Andrew Mellon

Based on Wikipedia: Andrew Mellon

The Man Who Owned Pittsburgh

In the early 1930s, a journalist observed that Treasury Secretary Andrew Mellon so completely dominated the White House during the Coolidge years that "it would be fair to call the administration the reign of Coolidge and Mellon." This was not hyperbole. For over a decade, one man—a banker who had never sought elected office—shaped American economic policy more profoundly than any president he served.

Then everything collapsed.

The story of Andrew Mellon is the story of the Gilded Age itself: spectacular accumulation, ruthless efficiency, quiet philanthropy, and eventual reckoning. He built an empire that touched nearly every major American industry, served under three presidents, weathered an impeachment attempt, and died while Congress investigated him for tax fraud. Along the way, he founded what would become Carnegie Mellon University, bankrolled the creation of the National Gallery of Art, and made decisions that still shape debates about taxation and inequality today.

Born to Banking

Andrew William Mellon came into the world on March 24, 1855, in Pittsburgh, Pennsylvania—a city his family would eventually come to define. His grandparents had emigrated from County Tyrone, Ireland, in 1818, part of the Ulster Scots diaspora that would produce so many American industrialists. His father, Thomas Mellon, had built himself from immigrant farmer's son into a successful attorney, judge, and real estate speculator. In 1843, Thomas married Sarah Jane Negley, whose family had been among Pittsburgh's original settlers.

Thomas Mellon was a man of obsessive control. So suspicious was he of both public and private schools that he built his own schoolhouse for his children and hired a personal teacher. Andrew entered this family academy at age five. The elder Mellon also harbored deep skepticism of formal education generally—a trait his son would inherit, leaving the Western University of Pennsylvania (now the University of Pittsburgh) without graduating.

In 1869, Thomas established T. Mellon & Sons, a Pittsburgh bank. Andrew, still a teenager, joined his father there and quickly proved himself indispensable. The Panic of 1873—a devastating financial crisis that wiped out banks and businesses across the country—destroyed a portion of the family fortune. With Andrew taking the lead, the bank not only survived but recovered to pre-panic deposit levels within a year. He was nineteen years old.

By 1876, Andrew had been given power of attorney to direct all bank operations. His father officially transferred full ownership to him in 1882, though Thomas remained involved in daily affairs. The transition was complete. The son had become the patriarch.

Building an Empire

What Andrew Mellon built over the next three decades was not merely a bank. It was an interlocking network of financial institutions, industrial concerns, and natural resource companies that would make him one of America's wealthiest men—though he took pains to remain less famous than contemporaries like John D. Rockefeller or Andrew Carnegie.

The strategy was consistent: identify promising ventures, provide capital and management expertise, and accumulate ownership stakes. In 1889, a fledgling operation called the Pittsburgh Reduction Company approached Mellon for a $25,000 loan. The company was attempting something that had never been done profitably: industrial-scale aluminum production. Mellon made the loan, became a director in 1891, and helped establish factories in New Kensington, Pennsylvania, and Niagara Falls, New York. The Pittsburgh Reduction Company would eventually be renamed Alcoa—the Aluminum Company of America—and it remains one of the world's largest aluminum producers today.

The petroleum industry followed a similar pattern. The Mellon family established the Crescent Oil Company, the Crescent Pipeline Company, and the Bear Creek refinery. By 1894, these vertically integrated companies—meaning they controlled extraction, transportation, and refining—produced ten percent of all oil exported by the United States. When the Panic of 1893 created difficult conditions, the Mellons sold these interests to Standard Oil, likely at significant profit.

But oil would return. During the Texas oil boom of the early 1900s, the Mellons helped J.M. Guffey establish the Guffey Company. When Guffey's management proved inadequate, the Mellons simply removed him from his own company. In 1907, they reorganized it as Gulf Oil, installing Andrew's nephew William Larimer Mellon Sr. as president. Gulf would become one of the Seven Sisters—the major oil companies that dominated the global petroleum industry for most of the twentieth century.

The Method Behind the Empire

Mellon's approach to business deserves examination because it reveals the logic of Gilded Age capitalism at its most effective—and most troubling.

First, he maintained control through interlocking ownership. In 1902, Mellon reorganized T. Mellon & Sons as Mellon National Bank, a federally chartered institution. He, his brother Richard, and his close friend Henry Clay Frick then drew up an arrangement where the three of them jointly controlled the Union Trust Company, which in turn controlled Mellon National Bank. They also established Union Savings Bank. By 1913, Mellon National Bank held more deposits than any other Pittsburgh bank, and the second-largest bank in the city was also controlled by Mellon's Union Trust.

Second, he diversified relentlessly. The list of Mellon investments reads like a directory of American industry: Westinghouse Electric Corporation (he helped save it from bankruptcy in 1907), Koppers (industrial coking ovens), Pittsburgh Coal Company and Monongahela River Coal Company (which together produced eleven percent of all American coal), Standard Steel Car Company, New York Shipbuilding Corporation, the Pennsylvania Railroad, the Carborundum Company, and the McClintic-Marshall Construction Company, among others.

Third, he wasn't afraid to remove founders. When the Mellons gained majority ownership of the Carborundum Company—a producer of silicon carbide used in abrasives—they replaced the company's founder and president, Edward Goodrich Acheson, with a more pliable manager. This pattern repeated across their holdings: capital came with control.

By the first decade of the twentieth century, biographer David Cannadine concluded, Andrew Mellon had become "the single most significant individual in the economic life and progress of western Pennsylvania."

The South Fork Fishing and Hunting Club

One episode from Mellon's early career deserves special attention, not because it defines him, but because it illuminates the moral universe of the Gilded Age elite.

Henry Clay Frick, Mellon's closest business partner, established the South Fork Fishing and Hunting Club as an exclusive retreat for Pittsburgh's wealthy. Mellon became one of its first members. The club built the South Fork Dam, which supported an artificial lake used for boating and fishing.

In 1889, the dam broke.

The resulting Johnstown Flood killed 2,209 people and destroyed 1,600 homes. It remains one of the deadliest disasters in American history. The club's neglect of the dam's maintenance was widely blamed.

Mellon's attorney friend, Philander Knox—who would later serve as Attorney General and Secretary of State—led a legal defense that successfully argued the club bore no legal responsibility for the catastrophe. Mellon himself never commented publicly on the flood. He donated $1,000 to a relief fund. For context, his Pittsburgh Reduction Company loan that same year was $25,000.

No civil litigation against the club succeeded. The wealthy members faced no consequences. The victims received, by some estimates, roughly $1,000 per person in charitable relief. Many received far less.

Whiskey and Politics

In 1887, Frick, Andrew, and Richard Mellon purchased Old Overholt, one of the largest and most respected whiskey distilleries in America, located in West Overton, Pennsylvania. The acquisition was straightforward business. What followed was not.

As the temperance movement gained strength in the early 1900s, Frick and Mellon quietly removed their names from the distilling license in 1907—while retaining ownership. When Prohibition became federal law in 1920, Mellon was serving as Treasury Secretary, the very cabinet position responsible for enforcing the alcohol ban.

Old Overholt secured a "medicinal permit," allowing it to sell existing whiskey stocks to druggists. Such permits were theoretically available to any distillery, but only a handful received them. The Treasury Department controlled who got permits. Mellon ran the Treasury Department. Mellon owned Old Overholt. He did not sell his stake until 1925, under pressure from prohibitionists—and only after Frick's death left him the sole Mellon owner.

Was there a direct corrupt connection? No smoking gun has emerged. But the arrangement illuminates something important: when you control both the regulated industry and the regulatory apparatus, the distinction between corruption and coincidence becomes philosophical.

Secretary Mellon

Andrew Mellon had never sought elected office. He preferred to influence politics through donations—supporting state party boss Matthew Quay, lobbying for high tariffs on aluminum, and funding Henry Cabot Lodge's campaign against the Treaty of Versailles. But in 1921, newly elected President Warren G. Harding offered him the Treasury.

Mellon accepted. He would serve longer than any Treasury Secretary since Albert Gallatin in the early 1800s, remaining in office under three presidents: Harding, Calvin Coolidge, and Herbert Hoover. For eleven years, the third-richest man in America controlled the nation's fiscal policy.

His agenda was straightforward: cut taxes on the wealthy, reduce the national debt, and minimize government intervention in the economy. This was not mere self-interest—though it certainly served his interests. Mellon genuinely believed that lower tax rates on top earners would generate more total tax revenue. The rich, freed from confiscatory rates, would invest rather than hide their money. Economic growth would follow. Everyone would benefit.

This theory—that cutting taxes on the wealthy increases total tax revenue—would later be called "supply-side economics" or, more colorfully, "trickle-down economics." Mellon articulated it decades before Arthur Laffer drew his famous curve on a napkin.

The Mellon Plan

When Mellon took office, the top marginal income tax rate was 73 percent—a wartime rate imposed to fund American involvement in World War I. The national debt had exploded from roughly $1 billion before the war to over $25 billion after.

Mellon's plan had several components. He wanted to reduce the top marginal rate dramatically. He wanted to eliminate the excess profits tax that had been imposed on corporations during the war. And he wanted to use the resulting economic growth to pay down the national debt.

Congress partially implemented his proposals through the Revenue Act of 1921 and the Revenue Act of 1924, but it wasn't until the Revenue Act of 1926 that the "Mellon Plan" achieved full realization. The top rate fell to 25 percent—a reduction of nearly two-thirds from its wartime peak.

Did it work? The 1920s certainly saw spectacular economic growth. The national debt declined substantially. Tax revenues held relatively steady despite lower rates. Mellon became a national hero, widely credited with engineering prosperity.

But the Mellon years also saw income inequality surge to levels not seen before or since—until the early 21st century. The share of income going to the top one percent reached heights that would not be matched again until around 2007. Stock market speculation reached manic proportions. Consumer debt expanded dramatically. And the financial system grew increasingly fragile beneath a surface of prosperity.

The Reign of Coolidge and Mellon

Calvin Coolidge, who became president after Harding's death in 1923, was perhaps the most ideologically compatible president Mellon could have hoped to serve. "The business of America is business," Coolidge famously declared. Mellon's influence reached its zenith.

Journalist William Allen White's observation bears repeating: "So completely did Andrew Mellon dominate the White House in the days when the Coolidge administration was at its zenith that it would be fair to call the administration the reign of Coolidge and Mellon."

This is remarkable when you consider that Mellon was not an elected official. He had no democratic mandate. He held power because one president after another chose to defer to his judgment on economic matters. The Treasury Secretary, in the American system, serves at the pleasure of the president. But during the 1920s, it often seemed that the president served at the pleasure of the Treasury Secretary.

October 1929

On October 24, 1929—a day that would become known as Black Thursday—the stock market began its catastrophic collapse. Within days, billions of dollars in paper wealth had evaporated. Within months, the economy had entered what would become the Great Depression, the worst economic crisis in American history.

Mellon's response was consistent with his ideology: the government should not intervene. Let the market correct itself. Let weak businesses fail. Let wages fall to their natural level. "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate," Mellon allegedly told President Hoover. "It will purge the rottenness out of the system."

Whether Mellon actually used these exact words is disputed. Hoover attributed them to Mellon in his memoirs, written years later, when both men had reason to blame each other for the Depression. But the sentiment accurately reflects Mellon's economic philosophy. He genuinely believed that government intervention would prolong the crisis, and that only the "creative destruction" of market forces could restore economic health.

Hoover, to his credit, rejected this advice. He launched various programs to stimulate the economy and maintain international economic stability. But he was constrained by his own ideological reservations about direct government intervention, and none of his efforts proved adequate to the scale of the catastrophe.

Fall from Grace

As the Depression deepened, Mellon's reputation collapsed with it. The man who had been credited with engineering the prosperity of the 1920s now bore blame for the disaster of the 1930s. His tax cuts, critics charged, had fueled the speculation that caused the crash. His opposition to intervention was prolonging the suffering.

In 1932, the House of Representatives began impeachment proceedings against Mellon. The charges were complex and partly political—Democrats controlled the House and smelled blood—but they centered on allegations that Mellon had used his position to benefit his business interests.

Hoover defused the immediate crisis by appointing Mellon as ambassador to the United Kingdom, a face-saving exit that removed him from the Treasury but also from congressional jurisdiction. Mellon served in London until Hoover's defeat by Franklin Roosevelt in November 1932.

The Tax Investigation

Mellon returned to private life, but his troubles were far from over. In 1933, the Roosevelt administration launched a tax fraud investigation against him—part of the broader New Deal assault on the titans of the old order.

The investigation became a national spectacle. The government alleged that Mellon had evaded taxes through various schemes, including claiming deductions for artworks he had supposedly donated to charitable institutions. Mellon countered that he was being politically persecuted by an administration hostile to wealth and business.

The case dragged on for years. Mellon died in August 1937, before it was fully resolved. His estate ultimately paid significant sums to settle the matter—not an admission of fraud, but not vindication either.

The National Gallery of Art

Here is where Andrew Mellon's story takes an unexpected turn.

Throughout his life, Mellon had been an avid art collector. His acquisitions were spectacular: works by Raphael, Botticelli, Rembrandt, Vermeer, Van Eyck, and dozens of other masters. In the 1930s, he made perhaps his most extraordinary purchase, acquiring twenty-one paintings from the Hermitage Museum in the Soviet Union. The cash-strapped Soviet government was selling off czarist treasures, and Mellon bought works including Raphael's Alba Madonna and Jan van Eyck's The Annunciation.

Shortly before his death, Mellon offered to donate his entire collection—along with funds for construction—to establish a new national art museum in Washington. The gift came with one remarkable condition: the museum would not be named after him. It would simply be called the National Gallery of Art.

Why this stipulation? Perhaps Mellon understood that his name had become too controversial. Perhaps he wanted the institution to transcend him. Perhaps, after a life of accumulation, he sought something approaching selflessness.

The National Gallery opened in 1941, four years after his death. It remains one of the world's great art museums, free to all visitors. The main building is still called the West Building—never the Mellon Building.

Other Philanthropies

The National Gallery was Mellon's most dramatic act of giving, but not his only one. His philanthropic efforts played a major role in the establishment of Carnegie Mellon University—originally the Carnegie Technical Schools, later merged with the Mellon Institute of Industrial Research that he and his brother had founded. He also contributed significantly to what would become the National Portrait Gallery.

This pattern—vast accumulation followed by spectacular philanthropy—defined the Gilded Age. Carnegie gave away libraries. Rockefeller funded universities and medical research. Mellon built museums. Whether such giving justified the methods of accumulation remained, and remains, a matter of fierce debate.

The Mellon Legacy

Andrew Mellon died on August 26, 1937, at age 82. His reputation was in ruins. The tax investigation cast a shadow over his final years. The Depression had discredited his economic philosophy. The New Deal represented everything he had opposed.

Yet his influence persisted. The Mellon family remained one of the wealthiest in America for generations. Gulf Oil operated until 1985, when it merged with Chevron. Alcoa dominated aluminum production throughout the twentieth century. The banks and financial institutions he built evolved but endured.

More profoundly, his ideas never disappeared. The argument that cutting taxes on the wealthy generates growth and ultimately benefits everyone—the core of the Mellon Plan—returned to prominence in the 1980s under Ronald Reagan and has remained central to Republican economic policy ever since. When politicians today debate the Laffer Curve, trickle-down economics, or the proper top marginal tax rate, they are relitigating arguments that Andrew Mellon made nearly a century ago.

Whether his ideas were right remains contested. Supporters point to the prosperity of the 1920s and argue that excessive taxation discourages investment and entrepreneurship. Critics point to the inequality of that same era, the speculation it encouraged, and the catastrophic collapse that followed. The debate, like so many in American politics, has no final resolution.

What We Can Learn

Andrew Mellon's life offers several lessons for understanding how power actually works in America.

First, the distinction between business and government is far more porous than civics textbooks suggest. Mellon moved seamlessly from controlling Pittsburgh's economy to controlling national economic policy. His investments in oil coincided with his authority over Prohibition enforcement. His tax policies benefited people exactly like himself. This is not necessarily corruption in the legal sense—but it raises questions about whose interests get represented when the wealthy hold office.

Second, the consequences of policy choices may not become apparent for years or decades. The Mellon tax cuts produced immediate prosperity and were wildly popular. Their role in creating the conditions for the Depression became clear only in retrospect. Policymakers and citizens must grapple with the possibility that things that seem to be working might be building toward catastrophe.

Third, philanthropy is complicated. The National Gallery of Art is a genuine gift to the American public—free, magnificent, enduring. But it was funded by wealth accumulated through methods that many considered exploitative, in an era of spectacular inequality, by a man who spent his public career reducing the tax burden on people like himself. Does the gift redeem the accumulation? Does the accumulation taint the gift? These are not questions with easy answers.

Finally, Mellon's story reminds us that history does not end. The arguments he made, the policies he championed, the tensions between wealth and democracy that his career embodied—all of these remain live issues in American politics. Understanding Andrew Mellon helps us understand today.

He was, in many ways, the prototype for a certain kind of American figure: the businessman who believes that what's good for his class is good for the country, who moves between private accumulation and public power, who gives generously while opposing the taxes that might require giving. Whether such figures are patriots or plutocrats, heroes or villains, builders or destroyers—that is for each generation to decide.