Too Big to Fall?
by Frank Schuchat
It was reported recently that a senior official of North Korea’s Finance Ministry was executed by firing squad for mismanaging his country’s currency. That has to be as motivational as it gets for economic policy officials.
Nobody in the U.S. Treasury Department is likely to be "taken out and shot." But public anger continues to rise against current and former government officials who allowed certain politically connected Wall Street firms to loot the U.S. Treasury to pay out billions in bonuses. All this while ordinary people lose their jobs, homes, college and retirement funds, health insurance, and unemployment benefits.
Which leads one to ask, just what could happen to a Treasury Secretary after leaving office?
It is well-known that our first Treasury Secretary Alexander Hamilton, died in 1804 from wounds suffered in a pistol duel with Vice President Aaron Burr. No other U.S. Treasury Secretary has been shot by a Vice President since Hamilton, which you have to admit is a pretty good record, given what we now know about Vice Presidential marksmanship.
In fact, with only one exception, no U.S. Treasury Secretary has been shot by anybody since 1804. John Connally, President Kennedy’s second Treasury Secretary, was wounded while riding with JFK in the motorcade in Dallas. But at that time, Connally was the Governor of Texas and a Democrat. By the time he became Treasury Secretary, Connally was serving in a Republican Administration.
If physical harm is not a significant danger for Treasury Secretaries, a trip to the courthouse is a real concern. At least three former Secretaries have been charged with crimes after they left office. (All three served in Republican Administrations, but that may be just a coincidence.)
Andrew Mellon was one of the richest individuals in America when he was named Treasury Secretary by President Warren Harding in 1921 at the age of 66.
Mellon stayed in office through all terms of Harding, his successor Calvin Coolidge and for most of the ill-fated administration of Herbert Hoover. Throughout his tenure, Mellon was known for tax and economic policies that favored the wealthy and privileged. When the stock market crashed in 1929 and the hardships of the Great Depression arrived, resentment against the seemingly heartless and uncaring Treasury Secretary led the House of Representatives to try to remove Mellon from office through impeachment. But Mellon resigned from the office so President Hoover could appoint him U.S. Ambassador to England. Conveniently, that got Mellon out of the country and mooted impeachment.
The arrival of the Franklin Roosevelt Administration in March 1933 ended the public career of Andrew Mellon, but it did not end public scrutiny. He was thoroughly investigated by the new Justice Department and charged with tax evasion for failing to declare the full value of works of art he imported. Mellon, who had more taste than scruples, had bought the art from Stalin’s cash-starved government, even though the U.S. Government did not even recognize the Soviet Union at the time.
Mellon went on trial in federal court in Manhattan in 1935, where he was found guilty notwithstanding the efforts of some very expensive attorneys. Ultimately, however, Mellon’s lawyers came through and his conviction was thrown out. The result came after his death in 1937.
Before he died, Mellon had already sown the seeds for restoring his public reputation. He donated a large part of his art collection, along with $10 million, to build the National Gallery of Art on the Mall in Washington. Some contend Mellon endowed the National Gallery of Art in a deal with Franklin Roosevelt to resolve the tax prosecution. Whether or not there was a deal, today many more people associate Mellon with the National Gallery than with the economic catastrophes that occurred on his watch at the Treasury.
Ironically, the Secretary who fell the furthest, Robert Anderson, served in office during a period of sustained growth and prosperity. Anderson, originally a Democrat active in Texas politics, was first appointed by Eisenhower as Navy Secretary and then as Treasury Secretary. Although Eisenhower encouraged him to pursue high elected office, Anderson went into private business after leaving the Treasury.
Anderson’s business ventures got him in big trouble years later. In 1987, he pled guilty to tax evasion and criminal violations of U.S. banking laws in connection with a British Virgin Islands bank he owned. The Court, however, did consider his prior service in government in determining the sentence. (Trivia: One of the character witnesses for Anderson was former First Lady Lady Bird Johnson.)
John Connally, who had served as Navy Secretary under President Kennedy, was appointed Treasury Secretary by Richard Nixon in February 1971. After he left Treasury in June 1972 to run Democrats for Nixon, Connally was charged with accepting a bribe of $10,000 to secure favors for milk producers. Although he was found not guilty at trial, it was jokingly remarked at the time that Connally must have felt insulted by the charge that he could be bought for just $10,000. (More trivia: One of the character witnesses who supported Connally at trial was former First Lady Lady Bird Johnson.)
What does history teach us? We know at least two of the three Treasury Secretaries who were prosecuted after leaving office (so far) were from Texas, served as Secretary of the Navy, switched from Democrat to Republican, and had Lady Bird Johnson as a character reference. No recent Secretary meets even one of those criteria.
On the other hand, the case of Andrew Mellon suggests indictment is a possibility if you served in office during the creation or burst of a financial bubble and or you had a role in blocking or removing regulations that favored financial operators and contributed to a painful rise in unemployment. Knowing that fact, the big question is whether Bob Rubin, Larry Summers, Hank Paulson or Timothy Geithner collects art.
In addition to practicing law in Denver with Schuchat, Herzog & Brenman, Frank Schuchat performs his stand-up comedy at clubs and charitable and corporate events. On June 16, Frank will be competing in the amateur finals at The Great American Comedy Festival in Norfolk, Nebraska.