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How the U.S. came to dominate Haiti: seizing the gold

Originally published: Internationalist 360° on September 3, 2021 by Peter James Hudson (more by Internationalist 360°) (Posted Sep 13, 2021)

Part I–Dark Finance

Chapter Three: Financial Occupations

The Banque Nationale d’Haiti (BNH) was housed in a whitewashed, two-story colonial building at the corner of rues Ferou and Américaine in the downtown business district of Port-au-Prince. On weekday mornings, before the afternoon heat forced the closing of its tall iron shutters for the late-day siestas, the vaulted main banking room sheltered a staff of about 60 clerks, accountants, messengers, and managers nattily outfitted in white linen suit jackets and black bow ties. They worked at mahogany bureaus within a brass-screened banking cage, handling the BNH’s everyday transactions and annotating its accounts in the columns of oversized leather-bound ledgers.

The BNH had a network of branches and agencies throughout Haiti–in Cap-Haïtien, Port-de-Paix, Gonaïves, Saint-Marc, Petit-Goâve, Jérémie, Aux Cayes, Jacmel, Fort-Liberté, Môle-Saint-Nicolas, Miragoâne, and Aquin. The branches and agencies served as tributaries through which the revenues of the republic from the export of coffee, cotton, sisal, and other commodities were carried by mules and peasant messengers up and down country roads from the rural districts to Port-au-Prince. This revenue did not remain in Port-au-Prince, however. Despite its name, from the time it was chartered in 1880, the BNH served a foreign master. Its president and directors were French. Executive decisions were made in Paris at the Société Générale de Crédit Industriel et Commercial. Its profits were repatriated to Europe. And the push of the white man in the BNH’s affairs came from France.

From 1910, this began to change. The push in the affairs of the BNH increasingly came not from the boardrooms of the Société Générale at 66 rue de la Chaussée-d’Antin in Paris but from the offices of the National City Bank of New York at 55 Wall Street. For the City Bank, control of the BNH emerged as a core element of a strategy of internationalization that itself was part of a broader project of modernization and organizational reform. Under the leadership of James Stillman and Frank A. Vanderlip, the City Bank sought to diversify and expand its business activities beyond that of a regular commercial bank… Overseas expansion, and the organization of the City Bank as an imperial institution, were central to this strategy…

Although Haiti has been excised from the City Bank’s official histories, the bank’s effort to acquire the BNH was arguably its most successful experiment in foreign banking. It was certainly among the most controversial. Its attempts to gain control of the BNH exacerbated the long-standing strife between the BNH and the Haitian government while fomenting the conditions leading to U.S. Marine intervention in Haiti in 1915 and a bloody 19-year military occupation. By the fifth year of the U.S. occupation–the tenth year of City Bank’s growing involvement in Haiti’s affairs–the bank was being denounced in the U.S. press for its support of U.S. imperial rule in Haiti and its role in the unceremonious suppression of Haiti’s hard-fought sovereignty. Members of the growing cohort of City Bank managers were publicly attacked both for their handling of the affairs of the BNH and their intimate role in shaping the terms of occupation and empire. Roger Leslie Farnham, in particular, was singled out. Hired by Vanderlip, Farnham had quickly emerged as one of the most active individuals in the City Bank’s affairs in Haiti. But Farnham did not act alone. The City Bank’s Haiti policy was shaped by a group of bankers that also included Vanderlip, William H. Williams, and John H. Allen, all City Bankers, as well as Henry H. Wehrhane of New York investment bankers Hallgarten & Co.

Stillman was constantly on the lookout for new avenues of accumulation and recognized the potential profitability of an international bank network organized to support the export of U.S. goods.

Vanderlip was a liberal, progressive force in the bank whose work continued Stillman’s efforts to move the City Bank out of the financial world of the 19th century.

With the aid and expertise of Farnham and the other managers, Vanderlip initiated a series of tentative, often unsuccessful forays overseas focusing largely on the Caribbean and Central America. As early as 1904, Vanderlip had considered opening an affiliated institution, agency, or branch abroad.

The Republic of Haiti also came to the attention of Vanderlip and the City Bank at this time. In February 1909, Speyer and Co. approached Vanderlip with prospects for investments in Haiti and the Dominican Republic…. Haiti was a new field for Vanderlip. He had little knowledge of the financial prospects of the republic or of the quality of the propositions offered by Speyer…. Vanderlip sent Lawrence M. Jacobs to investigate…. Jacobs’s report was enthusiastic. “The trip was very satisfactory,” Vanderlip wrote, “and I think there is a good deal of business ahead there.” The Speyer proposal consisted of the purchase of stock in a soon-to-be-formed holding company called the Central Railroad of Haiti. The Central Railroad controlled the Compagnie des Chemins de Fer de la Plaine du Cul-de-Sac (the Plain du Cul de Sac, or PCS Railroad), a 40-mile railroad between Gonaïves and Hinche with a branch line to Gros-Morne, and the Compagnie Haitienne du Wharf de Port-au-Prince.

The PCS Railroad concession proved, as Vanderlip noted to Stillman, “a small but profitable piece of business” while the wharf company gave “every indication that it will prove very valuable.” Yet for Vanderlip, the City Bank’s investments in Haiti’s railroads were but a stepping-stone to a larger prize: control of Haiti’s banking and monetary system. “This stock will give us a foothold there,” Vanderlip wrote to Stillman soon after the PCS purchase, “and I think we will perhaps later undertake the reorganization of the Government’s currency system which, I believe, I see my way clear to do with practically no monetary risk.”

On Sep. 10, 1880, Haiti’s president Lysius Salomon granted a concession to the Société Générale de Crédit Industriel et Commercial to create a government bank called the Banque Nationale d’Haiti [BNH]… Although based in France, the BNH was granted the rights of a Haitian citizen. Capitalized at 10 million francs, it was given a 50-year concession to act as the Haitian government’s treasurer, and permitted the privilege of note issuance. The BNH was responsible for maintaining the republic’s schedule repayments on its foreign debt, and was expected to stabilize the gourde, Haiti’s paper currency, by protecting against speculation. It also handled the deposits of customs revenue generated from exports.

In 1910, Simon demanded that the Société Générale agree to terminate its contract for the BNH and abandon its rights and privileges, and sent a delegation to Paris to seek out another group of financiers who could take over the contract and concession. U.S. banks were also hoping to get a foothold in Haiti through the republic’s banking and finances. A group backed by J. P. Morgan wanted to take over the BNH, and in November 1909, months after Lawrence M. Jacobs’s exploratory mission the City Bank and Speyer and Co. sent representatives to Haiti to negotiate with President Simon. Neither group was successful.

In the meantime, the Haitian government found another European group that was willing to take over and renegotiate the concession: a consortium of French and German banking houses, led by the Banque de l’Union Parisienne (BUP).

Yet as the new contract between the BUP and the Haitian government was being negotiated, the U.S. State Department intervened. It was displeased with the new banking contract and its conditions.

[U.S. Secretary of State] Philander Knox pressured the Haitian government and the bank’s French directors to include U.S. interests in the new institution. As a result, a portion of the bank’s shares were divvied up between a group of U.S. and German-American financial institutions. A new contract was drawn up between the government and a syndicate led by the BUP, and the bank was reconstituted as the Banque Nationale de la République d’Haiti (BNRH).

The headquarters of the BNRH remained in Paris, removed to the 55 rue de Châteaudun offices of the BUP, while a New York committee for the bank operated out of the 55 Wall Street offices of the City Bank and occasionally the offices of Hallgarten & Co.

In July 1911, Antoine Simon was overthrown and Cincinnatus Leconte came to power. Leconte was backed by German merchants in Haiti, and he quickly contracted a loan to repay them for their support. The Leconte presidency proved a boon to the City Bank and the BNRH. In May 1912, Leconte’s secretary of finance and commerce, Edmund Lespinasse, signed a contract with the BNRH… through which the bank performed the treasury services for the government while receiving in return “special affectations,” including the monopoly rights on the holding tax deposits and a commission on the exportation of goods. The City Bank’s Roger Farnham later estimated that 90% of Haiti’s customs revenue was collected under Leconte’s reign–a high figure considering the problems of graft and the frequent disruptions in collection–ensuring that the BNRH received high commissions on deposits while maintaining the schedule of repayments to the republic’s creditors for the internal and external debts.

During Leconte’s government the City Bank also became a stockholder of the National Railroad of Haiti. The concession for the National Railroad was held by a shady American entrepreneur, James P. MacDonald, who had previously built railroads in the United States, Jamaica, and Ecuador…

By 1912–three quick years after Speyer initially approached Vanderlip–the City Bank had found an anchor in Haiti through investment in the PCS Railroad and the Port-au-Prince wharf company, the National Railroad of Haiti, and the BNRH… In terms of the total foreign investments in Haiti, the bank had quickly gained an outsized presence in Haiti’s economic affairs and quickly emerged as a competitor to the long-standing French and German mercantile presence that had dominated the Haitian economy. At the same time, the City Bank’s economic foothold positioned it to make greater demands on both the Haitian government and the U.S. State Department and quickly led to the bank’s virtual control of Haiti’s finances, as Vanderlip had hoped.

For the City Bank, the Leconte administration proved a boon for its expanding ventures in Haiti. But his administration was unpopular among Haitians themselves. According to Farnham, Leconte’s efforts to organize and collect the customs duties were resented. Death threats were made against Leconte and his cabinet, and he was allegedly warned to back off from the collection of customs or risk being thrown out of office. The threats were not empty. On Aug. 8, 1912, less than a year after coming to power, Leconte was killed when an ammunition depot at the presidential palace exploded. The presidential transition happened the same day–Tancrede Auguste was quickly appointed–but a period of economic turbulence soon began. Strife between the government and the BNRH reemerged, with the officials of the City Bank and Hallgarten, along with the U.S. State Department increasingly involved in the fracas. Soon after Leconte’s death and Auguste’s appointment, the value of the gourde increased from about 5 or 6 to the dollar to between 3.10 and 3.50. The initial issue of 10 million francs set aside to retire the outstanding currency was deemed insufficient. Edmund Lespinasse, the Haitian minister of finance, decided to suspend the execution of the law withdrawing the paper money and passed a new law authorizing a plan for a gradual, three-stage withdrawal of the currency, demanding, at the same time, that the bank release the 10 million franc reserve to accomplish it. However, neither Allen nor the Paris directors were willing to abide by the new law and Lespinasse’s demands and refused to divert the 10 million francs from its original purpose.

Lespinasse was furious at the BNRH’s refusal. He wrote of his “astonishment” at its attitude and its suggestion that the BNRH had the right to refuse to employ the money of the republic according to the government’s wishes. He argued that there was a matter of law at issue–and one of sovereignty. He asserted that the legal provision of the contract did not usurp the laws of the republic, and argued that once the Haitian government had entered into a contract with the bank for both the loan and the bank charter, the 10 million francs became the property of the government and could thus be disposed of according to its desires…. Lespinasse charged that the bank and its foreign backers were challenging the sovereignty of the Haitian republic.

The agitation by the Haitian government against the BNRH began to work. Resentment among the Haitian elite against the bank grew, with the latter often referred to as a “bucket shop,” according to [Henry W.] Furniss, [the U.S. minister in Port-au-Prince], whose profits came from speculating with government funds. Furniss believed the public’s opinions concerning the bank were valid.

The relationship between the BNRH and the Haitian government deteriorated further in the fall of 1914 as political conditions in the country worsened. President Tancrede Auguste had died in office on May 2, 1913, of a rumored poisoning, and Michel Oreste assumed power. Oreste’s reign was a short one, notable, according to Farnham, for its unprecedented levels of graft and marked by a new inflationary period that pushed the price of staples beyond the reach of the Haitian peasant. By early 1914, discontent with the Oreste administration led to insurrections throughout Haiti and a contest for control of the country between Oreste Zamor, who had returned from exile in Jamaica and was gathering support in the towns around Port-au-Prince, and Joseph Davilmar Theodore, whose power base was in Cap-Haïtien in the north. For the City Bank, with its interests and investments in the Caribbean Construction Company, the railroads, and the BNRH–and, through the BNRH, the foreign debt of the republic–the insurrection proved a costly interruption of business. Customs collection slowed as rebels seized customs houses, evicted government officials, and appropriated customs duties for their own uses. Railway lines were shut down, train service was disrupted, and construction was suspended. Officials of the National Railroad requested protection from the United States for their life and property, while Allen and other officials of the BNRH protested the seizure of duties to the Haitian government and to the insurrection committee, as well as to the French and U.S. governments, demanding protection of Haiti’s creditors.

By the beginning of February, agents for the BNRH at Saint-Marc requested U.S. gunboats for their protection as Gonaïves burned and Aux Cayes was under siege and many of the towns in Haiti’s north were falling into the hands of the insurrectionists.

Oreste was ousted from power by the second week of February, and Oreste Zamor claimed a fragile hold on the Haitian state. Zamor’s power was dependent in part on the success or failure of Theodore, who still controlled much of the north, including the customs houses in Cap-Haïtien, and in part on the willingness of the BNRH to lend financial support to his government. The BNRH refused Zamor’s requests for funds, placing him in a fiscally precarious position. State funds were dwindling, and the remaining amounts in the reserve were going toward interest charges on the railway. For many Haitians, the bank’s intransigence stoked a bout of anti-Americanism. There was a sense that the United States was responsible for the government’s precarious situation and the political foment roiling the country.

As the political crisis in Haiti deepened, the intimacy between the City Bank and the State Department in involvement in Haiti’s affairs increased. Roger Farnham and often his counterpart Henry H. Wehrhane of Hallgarten became the conduit for dispatches from John H. Allen, Henri Desrue, and others for the bank in Port-au-Prince and its branches and agencies in Cap-Haïtien, Saint-Marc, and other cities…. Following the stream of dispatches from Allen via Farnham, Bryan eventually solicited Farnham’s thoughts for a long-term solution to the unsettled political and economic conditions in Haiti. Farnham offered Bryan a plan whose ultimate solution was military intervention… Following a telephone conversation with [Secretary of State William Jennings] Bryan on the morning of Jan. 22, 1914, Farnham drafted and sent to him a memorandum that outlined the history of Haiti’s domestic political strife and proposed a plan for intervention and customs control. Farnham argued that the republic’s economic development was hampered by “the almost continuous revolutionary disturbances which are imposed upon the country by a relatively small number of political aspirants.” Those aspirants, Farnham continued, tempted their followers with promises of “big pay and the gain of loot” in exchange for support in overthrowing the current government. Often, these movements were funded by foreign merchants, who were rewarded with funds from the Haitian treasury or, if it was empty, “as is sometimes the case,” the granting of privileges on coffee, cocoa, and cotton exports if the revolution was successful.

Farnham asserted that the majority of Haitians had little interest in these revolutionary movements, and claimed that military intervention would be a welcome prospect for most Haitians–especially once they realized it would not do anything to degrade their current conditions.

Farnham’s opinions were bolstered by a State Department memo in which Haiti’s internal political conflict was seen as an opportunity to capitalize and fulfill many of the U.S. government’s long-standing desires with regard to Haiti: the establishment of a coaling station at Môle-Saint-Nicolas, the signing of a protocol designed to settle the outstanding financial claims of U.S. citizens against the Haitian government, and a revision of Article 4 of the Haitian constitution barring non-Haitians from owning property in Haiti–a clause that was viewed by U.S. businesspeople as an impediment to investment.

The onset of war in Europe pushed the United States and the City Bank closer to their goals in Haiti.

In 1914, as Europe was engulfed in war…, the conflict between the BNRH and the Haitian government continued. By August, the BNRH was refusing the government’s requests for additional monies, and the government in turn pondered a potential issue of paper money as a means of continuing its operations and meeting its obligations. The USS Hancock was deployed to the region in anticipation of further problems. By September, the Haitian government had defaulted on interest payments to the Haitian National Railroad, forcing the line to suspend operations. Railroad officials demanded an indemnity from the government for losses and damages caused by its “hostile attitude.” At the end of the first week of November, the Zamor government was overthrown in a coup led by General Joseph Davilmar Theodore. His seizure of power precipitated one of the most controversial events during the lead-up to the U.S. military intervention, bringing the conflict of finance capital and sovereignty to a head.

On Dec. 8, 1914, Henry H. Wehrhane sent a note to Bryan stating that it was “very urgent” that the BNRH transfer $110,000 in gold from its vaults in Port-au-Prince to the Hallgarten offices in New York via U.S. naval vessel. Wehrhane and the committee apparently believed that political conditions in Haiti threatened the BNRH’s gold reserve, and feared its “theft” by the government… Two days later, Farnham telephoned Bryan, reiterating Wehrhane’s instruction and telling Bryan to increase the amount of gold to be shipped to $400,000. The secretary of the navy requested that the USS Machias proceed to Port-au-Prince to receive the gold, and the USS Hancock was instructed to “land as many marines as necessary to furnish safe escort for gold from bank to Machias.”

Desrue relayed a message that the BNRH could prepare the gold for shipment but worried that its removal could upset the Haitian government. He advised Wehrhane against sending the gold at all, assuring him that it was safe in the bank’s vaults… Bailly-Blanchard reiterated Desrue’s point to Bryan. “I respectfully submit that the gold is perfectly safe in the Bank of Haiti while a warship is in the harbor,” wrote Bailly-Blanchard.

Its transfer to the Machias, whether by means of agents from the Bank or men from the warship will probably bring about serious complications which it seems advisable to avoid at this time in view of possible feeling of the Haitian Government.

Bailly-Blanchard’s protest, alongside Desrue’s caution, was forwarded to Farnham. Farnham forwarded the protest to Wehrhane. The response was swift. “You must carry out our instructions to ship gold on the Machias immediately,” Wehrhane wrote in a cable to Desrue delivered to the BNRH via the American legation.

These are absolute instructions of both Paris and New York boards and must be obeyed.

On Dec. 16, the USS Machias and USS Marietta sailed from the Dominican Republic to Port-au-Prince where they joined the USS Brutus, which had arrived from Cap-Haïtien, and the USS Hancock. The officers of the vessels called on the U.S. legation. With the staff of the BNRH, they worked out a plan to remove the gold from the bank’s vault. The following day [Dec. 17], they put the plan into action. The staff of the BNRH loaded the half million dollars of gold into seventeen wooden boxes–15 boxes containing $30,000 each, and two with $25,000 each. At 1 p.m.–a time decided on because it was believed that most Haitians would be eating their lunch or taking their “siesta,” thus ensuring the streets of Port-au-Prince would be almost empty–eight U.S. Marines, armed with canes and revolvers, landed from the ships, crossed the Place Geffard, and entered the bank. They loaded the gold onto a wagon, and rode with it back to the wharf, all the while watched by additional marines, also in civilian clothing, posted at regular intervals between the wharf and the BNRH. A 40-foot motorboat waited at the wharf at the launch. It was outfitted with a cargo net and buoys and protected by an additional 25 marines armed with rifles. Both the Machias and the Wheeling stood ready, each with a company of marines prepared to go ashore at a moment’s danger, while watching the movements of the Pacifique, a Haitian gunboat. The marines quickly passed the boxes from the wagon to the motorboat, which then sped through the harbor to the Machias. The operation went quickly and smoothly. In less than half an hour, the $500,000 in gold was on board the Machias. At 2 p.m., the Machias sailed for New York. At 5 p.m., the Hancock sailed for Philadelphia and the Brutus for Key West. The Wheeling remained in Port-au-Prince. Two days later, the Machias arrived at the Navy Yard in New York City, where the gold was then transported under armed guard to the vaults of Hallgarten & Co..

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