An excerpt from: Yamoto's Dynasty Sterling and Peggy Seagrave©1999 All rights reserved Bantam Press ISBN 0593 04482 7 426pps. --First Edition --In-print( in every english-speaking country BUT the US) ----- Now can this be the same James L. [Lee] Kauffman? A rear admiral in the navy and father-in-law to George HW's bro Prescott? Lots Dillion Read, also. Kauffman went "on behalf" of Dillon Read. Do you know, Catherine, if this James Lee Kauffman was ever an admiral. Draper Kaufman was navalacadamey superintendent from 66-68, and according to < A HREF="http://www.netmagic.net/~franklin/MT18.html">http://www.netmagic.net/~ franklin/MT18.html</A> a Draper Kauffman is Prescott Jr's nephew. And interestingly enough if ya follow their tours of duty, they do show up in the Philippines quite often and at would be interesting times. An interesting group of characters, for sure. Om K ----- -- Grew also became co-chairman of a new lobbying group, the American Council on Japan (ACJ). The ACJ was a political action committee set up by wealthy American conservatives immediately after the war to lobby Washington and to fight the initiatives on reforming Japan that were being championed by liberals — whom the ACJ scathingly referred to as 'New Deal Democrats' and 'communist fellow travellers'. The ACJ was backed by Newsweek, the magazine founded in 1937 by Averell Harriman and others. (Harriman's brother was a News week director.) The magazine championed the Wall Street view of Japan's future. ACJ's chief organizers were Harry F. Kern, Newsweek's foreign editor; Compton Pakenham, the magazine's Tokyo bureau chief; and James Lee Kauffman, a New York lawyer who had taught at Tokyo University between 1913 and 1919 and had served as an attorney in Japan for General Electric, Standard Oil, Westinghouse, Ford, National Cash Register, Otis Elevator and Dillon Read. Kern was a personal friend of the Harrimans, and Pakenham had grown up in Japan and — as one critic put it -'looked upon most indicted war criminals in Tokyo as [his] childhood playmates'. After the war, Kern and Kauffman were both given high honours by Hirohito. Grew's co-chairman at the ACJ was another member of the Hoover circle and a former ambassador to Japan, William Castle. Descended from one of Hawaii's plantation-owning grandee families, Castle had been an undersecretary of state during Hoover's presidency. Grew's right-hand man at the ACJ was Japan-born career diplomat Eugene Dooman, who had worked with Grew at the State Department during the war. Their self-proclaimed mission was to correct SCAP 'excesses' — to reverse America's early efforts to punish, reform and democratize Japan. In the summer of 1947, Kauffman visited Tokyo on behalf of Dillon Read and made a personal assessment of the Truman administration's secret plan for the break-up of the zaibatsu. The secret FEC-230 documents were then leaked to New sweek by Undersecretary of the Army William Draper, in civilian life a senior partner of Dillon Read. In December 1947, while America was gearing up for its presidential election campaign, Newsweek began a series of articles denouncing SCAP-1. The magazine accused SCAP of running amok and exceeding its authority. SCAP was trying to impose 'an economic theory which has ... no counterpart anywhere else in the world. It is not communistic but it is far to the left of anything tolerated in this country.' Newsweek went on to warn American taxpayers that this plan posed grave dangers to their wallets. 'Japan is costing the American taxpayers millions of dollars a year.' Breaking up the zalbatsu would 'weaken the Japanese economy to the point where the maintenance of Japan would become a continual charge on the American taxpayer'. It was vital, Pakenham said, to get Japan back on track and make it 'a fertile field of American capital'.-- <snip> -- When the war ended, MacArthur's G-2 General Charles Willoughby and other intelligence officers backed secret recovery operations that netted huge sums, according to some of the American officers who participated. The gold was slipped into the market cautiously to avoid affecting world gold prices. These recoveries continued intermittently over the years. One such effort involved America's John Birch Society, a virulently anti-communist organization named after an American who was killed by Maoist forces during the Chinese civil war. In the mid- 1970s, the society lent nearly $500,000 to an American treasure-hunter to finance a recovery in the Philippines, promising to help him launder up to $20 billion of the recovered gold. (The society seemed to believe that it was perfectly correct to break American laws regarding the illegal laundering of money, providing it was done to finance anticommunism.) Colonel Laurence Bunker, a close friend of General Willoughby who took over from Bonner Fellers as MacArthur's chief aide, personal secretary and spokesman from 1946 until his retirement in 1952, was a charter member of the John Birch Society.-- CHAPTER 10 UNCLEAN HANDS WHILE HOOVER, FELLERS AND MACARTHUR WERE SECRETLY EXOR-cizing the emperor, SCAP-1 investigators were supposed to be taking a hard look at Japan's elite, to punish those who had been wicked during the war and to 'democratize' Japan's society and economy for the future. First, Japan had to purge itself of ultra-nationalists whose names were on a long list of dangerous people — many of them politicians and militarists — who were to be excluded from taking part in the new postwar government. Second, America declared that there must be a major redistribution of wealth in Japan. This was intended to correct many of the same gross inequities that had been the target of the young officers in the 1936 uprising, thwarted by Hirohito himself. Many SCAP-1 advisers previously had worked for President Roosevelt's New Deal and were planning to engineer similar radical programmes in Japan. America blamed the exclusive concentration of economic power in the big zalbatsu conglomerates for creating the autocratic conditions in which militarism flourished without check. This incestuous cartel of special-interest groups, created by the Meiji Genro, had grown into a huge machine to feed the elite, the military, the bureaucrats, the tame politicians and underworld godfathers. One of the chief objectives of the occupation was to root out the venality of the existing system. SCAP-1 was going to try to level the playing field by removing the long list of 'evil men' from power, dissolving the biggest conglomerates and banks which provided them with their monopoly on wealth. SCAP would introduce a new system of government based on a new constitution with built-in US-style checks and balances, with public oversight, accountability and referenda. It was an idealistic and ambitious agenda. Optimists in Washington and Tokyo viewed these reforms as nothing less than revolutionary. Japan's society would be completely changed by them, the way rural life in Japan was being changed by the American-led land-reform programme. This revolution did not happen. It failed because some powerful Americans and some powerful Japanese wanted it to fall. After getting off to an awkward start, they quickly sorted out their differences and made common cause. Together they sabotaged SCAP-1 and turned it into SCAP-2 — a parody of reform that put everything back the way it was, under the same 'evil men'. A number of cosmetic changes were made, like doing over Emperor Hirohito as a 'constitutional monarch' dressed in the same rumpled style as President Truman, and business resumed as before. Joe Grew had been preparing the way for this reversal for some time. In 1944 he said, 'To try to graft full-fledged democracy on Japan, as some of our people would like to do, would certainly lead to chaos in short order.' The following year he warned, 'From what I know of the Japanese, an outright democracy with an elected president would bring about political chaos.' Because memories of the war were still fresh in America, MacArthur at first moved cautiously and made himself seem to be the champion of America's liberal agenda. Many of SCAP's early pronouncements, issued in his name, had a liberal, populist vocabulary. This made MacArthur seem uncharacteristically fair-minded. He still had one eye fixed on the 1948 presidential campaign in America. If he wanted the backing of the Republican Party, he had to carry out the very different agenda for Japan laid on him by the party's money men, who communicated with MacArthur through Hoover and Grew. No one in Washington could force MacArthur to do anything about civil liberties. George Kerman said MacArthur had a 'flealike agility' that enabled him to resist any demands from Washington to get on with the democratization process. In retrospect, one may regret that Japan was not made more answerable to its own people when America had the chance, but that would have taken time, patience, tax-dollars and will-power. Paraphrasing the senior State Department adviser in postwar Tokyo, liberal George Atcheson, there were a long solution and a short solution. The long solution would probably be better, and would lead to the Japanese people having more say in their own government. But under the circumstances, the short solution was more likely. He was right. The start of the Cold War in Asia and Europe distracted those who might have worked miracles in Japan. Meanwhile, counter-revolutionary Americans and Japanese manipulated the reform agenda to their own ends. The mood of the world was swinging from fear of fascism to fear of communism. It was easy to fan fears of communism taking over Japan and in the process to suffocate all legitimate criticism, dissent, protest and opposition. Nowhere was deceit more conspicuous than in SCAP's investigations of the finances of Emperor Hirohito, the imperial family and the zaibatsu elite. Ethics can be argued, but here we are talking hard fact and cold cash. MacArthur sabotaged the process by tying SCAP's hands. He limited SCAP investigators to the emperor's visible domestic wealth, completely ignored his huge foreign holdings and turned a blind eye to persuasive evidence that much of the throne's gold bullion and other liquid assets were carefully hidden or moved offshore in the closing months of the war, while palaces and other real estate were conveyed to the wealthy Tsutsumi family and others for safekeeping. Washington declared that 'the property of the imperial household' was to revert to the state — meaning the people of Japan. To this end, SCAP investigators were instructed by Washington to carry out a meticulous audit of the imperial family's entire wealth. Instead, MacArthur ordered Hirohito's own financial advisers and accountants in the Imperial Household to prepare a self-audit listing only the emperor's domestic holdings as of late October 1945. According to this self-audit, Hirohito's domestic assets, excluding art treasures and palaces, totalled only 1.6 billion yen, or about $100 million (1945 dollars). This figure, they said, included his 'Income' from all his farms and country estates, vast tracts of forest, scores of major corporations, bonds, currency and gold bullion. The self-audit was rich with minor details about how much Hirohito had earned in 1944 from his timber reserves, but it did not include the value of the forests themselves or the land on which they grew. The imperial family were the biggest landowners in Japan, much of it conveyed directly to the throne when the Tokugawa shogunate collapsed, and in terms of value they ranked as one of the world's greatest landowning entities. Also not included in the self-audit were all manner of undeclared or hidden assets, in Japan and in overseas accounts. When SCAP investigators passed this audit up the line, they noted sourly, 'No representation as to accuracy is made by this Division.' After the occupation ended, Japanese experts recalculated the emperor's domestic wealth — not counting palaces, land or art treasures — at well over 66 billion yen or $4 billion (1945 dollars). Most independent estimates agree with this figure. Contrast this $4 billion to the $100 million offered by the Imperial Household self-audit. Where did all the imperial wealth come from? Since the Meiji Restoration, some of Japan's best financial brains had worked to maximize its growth. In keeping with Bismarck's advice to make the emperor so rich he would be above bribes, 10 per cent of shares in leading Japanese corporations and banks were conveyed to the throne, along with a similar percentage of their annual profits. Over three generations, this multiplied prodigiously. Specifically, Hirohito owned nearly one-fourth (22 per cent) of the stock in the Yokohama Specie Bank, Japan's official foreign-exchange bank, known today as the Bank of Tokyo. He also held large stock portfolios in twenty-nine conglomerates, including the Mitsui, Mitsubishi, Sumitomo and Yasuda zaibatsu, which profited richly from producing weapons, aircraft and munitions for the Japanese Army, and doing business in occupied territories. These tax-free imperial earnings were reinvested all over the world. In 1942, on the basis of information he gathered from bankers and economists, John Gunther had ranked the imperial family as 'the third or fourth biggest capital enterprise' in Japan. By this measure, the family came just after Mitsui, Mitsubishi and Sumitomo, but ahead of Yasuda, and far ahead of lesser 'new' zaibatsu such as Nissan. Similarly huge were Hirohito's foreign assets. These included major investments in Western banks, manufacturing and property — and also gold bullion, platinum and silver held under various covers in the vaults of banks in Switzerland, Sweden, the Vatican, Portugal, Argentina, Spain, Britain and the United States. The House of Morgan, while a commercial bank, also handled private investment portfolios for the supremely rich. Tom Lamont had spent much of his professional life enriching Morgan's Japanese clients, one of whom was the emperor. In January 1944, anticipating an American invasion of the Home Islands, Privy Seal Kido called together Japan's leading investment bankers who were financial advisers to the throne. On their recommendation, most of the throne's immediate liquid assets were conveyed to Swiss bank branches in Tokyo and credited to numbered accounts in Switzerland. The same Swiss banks already held, on Hirohito's behalf, investment credits denominated in the currency of Nazi Germany, and during 1944 these were converted into 'clean' currencies of neutral countries. It was reported that some imperial bullion was sold to wealthy Chinese, and the hard currencies obtained were credited to Zarich. There were also reports that some quantities of war loot were sent to South America on Japanese cargo submarines and deposited at Swiss banks in Buenos Aires. Even after the Imperial Household's comic self-audit in October 1945, Hirohito's declared domestic assets were not frozen by SCAP for nearly another month. By the time SCAP officers got around to having a look for themselves, the emperor's stock and bond certificates, and his gold and silver bullion held in the Yokohama Specie Bank, had vanished. Bank officials explained that all their records had been destroyed by American fire-bombing (a useful excuse in those days). As for gold or silver, they knew nothing about any bullion. By then all the emperor's bullion that was not already secured in Swiss vaults in Tokyo was tucked into the mountain bunker near Nagano. Paul Manning, a war correspondent trusted by MacArthur, many years later stated flatly that 'General MacArthur was aware of the emperor's missing gold and transferred currencies, but chose to ignore them'. Ultimately, SCAP made the extraordinary announcement that the emperor, after paying back taxes and other 'penalties', had only $42,000 in cash left to his name, roughly what a small-town American businessman in 1945 might have saved towards his retirement. It was declared that from then on Hirohito would receive a tax-free annual salary equivalent to $22,000. To make sure everyone appreciated the emperor's humility, the Japanese press reported that Hirohito was going to sell the family jewels and his collection of ancient Japanese art to buy food for the common people. One article said the emperor was donating 10 million feet of timber to rebuild homes destroyed by Allied bombing. So that America could not confiscate the palaces and real estate of other members of the imperial family, many of these were 'sold' to the Tsutsumi family, friends of the imperial family who had made their fortune in railways, department stores and property speculation following the Kanto quake. The Tsutsumis were buying up 'excess' imperial palaces at what were said to be 'fire sale' prices. The impression was given that this had to be done because the dynasty was desperately strapped for cash. Prince Takamatsu and Prince Chichibu were even said to have been 'reduced by financial pressure to selling their personal and household belongings, even empty whisky bottles'. Princes Higashikuni, Asaka, Takeda and the family of Kitashirakawa also made such deals. However, they were not obliged to move out of their palaces even after having 'sold' them. Prince Asaka continued to live in his palace for the remainder of his very long life. The Tsutsumis were on their way to becoming one of the world's richest families and would enjoy unparalleled leverage in Japan for the rest of the century, thanks to their imperial connections. In short, the overwhelming impression was created that Japan was bankrupt, and the dynasty penniless. Indeed, the war did exhaust Japanese industry and raw materials, but most top management of banks and corporations had personal wealth that remained hidden and intact. Most zaibatsu had participated in the looting of conquered countries and helped in running the wartime drug trade on the mainland. An estimated $3 billion was made in the heroin trade alone, in which drugs grown and processed under army supervision in Manchuria were sold throughout China and Southeast Asia with the help of the zaibatsu. Within days of the surrender, but before the occupation actually began, corporate directors anxious to obliterate any record of their close ties to the military and of wartime profits ensured that all incriminating paperwork was hidden or burned. Their top executives were shifted to obscure rural offices where they assumed the temporary guise of underlings. With feudal loyalty structures still operative, there was no danger of staff turning bosses in. The Finance Ministry hastily paid bills owed to defence industries on wartime contracts. One such contract in the last days of the war netted future prime minister Tanaka Kakuei an effortless $73 million profit. There were other prominent men who had also accumulated great personal fortunes during the war. The most famous figure in Japanese organized crime, godfather Kodama Yoshio, spent the war supervising the looting of strategic ma teriel and the distribution of drugs. Kodama first worked with the army in Manchuria and China, then was given the rank of rear admiral by the navy minister, Admiral Yonai (who helped General Fellers suborn General Tojo). In this guise, Kodama travelled throughout East and Southeast Asia, making free use of naval vessels for the repatriation of loot and reputedly keeping the platinum and the best gems for himself. Then there was Golden Lily, which was dedicated only to so-called 'imperial' loot — plundered treasure that was collected, inventoried and set aside for the imperial family. If Golden Lily did hide considerably more than $100 billion worth of this treasure in the Philippines, then the claim of postwar insolvency is rather suspect. During the closing months of the war, American guerrilla forces operating in the mountains of Luzon observed Japanese Army units hiding truckloads of very heavy small boxes in caves. They captured and interrogated Japanese soldiers and learned that the boxes contained gold bars. When the war ended, MacArthur's G-2 General Charles Willoughby and other intelligence officers backed secret recovery operations that netted huge sums, according to some of the American officers who participated. The gold was slipped into the market cautiously to avoid affecting world gold prices. These recoveries continued intermittently over the years. One such effort involved America's John Birch Society, a virulently anti-communist organization named after an American who was killed by Maoist forces during the Chinese civil war. In the mid- 1970s, the society lent nearly $500,000 to an American treasure-hunter to finance a recovery in the Philippines, promising to help him launder up to $20 billion of the recovered gold. (The society seemed to believe that it was perfectly correct to break American laws regarding the illegal laundering of money, providing it was done to finance anticommunism.) Colonel Laurence Bunker, a close friend of General Willoughby who took over from Bonner Fellers as MacArthur's chief aide, personal secretary and spokesman from 1946 until his retirement in 1952, was a charter member of the John Birch Society. Because none of this was revealed to the war-crimes tribunal, to the American people, to the Japanese people, or to Japan's victims in other countries, serious questions are raised of ethics and fraud. When MacArthur first arrived in Japan in 1945, the joint Chiefs of Staff ordered him to arrest key business figures. The directive said, 'You will assume that any persons who have held key positions of high responsibility since 1937, in industry, finance, commerce, or agriculture have been active exponents of militant nationalism and aggression.' MacArthur immediately ordered the arrest of one of the emperor's uncles, Prince Nashimoto, who was said to have joined a plot to prevent Hirohito from announcing Japan's surrender. He was the only member of the imperial family to be arrested for any reason and the only one to die in poverty. SCAP also arrested several senior zaibatsu officials, including the chairman of Mitsubishi, which had been Japan's primary arms maker, and the managing director of Mitsui, the oldest zaibatsu. Soon afterwards, it was decided to tell MacArthur about $2 billion in gold bars that had been sunk in Tokyo Bay in the closing days of the war. The gold had been flown from Korea to Tokyo by the Japanese Air Force on the instructions of Prince Takeda. The small gold bars were then placed in bronze boxes and submerged in the bay. In April 1946 the Central Liaison Office informed SCAP of the gold and asked if it could be raised and placed in the central bank 'for the common good of the Japanese people'. MacArthur approved, saying his mission in Japan was to 'return the nation to solvency'. President Truman was informed about this recovery. One plan was to ship the gold bars to America for safekeeping and as security against outstanding loan payments to groups like Morgan Bank. Instead the gold was kept in Japan. At the same time, perhaps coincidentally, Prince Nashimoto, the Mitsubishi chairman, the Mitsui managing director and three other top Japanese business leaders were quietly released from Sugamo prison and all charges against them were dropped. This was only one of many such coincidences during the occupation. Substantive reports of huge sums of money being transferred back and forth around the Pacific during that period coincided with groups of 'Class A War Criminals' being released from Sugamo with all charges dropped. Generalissimo Chiang Kai-shek drew up several lists of Japanese he thought should be arrested, and others he thought should not be arrested. In what some might regard as clear indication of collusion or extortion, names were moved from one list to the other. When godfather Kodama turned over half of his declared fortune to SCAP, he walked free, as did his good friend and cellmate, future prime minister Kishl Nobusuke, the wartime vice-minister of munitions and the financial brains of Japan's Manchurian exploitation. After more than half a century, SCAP documents relating to these mysterious payments have yet to be made public. When a Japanese official was asked who was behind the apparent connivance between the Imperial Household and MacArthur's headquarters, he raised his hands above his head and clapped. 'Now, tell me, which hand made the noise?' In October 1946, Joseph Keenan, chief of the war-crimes tribunal, announced that after prosecuting the militarists he planned a second trial that would prosecute businessmen. This provoked a ripple of fear through the elite, but it never came to pass. This intended purge of business leaders was detailed in a secret directive to SCAP from the Far Eastern Commission (FEC) in Washington, a task force charged with planning the occupation of Japan. The secret directive, known only as FEC-230, was designed to break Japan's huge conglomerates into smaller corporations and put in place anti-monopoly laws that would prevent their re-establishment. This would end the monopoly profits the zaibatsu had been squeezing from captive Japanese consumers since the 1870s. It was also meant to reinforce political freedom by diluting the wealth the elite used to corrupt politicians through bribery and kickbacks. Imprudently, the American bureaucrats who drafted FEC-230 foolishly overlooked the vested interests of major US banks and corporations that had made huge prewar loans and investments in Japan. Morgan Bank had provided Japan with many loans, including one of $150 million to rebuild Tokyo after the Kanto earthquake, and the Japanese government had defaulted on repayment of all these loans at the time of Pearl Harbor. Many other US corporations had major prewar stakes in Japan in the form of loans and direct investments. At the end of 1941, American investment accounted for three-quarters of the total foreign capital in Japanese industry. The largest single direct investment, nearly half of the total, was by General Electric, one of the Morgan extended family. GE' held 16 per cent of the paid-up capital of Tokyo-Shibaura Electric, a firm linked to the Mitsui zaibatsu. Other large investments had been made by Associated Oil in Mitsubishi Petroleum, by Westinghouse in Mitsubishi Electric, by Owens-Libby in Sumitomo, by American Can in Mitsui, and so on. After the war these US corporations were owed reparations, royalties and loan payments totalling more than a billion dollars. They were determined not only to recover their investments but to resume their profitable business operations in Japan. If Japan's biggest conglomerates were broken up, this would impact directly on their American partners. If the directors and owners of these zaibatsu were condemned to death or to long prison terms, the new management might well argue that they were not responsible for debts incurred under a previous criminal military dictatorship. If efforts to introduce democracy to Japan miscarried and led to a socialist or communist takeover, past experience with Soviet Russia showed that such debts would never be honoured. This new rationale was taking hold in Washington and being echoed in Tokyo, thanks to careful orchestration. Japanese government spokesmen said that SCAP was persecuting businessmen not because they had committed war crimes, or acquired their wealth by illegal means, but because they had been successful. 'We find it difficult to understand how this can be democracy ... the empire's key financial and industrial figures, the men we need most to provide a sound business development upon which real democracy must rest, are being condemned without trial, merely because they were businessmen.' The old guard in the Diet (echoing Joe Grew) predicted 'chaos and confusion' and communist revolution in Japan if these purges went ahead. In Washington, a group known as the Japan Crowd encouraged these reversals of SCAP policy. Joe Grew was their spokesman, guided by Herbert Hoover as well as Tom Lamont, who had raised a generation of investment bankers to share his view of China as a corrupt place and Japan as a nation of fiscal self-discipline. After the war, Grew retired from his post as undersecretary of state and moved to Wall Street, where he became the leading lobbyist of the Japan Crowd. By 1947, America's Republican Party was in full resurgence. Democrats were on the defensive. SCAP reforms were being aborted and all talk of purges and retribution in Japan was silenced. Grew and the Japan Crowd prevailed because Mao's success in China and communist challenges in Korea, Vietnam, Indonesia and elsewhere alarmed even liberal politicians, persuading them of the need to build an Iron Triangle of Japan, Taiwan and Korea. Conservative American business leaders were usually careful to denounce monopolies and cartels in principle, but they successfully fought off any effort to break up Japan's conglomerates in practice. Grew and his colleagues made all the right democratic noises about reforming postwar Japan, while working energetically behind the scenes to block all efforts at reform. These men believed that the best hope for the future Pacific economy lay in reviving prewar trade patterns, with America again becoming Japan's biggest trading partner. Japan had the only massive industrial base in Asia. Once its financial elite were fully restored to positions of control, Japan would become an industrial bulwark against further expansion of communism in Asia. The time frame was urgent. Grew also became co-chairman of a new lobbying group, the American Council on Japan (ACJ). The ACJ was a political action committee set up by wealthy American conservatives immediately after the war to lobby Washington and to fight the initiatives on reforming Japan that were being championed by liberals — whom the ACJ scathingly referred to as 'New Deal Democrats' and 'communist fellow travellers'. The ACJ was backed by Newsweek, the magazine founded in 1937 by Averell Harriman and others. (Harriman's brother was a News week director.) The magazine championed the Wall Street view of Japan's future. ACJ's chief organizers were Harry F. Kern, Newsweek's foreign editor; Compton Pakenham, the magazine's Tokyo bureau chief; and James Lee Kauffman, a New York lawyer who had taught at Tokyo University between 1913 and 1919 and had served as an attorney in Japan for General Electric, Standard Oil, Westinghouse, Ford, National Cash Register, Otis Elevator and Dillon Read. Kern was a personal friend of the Harrimans, and Pakenham had grown up in Japan and — as one critic put it -'looked upon most indicted war criminals in Tokyo as [his] childhood playmates'. After the war, Kern and Kauffman were both given high honours by Hirohito. Grew's co-chairman at the ACJ was another member of the Hoover circle and a former ambassador to Japan, William Castle. Descended from one of Hawaii's plantation-owning grandee families, Castle had been an undersecretary of state during Hoover's presidency. Grew's right-hand man at the ACJ was Japan-born career diplomat Eugene Dooman, who had worked with Grew at the State Department during the war. Their self-proclaimed mission was to correct SCAP 'excesses' — to reverse America's early efforts to punish, reform and democratize Japan. In the summer of 1947, Kauffman visited Tokyo on behalf of Dillon Read and made a personal assessment of the Truman administration's secret plan for the break-up of the zaibatsu. The secret FEC-230 documents were then leaked to New sweek by Undersecretary of the Army William Draper, in civilian life a senior partner of Dillon Read. In December 1947, while America was gearing up for its presidential election campaign, Newsweek began a series of articles denouncing SCAP-1. The magazine accused SCAP of running amok and exceeding its authority. SCAP was trying to impose 'an economic theory which has ... no counterpart anywhere else in the world. It is not communistic but it is far to the left of anything tolerated in this country.' Newsweek went on to warn American taxpayers that this plan posed grave dangers to their wallets. 'Japan is costing the American taxpayers millions of dollars a year.' Breaking up the zalbatsu would 'weaken the Japanese economy to the point where the maintenance of Japan would become a continual charge on the American taxpayer'. It was vital, Pakenham said, to get Japan back on track and make it 'a fertile field of American capital'. In the US Congress, the attack was led by Republican Senator William F. Knowland, a wealthy Californian newspaper publisher who charged that vital information about US policy in Japan was being hidden from the American people. He said SCAP policy was 'contrary to American standards of decency and fair play [and] not in conformity with our own political, moral, or economic standards'. Foreshadowing the witch-hunts of Senator Joseph McCarthy, Knowland insinuated that FEC-230 had been concocted by communists in the State Department. Herbert Hoover had earlier warned Bonner Fellers that the State Department was sending 'a bunch of communists' to Tokyo, along with some 'fellow travellers'. At the time Fellers was very busy suborning General Tojo and other key witnesses. Hoover was living in an apartment at the Waldorf Astoria Hotel in New York City, where he met regularly with Grew, Kern and the others. He encouraged them to attack SCAP, while at the same time secretly giving advice to MacArthur and Fellers, and passing questions to Hirohito. During this whole period, Hoover continued to lead MacArthur to believe that he had a serious chance of being nominated as the Republican presidential candidate or, at the very least, vicepresident. This made MacArthur acutely sensitive to Newsweek's charges that SCAP was pursuing goals that were virtually communistic. In a fury, he expelled Pakenham from Japan, then was obliged to backtrack and let him return, under pressure from his Republican friends in New York City. When Senator Knowland then made his inflammatory charges in the Senate, MacArthur became apoplectic with rage, but there was nothing he could do. While he could ignore the White House, the Pentagon and the State Department, he could not offend the men who would decide his presidential chances. Accordingly, MacArthur halted all further punitive moves by SCAP, weeded out the remaining liberals and New Dealers from its ranks, turned SCAPA into SCAP-2, and followed the prophylactic course dictated by those who held his future in their fists. The death-blow to reform came soon afterwards. In February 1948 the American government sent two Wall Street bankers to Japan to decide whether liberal reforms should go ahead or not. The outcome was predictable. The Draper-Johnston mission — led by banker Percy Johnston and Undersecretary of the Army William Draper — spent two weeks in Japan, then announced its recommendations. Draper knew little about Japan but, as he was on leave from his position as a vice-president of Dillon Read, it was only natural that he was anxious to protect its investments and those of related firms. Earlier, he had made a name for himself by rescuing German industry from the 'excessive zeal' of US occupation forces in Europe. Percy Johnston was chairman of New York's Chemical Bank, which had longstanding ties with Mitsui Bank. So this was like sending foxes to inventory the hen house. What Japan really needed, they said, was not to be punished for waging a merciless war, but to be restored to economic power as quickly as possible. The Japanese themselves could not possibly have said it better. Of the original list of 325 Japanese companies that were to be reorganized, only 20 remained on the Draper-Johnston list. No Japanese banks were to be restructured. The ambitious American plan to reform Japan's economy and government was suffocated in the cradle in less than three years. As a precaution, the great zaibatsu banks did change their names for a while. Mitsubishi Bank temporarily became Chiyoda Bank, Sumitomo Bank became Osaka Bank, Yasuda Bank became Fuji Bank, and so on. (The boom brought about by the Korean War, 1950-3, quickly returned them to profitability, and made it possible to resurface their carefully hidden assets without attracting attention. Prime Minister Yoshida called the Korean War 'a gift from the gods'.) Japan's incest of business, politics, bureaucracy and outlaws ensured that preserving any one of the four guaranteed the survival of them all. The initial American purge directive of 4 January 1946 had removed from eligibility for postwar political office anyone who had played any part in promoting Japanese aggression or militant nationalism. This included all military officers, heads of overseas business organizations, colonial officers and leaders of ultranationalist organizations. Some 220,000 persons were declared ineligible to hold public office in the new Japan. Washington believed that if these people were purged, new democratic voices would take their place. Nascent labour movements formed in 1946 began noisy demands for reform. MacArthur, after first encouraging such political freedoms, reversed his opinion in 1947-8 and decisively crushed the Japanese labour movement, labelling it a dangerous threat to economic recovery. Anyone who became politically active in organized labour or other radical postwar political movements was called a Marxist. The purge mechanism, intended to remove ultranationalists from public life, was redirected at socialists, labour activists and other leftists. In July 1948, MacArthur intervened personally to avert a general walkout by Japanese railway and communications unions, and followed that with a law prohibiting all government employees from striking. Because he needed the wartime civilian bureaucracy to run the day-to-day business of government after the war, MacArthur left the bureaucracy intact. Japan's bureaucracy had its roots in the former samurai class, so they practised clique loyalties and aligned themselves with oligarchs who could assure their promotion or with special-interest groups who rewarded them more directly with kickbacks. Because no effort was made to reform it after the war, Japan's unreconstructed bureaucracy became the new centre of power. After promising Japan a new constitution, something had to be contrived. At first, MacArthur ordered the Japanese to write their own, but when he saw the results he decided to have it done by his own staff. They were given only three guiding principles: the emperor system would be preserved, the Japanese would formally repudiate war as an instrument of foreign policy, and certain feudal vestiges of the old nobility — like the peerage system — would be eliminated. This constitution was drafted in six days by MacArthur's old friend General Courtney Whitney, a former Manila lawyer and businessman, who was helped by a team of SCAP legal experts. When Whitney presented his hasty draft to Japanese officials, he told them, 'If you are not prepared to sponsor a document of this type, General MacArthur will go over your heads to the Japanese people. But if you will support a constitution of this kind, General MacArthur will support you.' Yoshida consented to the constitution only when he was directly ordered to do so by Emperor Hirohito and because MacArthur had promised that this would guarantee the emperor's safety. The idea of being subjected to any kind of national constitutional referendum so horrified Hirohito and Yoshida that they decided to make the best of it. Being shrewd men, the Japanese recognized that Whitney's text was full of holes and subject to a broad range of interpretations when it was finally — as MacArthur put it -'presented by the emperor to the Japanese people'. Historically, constitutions are drafted by the people or their representatives, as a way of defining and restricting the authority of their government. MacArthur preferred that this constitution would be handed down to the people by the emperor, like the Meiji Constitution before it. As MacArthur's biographer William Manchester noted, it would be conveyed from the emperor to the people by 'the handpicked Tojo Diet' left over from before the surrender. Reporter Mark Gayn observed sourly in March 1946 that 'the new constitution is being passed on to the Japanese by unclean hands'. MacArthur retaliated by banning Gayn from Japan. Although the constitution was written by his own team, MacArthur publicly praised Japan's government for 'such an exemplary document which so coincided with his own notion of what was best for the country'. The constitution did make a pretence of stripping the emperor of political authority, but he had never really had that, so this was done more for the international audience. More importantly, by endorsing a continuation of the imperial institution, MacArthur and Whitney wittingly or unwittingly breathed new life into the very octopus SCAP had been charged to dismember. The emperor was obliged to renounce his divinity, which he did in January 1946 in a statement drafted by SCAP and approved by MacArthur, but this was such an abstraction as to be completely meaningless. By preserving the throne, MacArthur, Hoover, Grew and the others gave conservative Japanese politicians back the very device they had used to hoodwink the Japanese public since the Meiji Restoration. The emperor was a magic wand, and whenever the wand was waved it distracted people from what was really happening. Before the war, any criticism of the Japanese government was interpreted as an insult to the emperor, punishable by death. After the war, no matter what SCAP said, the emperor continued to serve as the chief priest of Shinto and was still popularly regarded as sacred. Conservative politicians hammered home the argument that the emperor remained the head of the Japanese family. Thus any criticism of his government was still an insult to the emperor, the father of the country, with dire consequences. During the 1946 election campaign, the Liberal Party ('liberal' in name only) let it be known far and wide through campaign posters and rhetoric that a vote against them was a vote against the emperor himself. This stirred such deep and fearful resonances that the Liberals easily won. By the end of 1951 all but a few of the 220,000 people purged for their involvement in the war had been exonerated, had their pensions restored and were allowed to resume life as if there had been no war. In 1952, when Japan's sovereignty was fully restored, the few remaining on the list were de-purged. A number of them immediately returned to senior economic advisery posts, while others resumed their jobs in the police and defence forces. In the October 1952 general elections, 139 individuals recently freed from detention were elected to parliament. When the occupation ended in 1952, all Japan's leftists were back in prison, reform was a dead issue and hopes for democracy were again on the back shelf. Japan was quietly bringing its hoard of gold bullion out of hiding. By not forcing the elite to play a leading role in the reform of the Japanese system, America had allowed them to sabotage the very idea of reform. America's oligarchs had rescued Japan's oligarchs. Although it was absurd to see the Pacific War as only a minor historical aberration, they were intent upon restoring things in Japan as they were before the war. George Kerman said: 'We had purposely relieved our erstwhile opponents of every shred of responsibility for what was now to come.' The elite simply tucked the bitter pill in their cheek to spit it out the moment the Americans were gone. Given a priceless opportunity, the American occupation had done little to change Japan. What was intended to be a victory of Western democracy over Japanese fascism became a struggle between American liberals and American conservatives, with many casualties. One of them was George Atcheson, the senior State Department adviser in Japan. Although he was resigned to 'the short solution', he had his enemies, more than he knew. Repeatedly, he and his liberal colleagues and friends were harassed by MacArthur's hardcore rightwingers: General Whitney, General Willoughby and Colonel Bunker. Atcheson had been friends with Terry Terasaki and his wife and daughter since 1941 when Terry had tried frantically to stop the attack on Pearl Harbor. In Tokyo after the war, Atcheson saw a lot of the Terasakis and, realizing how desperately poor they were, he took them packages of foods and other gifts from the embassy store and the US Army post exchanges. Inevitably, US military police or G-2 agents would then appear, arrest Terry and search his house for 'stolen American goods'. This was the kind of harassment the MacArthur team was good at, a form of 'friendly fire'. In August 1947, when MacArthur's inner circle was making the final turnabout from SCAP-1 to SCAP-2, George Atcheson decided he had to go back to Washington personally to report to the secretary of state and the White House what was afoot. He gathered several members of his staff together and set out by government plane across the Pacific, bound for Honolulu. After passing lonely Johnston Island but well short of Hawaii, the plane that had been fully fuelled mysteriously ran out of fuel and went down. One of the survivors said that, as the plane fell, Atcheson shrugged, shook his head sadly and said, 'It can't be helped.' When news of the crash reached Terry Terasaki in Tokyo he was stunned. In a daze, he went to the shore of Sagami Bay and, tears in his eyes, walked fully clothed into the sea, to immerse himself for an hour with his friend Atcheson and all the other victims of the war, whose hopes had now died twice. Once when they were trampled by the oligarchs of Japan, and then when they were trampled by the oligarchs of America. pps.218-235 --some notes-- page 226 For information about Generalissimo Chiang's deals and the release of Japanese war-criminal suspects, see Kaplan and Dubro; Seagrave, The Marcos Dynasty and The Soong Dynasty; the Harrieses, Sheathing the Sword. See also Kataoka on the founding of the LDP. Kodama's release and that of Kishl are in the above sources. 226 For more on the FEC-230 see Hadley and Bisson. 227 For information about the extended Morgan family and General Electric, see Davis and Roberts, Chernow, and E. Lamont. 227 The figures about American investment in Japan come from Bisson, Zaibatsu Dissolution. 227 'We find it difficult to understand' and 'chaos and confusion' are from the New York Times, 21 December 1946. 227 There are many linkages between conservative US business and the Japan Crowd. Morgan Bank was now being run by Russell Leffingwell (1948-50). The Japan Crowd influenced Washington at the highest levels. Secretary of Commerce W. Averell Harriman was a principal in the investment firm of Brown Brothers, Harriman, and was part-owner of Newsweek. See McCullough, p. 370. Secretary of Defense James Forrestal was a key figure at the investment bank of Dillon Read. See Choate, Agents of Influence, pp. 65-6. Dillon Read, headed by future Treasury Secretary C. Douglas Dillon, was one of a group of investment banks called the Club of Seventeen, which handled 70 per cent of Wall Street underwriting. See Chernow, The House of Morgan, p. 502. Former Secretary of War Henry L. Stimson had ties to Morgan and Dillon Read through his law firm. In their thinking about Japan, all were influenced by Lamont, Hoover and Grew. 228 In public, conservative American financiers criticized Japan's monopolies, but favoured them in private. As Eleanor Hadley put it in Antitrust in Japan: 'American political mores require everyone to denounce monopoly and cartels, which all conservative critics were careful to observe.' 228 Information about the American Council on Japan comes from Schonberger; Davis and Roberts; the Harrieses, Sheathing; Livingston et al. 228-9 'Looked upon as playmates' is from the Harrieses, Sheathing, p. 206. 229 From Hirohito, Kern received the Order of the Sacred Treasure and Kauffman received the Order of the Rising Sun. See Davis and Roberts, p. 31. Pakenham was described as 'a friend of Hirohito and Prince Takamatsu'. 229 Castle's background is in Heinrichs, p. 104, and Davis and Roberts, p. 36. 229 Details of Eugene Dooman are from the Harrieses, Sheathing, Nakamura Masanori, and Heinrichs, p. 239. 229 Nakamura Masanorl discusses the self-proclaimed mission of the ACJ to correct the 'excesses' of SCAP policies. 229 On the plan for Kauffman secretly to assess the break-up of the zaibatsu, see Davis and Roberts. Also Tamaki, Japanese Banking: A History 1859-1959. 229 Newsweek's attack began with 'Lawyer's Report on Japan Attacks Plan to Run Occupation', I December 1947. See also the Harrieses, Sheathing, p. 206. 229 Knowland's speech attacking FEC-230 is in Livingston et al., pp. 113-15. Knowland was not elected to the Senate but merely appointed to fill in for a senator who died mid-term. He habitu- ally worked the Red-scare theme, declaring that China was 'lost' by Reds in the State Department. See McCullough, pp. 550, 774. 230 Hoover's behind-the-scenes manipulation. Hoover's own political ambitions had been disappointed. In 1945 he hoped Truman would appoint him secretary of war. Then he was passed over for the vacant Senate seat given to Knowland. He had to be content manipulating events behind the scenes, playing both kingmaker and spoiler. 230 For the Draper-Johnston mission see Livingston et al., p. 106, and Hadley, Antitrust in Japan. More on Draper is in Schonberger, and Davis and Roberts. 230 Johnston's ties to Morgan through Chemical Bank are in Davis and Roberts. 230-1 Hadley describes the arguments of the Draper-Johnston mission. 231 MacArthur and Yoshida sometimes agreed, as when Yoshida denounced labour leaders as 'lawless elements'. Dower, Empire and Aftermath, p. 337. 231 Pyle talks about MacArthur's crackdown on Japanese labour in The Making of Modern Japan, p. 224. 232 MacArthur left bureaucracy intact. Japan's unreconstructed bureaucracy was a danger recognized by many; see Maki. For how this impacted on later decades, see van Wolferen; and Chalmers Johnson, Japan: Who Governs? 232 'If you are not prepared' is Whitney quoted by Gayn, Japan Diary. 232 MacArthur's biographer Manchester says the 'handpicked Tojo Diet' approved the new constitution. American Caesar, p. 500. <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, misdirections and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRL gives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. 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