner announced that he would be going to work for J.P. Morgan. A short time later, the crush of work demanded the hiring of an additional senior partner, Edward D. Henderson, who was said to be “even less of a court lawyer than Cravath.” On January 1, 1901, the firm would be renamed Guthrie, Cravath & Henderson. Swaine, Vol I, supra at 572-73, 664, 670.
The Trust Problem
The original Gilded Age lawyers benefited from their close associations with clients who were well-positioned to form a trust (a business form to collect and consolidate many companies so they could act in unison) and thus accumulate monopoly power. The largest trust industries included oil (Standard Oil/John D. Rockefeller), banking (J.P. Morgan), railroads (Northern Securities/E.H. Harriman & J.P. Morgan), tobacco (American Tobacco/Thomas Fortune Ryan), and steel (US Steel, created when Andrew Carnegie sold to a group led by J.P. Morgan).
One of the enormous advantages of the trust form was the avoidance of ruinous competition and thus the preservation and enlargement of capital. Yet, the rapid building up of these industries exacted a punishing toll on an emerging working class that was working extremely long hours under conditions that risked serious injury or death. In 1890, the federal government responded by passing the Sherman Antitrust Act, in part to assuage voter animus toward the trusts, but also because at least some members of Congress feared that so much concentrated wealth and power would inevitably corrupt the political process.
For example, during the floor debate for the Sherman Antitrust Act, Senator John Sherman, an Ohio Republican after whom the law is named, decried “the inequality of condition, of wealth, and opportunity” of the trusts and concluded, “if the concerted powers of this combination are entrusted to a single man, it is a kingly prerogative, inconsistent with our form of government.” Tim Wu, The Curse of Business: Antitrust in the New Gilded Age at 31 (2018)(quoting Sherman).
Here, it’s crucial to briefly mention the larger project of Columbia Law Professor Tim Wu, who now works in the Biden Administration as a competition policy advisor.
Professor Wu’s short book, The Curse of Bigness (2018), is an impassioned plea to develop and implement an aggressive Neo-Brandeisian antitrust agenda — not as a wedge to drive lower consumer prices, but as a partial tool (other tools, such as tax policy are needed as well) to reduce massive economic inequality and concomitant populism and political instability that it invariably produces, with the rise of fascism in Germany, Italy, and Japan, and in turn World War II, being some of the most abject and recent examples. Id at 14 (“If we learned one thing from the Gilded Age, it should have been this: The road to fascism and dictatorship is paved with failures of economic policy to serve the needs of the general public.”)
So herein lies our dilemma and thus one of the key points of this essay: The legal tools of antitrust require immense intelligence and judgment (which is obvious) and great political courage (which is rare). The language of the Sherman Antitrust Age is bold and sweeping and authorizes criminal sanctions against those seeking to create a monopoly. But unless the executive branch is willing to enforce it — that is, take aim at the nation’s wealthiest and most powerful business owners — it has little value. And even then, it may be too little too late.
Ironically, after the passage of the Sherman Antitrust Act, the Trust Problem got worse. Now, back to the narrative.
William Nelson Cromwell and Francis Stetson
For the nation’s largest clients, the new antitrust laws created uncertainty at two levels: first, whether there would be political will to aggressively enforce them; and second, whether they could be successfully defeated or watered down in court.
At roughly the same time that Congress was considering the Sherman Act, William Nelson Cromwell was at work on an elegant, legalistic solution. Cromwell, who is sometimes described as the lawyer “who taught the robber barons how to rob,” Oller, supra at 25 (quoting Nancy LIsagor & Frank Lipsius, A Law Onto Itself: The Untold Story of the Law Firm of Sullivan & Cromwell at 31 (1989)), had been working with the New Jersey legislature to amend its corporate law to permit holding companies. Under various state court rulings, and then later the Sherman Antitrust Act, the formation of a trust was presumed to be an agreement in restraint of trade. In contrast, the purchase of stock by one corporation by another, which was now permissible under New Jersey law, could be characterized as an ordinary stock transaction that involved no “agreement” regarding either local or interstate trade. See Oller, supra at 29-30.
Historian John Oller writes:
Beginning with the Cotton Oil Trust in 1889, and especially after the 1890 Sherman Act, a wave of trusts, many of them Sullivan & Cromwell clients, began reconstituting themselves as New Jersey holding companies to skirt the antitrust laws. For the Southern Cotton Oil Trust, Cromwell locked his firm’s doors at 6:00 P.M. one evening, drew up 175 agreements overnight, and by daybreak had the trust incorporated as a New Jersey holding company. Reportedly he was paid $50,000 for a single night’s work.
From 1889 to the end of the century, New Jersey became home to more than seven hundred corporations worth a total of $1 billion. Nationwide, 183 holding companies had been formed with a total capitalization of more than $4 billion—almost double the amount of money in circulation in the country.
Id at 30.
With the election of President William McKinley in 1896, the laissez-faire approach to business set in, emboldening J.P. Morgan in 1901 to broker a deal with Andrew Carnegie to form United States Steel, “the first billion-dollar corporation in world history.” Id at 17. By selling Carnegie Steel to Morgan’s group and eliminating himself as a competitor, Carnegie became the world’s richest man, with a net worth in today’s dollars of roughly $310 billion, see Wu, supra at 25-26, an amount greater than Elon Musk in 2022. After creating US Steel, Morgan formed the Northern Securities Corporation, which was a combination of railroads that resulted in the world’s second-biggest corporation.
Morgan’s primary lawyer from 1885 until his death in 1913 was Francis Stetson, an ingenious legal technician and business strategist who, earlier in his career, had obtained enough trial experience to see and anticipate potential vulnerabilities in the complex business documents used to build Morgan’s vast financial empire. Oller, supra at 20. Morgan first witnessed Stetson in action while Stetson was working to resolve a dispute between two rival railroads. William Vanderbilt owned one of the railroads; Morgan was his banker. Recounts historian John Oller, “Morgan, who preferred cooperation to ruinous competition, was so impressed with Stetson that he hired him away from Vanderbilt.” Id.
Proving himself indispensable to Morgan, Stetson (whose law office would later become Davis Polk & Wardell) was placed on a $50,000-per-year retainer, which he received on top of fees for individual matters. Further, Stetson also profited handsomely from Morgan company stocks, which he was permitted to buy at insider prices. “In 1901,” writes John Oller, “[Stetson] earned $301,997 in fees alone (about $8 million in 2019 dollars).” Id at 21. That same year, Cromwell worked with Stetson to complete the US Steel merger, which of course was organized as a New Jersey holding company under the theory that it would provide immunization against the Sherman Act. For Cromwell’s efforts, he was permitted to buy $2 million of US Steel stock for $250,000.
Antitrust under Theodore Roosevelt
The whole business environment changed, however, on September 6, 1901 when President McKinley was assassinated in office, thus elevating Theodore Roosevelt into the White House. Suffice to say, Roosevelt had dramatically different views on how to respond to the Trust Problem.
In 1899, a year before becoming McKinley’s vice president, Roosevelt wrote to a friend:
I have been in a great quandary over trusts. I do not know what attitude to take. I do not intend to play a demagogue. On the other hand, I do intend, so far as in me lies, to see that the rich man is held to the same accountability as the poor man, and when the rich man is rich enough to buy unscrupulous advice from very able lawyers, this is not always easy.
Joseph Bucklin Bishop, ed., Theodore Roosevelt and His Time Shown in His Letters, Vol I at 127 (1920) (to Charles F. Scott, Aug 15, 1899). Roosevelt, who studied law at Columbia but left before graduating, had a lifelong antipathy toward legalisms used to thwart or delay justice.
Roosevelt instructed his attorney general, Philander K. Knox, who somewhat ironically had been one of Andrew Carnegie’s lawyers in Pittsburgh (and co-founder of present-day Reed Smith), to block the Northern Securities merger under the Sherman Antitrust Act. Morgan was enraged, partially because he believed that his lawyers had made the transaction legally bulletproof, and partially because the suit was initiated by Roosevelt, who was a fellow wealthy New York Republican who he had financially supported and helped elect. Oller, supra at 17.
Remarkably, in early 1902, Morgan got an audience with Roosevelt and Knox at the White House. Morgan, whose first impulse was always to cutoff problems through private negotiations, reportedly said to Roosevelt, “If we have done anything wrong, send your man [Knox] to my man [Stetson,] and they can fix it up.” Id at 18 (quoting Roosevelt). Then the conversation turned to US Steel, which had been “Morgan’s most beloved corporate child.” When Morgan asked about Roosevelt’s intentions to challenge that transaction, Roosevelt offered a less-than-reassuring reply that no action would be taken “unless we find out that they have done something that we regard as wrong.” Id at 24 (quoting Roosevelt).
In late 1904, the Supreme Court ruled 5-4 that the Morgan-Harrison combination was an illegal restraint on trade under the Sherman Antitrust Act and would have to be dissolved, thus creating an important precedent for the break-up of the big trusts.
Roosevelt’s record on antitrust, however, fell short of his trustbusting reputation, primarily because he was drawn to the power and dynamism of large industrial projects that were capable of creating widespread order and prosperity. What he disliked was the callousness and overreaching of so many monopolists, which created misery and hardship for the working class and fomented dangerous class warfare and support for socialism. Thus, during his nearly eight years in office, one of Roosevelt’s top priorities was the passage of new federal antitrust legislation that would shift antitrust enforcement away from the courts and judges, who lacked a sophisticated understanding of economics and business, to a new cadre of experts who would become part of the federal executive branch. In effect, Roosevelt wanted to separate the “good” trusts from those that were “bad.”
To the monied class that was wary of the uncertainty and unpredictability of the Sherman Antitrust Act, Roosevelt’s ambivalence was viewed as an opportunity. The result was draft legislation to amend federal antitrust law put forward by the National Civic Federation, which was nominally a progressive, nonpartisan group that spanned labor and business but was substantially controlled by the monied class.
Tellingly, the draft legislation’s primary authors were two longtime Morgan lawyers, Francis Stetson and Victor Morawetz, who had worked together on the US Steel merger. Morawetz, who had served as Andrew Carnegie’s personal lawyer for many years, eventually joined and became a name partner at the Seward firm (which evolved into Cravath, Swaine, & Moore) before leaving to become general counsel of the Atchison, Topeka, & Santa Fe Railway, one of the great railroads that he had helped create for J.P. Morgan. Historian John Oller reports that in early 1908, “Morawitz gained the distinction, along with Cravath, of being named by progressive Wisconsin senator Robert La Follette as one of the hundred men who allegedly controlled the industrial and financial life of the country.” Id at 152 (noting it was not a compliment).
Roosevelt, however, proved to be uncompromising, pushing back on Stetson and Morawetz’s middle-road approach. In 1908, Roosevelt’s last year in office, the final version of the bill, known as the Hepburn amendments to the Sherman Act, was submitted to Congress. Writes historian John Oller:
It placed in the hands of the president, rather than executive agency heads, the power to prescribe the information to be furnished publicly by companies that registered and to change the requirements whenever he saw fit. Court review of executive branch decisions was to be significantly limited. It practically made the president of the United States a corporations czar, with the validity of every major business combination subject to his approval. Described by business historian Martin Sklar as a “statist” solution that would effectively turn large private corporations into public utilities and capitalists into public servants, it was a more radical attempt at corporate regulation than anything another Roosevelt, Theodore’s cousin Franklin, would propose under the New Deal a generation later.
Id at 154. Not surprisingly, Roosevelt’s preferred solution to the Trust Problem died in committee.
During this same period, Roosevelt honored his promise not to seek a third term, instead endorsing his Secretary of War, William Howard Taft, as his successor. In the election of 1908, Taft handily defeated three-time Democratic candidate, William Jenning Bryant, who vigorously campaigned against business elites. Under Roosevelt, however, the Republicans were perceived as being tough on business. At least on this issue, the country was relatively united.
Antitrust under William Howard Taft
In many respects, the core judicial framework for federal antitrust was set during the four years of the Taft Administration. William Howard Taft was a Cinncinati lawyer who would be swept into government service early in his career. His two sons founded the Ohio-based firm that is today Taft Stettinius & Hollister (or Taft). His brother was the influential corporate lawyer, Henry Waters Taft, who became the named partner of Cadwalader, Wickersham & Taft, which is reputed to be Wall Street’s oldest law firm.
For his attorney general, Taft picked his brother’s law partner, George Wickersham, which turned out to have enormous consequences for federal antitrust law. During the McKinley (1897-1901) and Roosevelt Administrations (1901-1908), the DOJ filed 3 and 44 antitrust cases respectively; during Taft’s single term, Wickersham filed 88, including actions against Morgan’s US Steel and the Westinghouse/General Electric cross-licensing created and overseen by Cravath. Oller, supra at 162. Historian John Oller observes:
The sheer breadth of the list of products and industries targeted by Wickersham is astonishing: paper and cardboard; plumbing supplies; meat, butter, and eggs; magazines and posters; New England milk; motion picture patents; lumber and kindled wood; coffee; shoe machinery; fertilizer; cash registers and adding machines; flour; thread; cotton; tar; sugar and candy; window glass; watches; horseshoes; oil and turpentine; copper wire; wallpaper; aluminum; stone; freight railways; and Kellogg’s Corn Flakes.
Wickersham’s most consequential cases, however, were two holdovers from the Roosevelt administration, the antitrust cases against Standard Oil (controlled 90% of the refined oil market) and American Tobacco (controlled 95% of cigarette manufacturing). Id at 164. Although the government successfully persuaded the Supreme Court to break up both companies — which we still see more than 100 years later in the form of Exxon, Mobil, Amoco, Chevron; and R.J. Reynolds, LIggett & Myers, Lorillard — it was only a partial victory, as the Court ruled that bigness was not Illegal per se, but only in cases where companies acted improperly to crush the competition. Id. These cases ushered in the “rule of reason” doctrine, which would guide the federal antitrust jurisprudence for decades to come.
Vastly different politics environments
At this juncture, it is critical to highlight the radical differences between the first Gilded Age and what many of us might perceived as the second.
During the presidential election of 1912, the Trust Problem was very much on the ballot. Remarkably, the most conservative position was President Taft’s aggressive enforcement of the Sherman Antitrust Act. The Democratic candidate Woodrow Wilson occupied the middle-road position, which was a crusade against corporate bigness advocated by his advisor, Louis Brandeis. The most liberal position was taken by Teddy Roosevelt, who was the Progressive (or “Bull Moose Party“) candidate after unsuccessfully challenging Taft for the Republican nomination. Roosevelt advocated an approach that was similar to his failed amendments to the Sherman Antitrust — large state-regulated monopolies, a position only slightly less radical than the Socialist Party candidate, Eugene Debs.
Obviously, Wilson’s middle-road position, inspired by Brandeis, carried the day with 41.8% of the vote. Yet, it is truly remarkable that Theodore Roosevelt received 27% of the vote compared to only 23% for Taft. Eugene Debs came in fourth with 6% of the vote. See “1912 United States presidential election.” The adjacent map shows the 1912 election results by state.
These numbers ought to give us pause. Today, the Taft approach would be viewed by many as too far left. Yet, in 1912, more than 75% of voters wanted something even tougher. Stated another way, the populism of the first Gilded Age tilted left; the populism of the second Gilded Age seems to be tilting right.
In the section above on the Trust Problem, I made the point that enforcement of federal antitrust laws requires enormous courage. Thus, it is noteworthy that during Taft’s reelection efforts, he privately assured his business supporters that Wickersham would be removed from his cabinet if he successfully gained a second term. Oller, supra at 163.
Perhaps more disturbing, however, is the case of Thurman Arnold, who served as Assistant Attorney General in charge of the Antitrust Division from 1938 to 1943. During this tenure, Arnold “brought about a ‘shock treatment’ campaign amounting to an astonishing 1,375 complaints in 213 cases involving 40 industries.” Wu, supra at 79. According to Tim Wu, Arnold’s relentless antitrust enforcement was rooted in his belief that Nazi totalitarianism was the inevitable consequence of concentrations of economic power that had begun under Bismarck. Id at 79-82 (quoting Arnold, “Germany became organized to such an extent that a Fuehrer was inevitable; had it not been Hitler it would have been someone else”).
Arnold’s hardline approach, however, proved to be a liability for FDR, particularly during wartime, when he needed the cooperation of industry. Roosevelt’s solution was to “promote” Arnold to the U.S. Court of Appeals for the D.C. Circuit, thus providing a facesaving way to obscure Arnold’s firing. See Spencer Weber Waller, “The Antitrust Legacy of Thurman Arnold,” 78 St Johns L Rev 569, 603-607 (2004). Hence, “Arnold was effectively gone from the one job he truly loved.” Id at 607. Arnold resigned from the court two years later, quipping that he preferred to “make my living talking to a bunch of damned fools than listening to a bunch of damn fools.” Spencer Weber Waller, “The Short Unhappy Judgeship of Thurman Arnold,” 3 Wyoming L Rev 233, 252 (2003) (quoting Thurman Arnold, Fair Fights and Foul. A Dissenting Lawyer’s Life at 158 (1965)). Arnold subsequently started a law practice with Abe Fortas, which evolved into the present-day Arnold & Porter.
The above anecdotes raise a discomfiting possibility: If aggressive antitrust enforcers are cut off at the knees during the most progressive/liberal presidential administrations, perhaps antitrust is destined to be an unreliable or fickle means of solving gilded age-type problems, such as extreme inequalities of wealth and power.
The trusts were never busted
During Wilson’s first term, the era of major new federal antitrust developments came to a close with the passage of the Clayton Antitrust Act, which expanded the tools available to limit early-stage monopolies, and Federal Trade Commission Act, which created a commission with both investigative and enforcement powers in antitrust and unfair and deceptive business practices. In the summer of 1916, Wilson also managed to appoint Louis Brandeis to the Supreme Court over fierce opposition, in part because he was Jewish but mostly because Brandeis had shown himself to be a brilliant lawyer who was utterly fearless in his willingness to confront the power of big business.
During the second Wilson administration, however, Wilson’s policy agenda was derailed by the demands and exigencies of World War I. In 1920, Warren G. Harding successfully ran for president in a campaign that called for a return to “normalcy.” Oller, supra at 286. During that same year, the 18th Amendment went into effect, which commenced the official policy of Prohibition. Active in Harding’s campaign and reflecting on the mood of the nation, Frank Polk wrote to John W. Davis (law partners in the present-day David Polk & Wardell) and observed that the American voters “don’t give a darn about peace treaties, or suffering Europe. They are interested in the high cost of living, the baseball season[,] and the difficulty of getting something to drink.” Id at 286-87. [Haha, sound familiar? wdh]
According to historian John Oller, the Roaring Twenties “would see a renewed merger wave and, under Harding, Coolidge, and Hoover, a hands-off attitude toward big business, as compared with that in the Progressive Era.” Id at 291. Thus, the excesses of the Gilded Age did not come to an end because of the enlightened progressive policies and/or the wisdom of corporate lawyers, but instead by the massive leveling caused by the Market Crash of 1929, the Great Depression, and America’s entry into World War II.
The chart below shows the disturbing parallel between the end of the 1920s, when the system set in motion by the first Gilded Age collapsed under its own weight, and the present.
Reflections on the original Gilded Age lawyers
Although I hope you’ve enjoyed this essay on the first Gilded Age, we have one more task to complete, which is connected to my original purpose.
I no longer believe in the unstated assumption that America’s future will be one of political stability and relative economic prosperity. It might be. I certainly hope so. But I can no longer take it for granted. In terms of historical patterns and parallels, we are at a point that is often associated with a shift to civil war and totalitarianism. See, e.g., Barbara F. Walters, How Civil Wars Start: And How to Stop Them (2022) (social scientist who studies revolutions in countries throughout world reporting on the many risk factors present in the United States).
Again, the public hearings from the January 6th Commission display our tenuous hold on the rule of law.
Perhaps some readers think it’s a myth, but lawyers are supposed to see and anticipate these systemic risks before the broader public and, to the extent humanly possible, uphold the rule of law, the functioning of our legal system, and public confidence in our system of constitutional democracy. Thus, I’m studying the original Gilded Age lawyers to better understand, and respond to, the present.
This essay would not have been possible without the amazing historical work of John Oller, the author of White Shoe: How a New Breed of Wall Street Lawyers Changed Big Business and the American Century (2019), who was a partner in Wilkie Farr & Gallagher before retiring and become a prolific writer of historical nonfiction. I first read White Shoe back in 2020, primarily because it overlapped with my legal market research. Yet, because it was such a robust historical frame, I found myself coming back to it as a means of understanding the present.
Oller’s prologue contains the following passage, which I think can be fairly characterized as a two-pronged thesis:
[Prong 1: The white show lawyers ] were instrumental in forging the great capitalist enterprises that emerged in late Gilded Age America and continued their growth into the following century. ….
They devised new, more flexible forms of borrowing and financing that provided lubrication for the growth of American business. They also made it easier for bankrupt companies to rehabilitate themselves financially and get back on their feet following the economic panics and depressions that so frequently afflicted the nation in those years. … As one legal scholar put it, many decades after their heyday had passed, “In a . . . Cromwell, a Cravath, or a Stetson, we shall find builders of American society as intellectually bold as a John Marshall whose molding of Constitutional interpretation and whose fashioning of the Union are familiar to all of us.” …
[Prong 2: These top lawyers also] pushed their clients away from a Wild West mentality toward greater transparency and concern for investors, and thereby served as a mediating and stabilizing force in a time of turbulent change. Having helped create the vast new impersonal corporations, the great Wall Street lawyers became part of the effort to tame them.
Oller, supra at 8. In essence, it’s a hero’s journey in which the hero does both well and good. Its primary flaw, however, is that those with the greatest success building up capitalism (and thus enjoying the largest spoils) were not the same people who did the heavy lifting to curb its excesses — instead, what ties them together is membership is the same narrow, privileged class.
The primary (and commercially valuable) virtue exhibited by lawyers like Cravath and Stetson was the ability to clearly see when their clients were acting against their own self-interest, or alternatively, expecting the impossible. For example, in a letter to President Roosevelt in October 1906, Paul Cravath praised Roosevelt’s constructive approach to labor and capital, going on to write, “The men who stand for the great corporations and other aggregations of capital will be very dull if they do not soon realize that in national affairs they must look to you for protection against injustice and in receiving that protection must be content to accept justice uncomplainingly.” Id at 100.
Similarly, after the loss of the Northern Securities case, which resulted in the first antitrust breakup at the expense of his client, J.P. Morgan, Francis Stetson lobbied the Senate to pass an amendment to weaken the Sherman Antitrust Act. When that failed, he organized the Constitution Club with other bar leaders to “assail Roosevelt as an autocrat” and oppose his reelection. Id at 77. Oller notes that after the Northern Securities loss, Stetson began counseling his clients against large business combinations, concluding “You can’t fight a community.” Id. Yet, that appears to be more a pragmatic concession than a softening of his views or a conviction that lawyers are accountable to anyone but their clients.
William Guthrie, in contrast, remained an unrepentant reactionary who used his immense legal acumen to oppose virtually all changes to the social and economical order, including (along with other elite white-shoe lawyers) a proposed constitutional amendment to regulate child labor during the early days of the FDR Administration. Id at 295. Not surprisingly, Guthrie withdrew from his partnership with Cravath in 1907, due in part to his unwillingness to conform to the “Cravath system,” which would eventually be copied by every large New York City law firm.
Of all Gilded Age lawyers discussed in this essay, the closest to Oller’s ideal is likely George Wickersham. According to Oller, Wickersham believed lawyers had met the needs of society by developing legal mechanisms to enable industrial expansion but “had gone too far in allowing the accumulation of great wealth. The law, [Wickersham] said, had failed to consider the interests of those ‘who had but a humble share’ of the overall pie.” Oller, supra at 161 (quoting George W. Wickersham, The Changing Order: Essays of Government, Monopoly, and Education (1914) at 32). Thus, it was the lawyers’ job to fix it.
On the sacrifices entailed by his government service, Wickersham wrote to Francis Stetson, “I felt that the opportunity to devote oneself to the service of one’s country does not always come to a man, and that when it does, he would be guilty of what Dante calls ‘the great refusal’ should he refuse to answer the call.” Oller at 163 (quoting letter dated Sept 5, 1910). This was not Wickersham’s last stint in government. Moreover, as noted in Post 207, he served as the first president of the American Law Institute, presiding over the Restatements of Law, a truly invaluable and enduring example of what Professor Gillian Hadfield calls “legal infrastructure.”
Of all the Gilded Age lawyers discussed in this essay, William Nelson Cromwell died with the most money — an estate of $19 million (more than $200 in today’s dollars) despite extensive philanthropy during his lifetime. Id at 229, 307. Although a brilliant and prolific corporate lawyer, Cromwell’s greatest claim to fame was his work on the Panama Canal, which began as a representation for a financially distressed French construction company but, through elaboration machinations with Congress and various foreign agents, ended up benefitting the U.S. government. Id at Ch 5-6.
Nine years after Cromwell’s death, Arthur H. Dean, then the senior partner of Sullivan & Cromwell, wrote a private press biography of Cromwell. See Arthur H. Dean, William Nelson Cromwell, 1854-1948, An American Pioneer (1957). Apparently, it was designed to be circulated to clients, as my copy included a small pamphlet insert that begins, “Enclosed is a biography which I have written of my former senior partner, William Nelson Cromwell.” The penultimate paragraph, however, starts with something that is very true yet ends with something that, in my view, is the mythology we use as lawyers to whitewash the sum and substance of our lives, most of which is devoted to work:
When at the bar, the winning of cases and the effective dispatch of the daily problems of clients is of paramount importance to the practising attorney. But the nature of law itself and of the judicial process, the proper function of the bar and the courts, the change of the character of society, of business and of the individual citizen’s relations to government also occupy the practising lawyer’s thoughts.
Dean’s formulation is attractive on the upswing, when great industries are being built out. It’s possible to become rich. But what happens on the downswing — when one’s society is fraying and falling apart? Further, isn’t it part of our job to see it coming? Or alternatively, to do the grunt work of maintaining our legal institutions for the benefit of all?
I suppose the lesson here is the crucial importance of continuously climbing out of the bubble of money, prestige, careerism, and personal goals to observe how the rules of the game are working for others. Further, there’s no safety in numbers, which is the way that lawyers naturally hedge; instead, it’s an individual imperative that can never be delegated. To the extent we neglect to do it, we’ve constructively become part of the problem.
I’m grateful my “unstated assumption” has been shattered. Good riddance. As noted at the outset of this essay, today’s essay was created as a baseline to start constructing my studier, more informed, and more realistic view of the world, which is a precondition to making a difference. In a future essay later this summer, I’ll have something more to say cycles (and rhymes) of history. The goal is to locate where we are.