MELLON, ANDREW W. 1855-1937

Secretary of the treasury, 1921-1932

Millionaire Cabinet Secretary

As President Warren Harding's secretary of the treasury, Andrew Mellon, a Pittsburgh multimillionaire, molded the relationship between government and business during the 1920s, a relationship that influenced politics throughout the decade. Before entering government service, Mellon had an exceptionally successful career as a financier in various businesses, including oil and aluminum. Harding appointed Mellon as treasury secretary on the advice of Philander Knox, a prominent Republican senator from Pennsylvania and a longtime friend of Mellon. Mellon's age, wealth, career banking experience, and conservative Republican connections suggested he would probably endorse traditional, old-line conservative policies, and he did.

Mellon's Economic Philosophy

Committed to retrenchment and economy in government, Secretary of the Treasury Mellon reduced federal spending vigorously. He consistently opposed the veterans' bonus bill and the McNary-Haugen farm bills. But even more central to Mellon's financial vision than spending reduction was tax reduction, especially for the rich. Mellon rejected the progressive philosophy of taxation that insisted those Americans most able to pay should pay more taxes. Instead the he articulated a philosophy later known as "trickle-down economics." Taxing the rich, Mellon argued, inhibited their investment ability, thus impeding job growth and the entire economy. Without a heavy tax burden, the wealthy would invest, create jobs, and ultimately all participants in the economy would become beneficiaries of investors' tax-free profits as prosperity filtered down to workers and farmers, Mellon argued.

Mellon's Tax Program

Republicans eagerly returned America to a peacetime budget, dramatically reducing government spending that had grown substantially during World War I. Mellon complemented these spending reductions with major tax revision. Mellon proposed that Congress repeal the excess-profits tax, which taxed corporate profits above 8 percent, and that it reduce the surtax on income from 65 percent to 40 percent and steadily lower it to 25 percent, (The surtax was an additional tax on existing taxes for wealthy Americans.) These reductions applied only to wealthy Americans, and Congress balked. While blunting Mellon's extreme cuts, Congress did, however, approve substantial tax cuts in 1921. This was the first of many tax reductions enacted during the decade at Mellon's instigation, as he was reappointed secretary of the treasury during both Coolidge's and Hoover's administrations. During Coolidge's administration a Nebraska progressive commented that "Mr. Mellon himself gets a larger personal reduction than the aggregate of practically all the taxpayers in the state of Nebraska." Mellon eventually convinced Congress to eliminate gift taxes, to cut estate taxes by 50 percent, and to reduce the maximum income-tax rate from 40 percent to 20 percent.

Source:

George Soule, Prosperity Decade: From War to Depression 1917—1929 (New York: Rinehart, 1947).

MELLON, ANDREW WILLIAM 1855-1937

Banker and financier

A Father's Footsteps

Andrew Mellon was the son of Judge Thomas Mellon of Pittsburgh, Pennsylvania, who acquired a great deal of wealth from his legal practice but even more from his investments. Andrew learned a much from his father, and in the early 1870s he started his own lumber and building business in Mansfield, Pennsylvania. Because of the depression of 1873, his company went out of business. Mellon went on to build his financial reputation in his father's bank. By the age of twenty-seven he was running the banking house, and soon thereafter he received ownership of the bank from his father. Mellon built his fortune through his ability to shrewdly judge both businesses and businessmen and his faithfulness in following his father's rule of constantly reinvesting profits in the businesses that generated them.

Ground-Floor Investments

Mellon was able to discover several companies in their infancy and provide them with the capital to become dominant American businesses. One such success was in the newly founded aluminum industry. In 1889 Mellon agreed to give the Pittsburgh Reduction Company $4,000 to meet an overdue note in exchange for stock and expressed his confidence in the company by continued financial support. In 1907 this company became the Aluminum Company of America (Alcoa), having provided aluminum for buildings, boats, automobiles, and the Wright brothers' air-plane; by the 1930s Mellon and his brother owned about 33 percent of the company. The oil industry was another success for Mellon. He provided seed money to James Guffey and John Galey for oil explorations at Spindletop Hill, near Beaumont, Texas, where in January 1901 they struck it rich. Within the next year Mellon helped organize the Gulf Refining Company. By 1923 their refinery at Port Arthur was the world's largest, and Gulf was one of the giants of the oil industry. Mellon also invested in the steel industry. He assisted in organizing the Union Steel Company and in 1902 sold it to U.S. Steel for more than $30 million. He also acquired 60 percent ownership in a small steel-fabricating business in the early 1900s. This company, McClintic-Marshall Construction Company, later provided the steel and engineering for the Waldorf-Astoria Hotel, the RCA building in New York City, the George Washington Bridge, and the Golden Gate Bridge in San Francisco. It was merged into Bethlehem Steel in 1931.

The Later Years

In the 1920s Mellon became active in the Republican Party, and in 1921 President Warren G. Harding appointed him secretary of the treasury, a job at which he excelled. Mellon also used his money for philanthropy. He founded the National Gallery of Art in Washington, D.C., assisted the Carnegie Library of Pittsburgh, founded the Mellon Institute, and set up endowments at several universities.

Sources:

Andrew Mellon, Taxation: The People's Business (New York: Macmillan, 1924);

Harvey O'Connor, Mellons Millions: The Biography of a Fortune (New York: John Day, 1933).

Andrew William Mellon 1855–1937, American financier, industrialist, and public official, b. Pittsburgh. He studied at the Western Univ. of Pennsylvania (now the Univ. of Pittsburgh), but he left college to organize a lumber business with his brother, Richard B. Mellon. Soon they joined interests with their father, Thomas Mellon, a successful Pittsburgh banker and lawyer, who had helped Henry C. Frick to expand his holdings in the coke industry. When Thomas Mellon retired (1886), the sons took over the banking firm of Thomas Mellon and Sons. In 1889, Andrew Mellon led in establishing the Union Trust Company of Pittsburgh—later to become one of the larger financial institutions in the United States and merge with the Mellon National Bank (and ultimately become Mellon Financial Corporation)—and the Union Savings Bank was created as a subsidiary firm. Meanwhile Andrew Mellon expanded his holdings in key American industries and secured large interests in the Gulf Oil Company, the American Locomotive Company, the Pittsburgh Coal Company, and in hydroelectric, bridge-building, public-utility, steel, insurance, and traction companies. He also played an important role in originating the huge Aluminum Company of America (Alcoa).

Mellon resigned (1921) as president of the Mellon National Bank to become U.S. secretary of the treasury and held that cabinet post until 1932 under Presidents Harding, Coolidge, and Hoover. As secretary, Mellon worked for a downward revision of income taxes and surtaxes, and in spite of drastic tax curtailments, he reduced the national debt from $24,298,000,000 in 1920 to $16,185,000,000 in 1930. He later served (1932–33) as U.S. ambassador to Great Britain. His income-tax return for the year of 1931 was the subject of a federal investigation in 1935, but he was exonerated in Dec., 1937, four months after he died. He gave $10 million for the founding (1913) of the Mellon Institute of Industrial Research in Pittsburgh (since 1967 Carnegie Mellon Univ.); in 1937 he donated his art collection to the public, with funds for the erection of a building in Washington in which to house it (see National Gallery of Art ). He wrote Taxation: The People's Business (1924).

Bibliography: See biography by D. Cannadine (2006); F. D. Denton, The Mellons of Pittsburgh (1948).

Mellon, Andrew William (b. 24 Mar. 1855, d. 26 Aug. 1937). US Secretary of the Treasury 1921–32 Born in Pittsburgh, Pennsylvania, the son of a wealthy banker, he studied at the West University of Pennsylvania (now the University of Pittsburgh), joined his father's bank, and by 1920 was one of the richest men in the USA. Appointed by President Harding in 1921, he served under his two Republican successors, Presidents Coolidge and Hoover. He presided over the boom of the 1920s, convinced that government was an extension of big business, to be run on business lines. His tax cuts purposely helped investments of the rich, which he felt would bring employment and other benefits to the less well-off. After the Wall Street Crash, he had no response to the Great Depression other than increasing retrenchment. He donated his considerable art collection, together with funds, to establish the US National Gallery of Art (1937) in Washington.

Mellon, Andrew William (1855–1937) US financier. He inherited a fortune which he increased through industrial investment and banking, and was secretary of the treasury under three presidents (1921–32). A generous patron of the arts, he was ambassador to Britain (1932–33).