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A SPECIAL SECTION:  Haiti since the January 12, 2010 Earthquake
Posted June 13, 2012

On Citigroup’s Anniversary, Don’t Forget Its Brutal Past

U.S. Marine Corps Colonel McDougal

U.S. Marine Corps Colonel Douglas C. McDougal posing with Haitian riflemen. Source: Library of Congress Prints and Photographs Division

Citigroup Inc. (C)’s online timeline commemorating its 200th anniversary presents a story of achievement, progress and world-uniting vision, but it says little about the Republic of Haiti -- and no wonder.

Citigroup’s history in Haiti is remembered as both among the most spectacular episodes of U.S. dollar diplomacy in the Caribbean and as an egregious example of officials in Washington working at the behest of Wall Street. It’s also a story marked by military intervention, violations of national sovereignty and the deaths of thousands.

In the early 20th century, the National City Bank of New York, as Citigroup was then called, embarked on an ambitious and pioneering era of overseas expansion. Haiti emerged as one of National City’s first international projects. In 1909, Speyer & Co. invited National City President Frank A. Vanderlip to join in the purchase of a moribund American-controlled railway concession in Haiti.

Vanderlip agreed and the purchase turned out to be a “small but profitable piece of business” for the bank. But Vanderlip wasn’t interested in the acquisition for its short-term returns. He thought the stock would give National City a “foothold” in the country that could lead to a risk-free and profitable reorganization of the Haitian government’s finances.

Graft, Malfeasance

The next year, the government canceled the contract of the Banque Nationale d’Haiti -- giving Vanderlip the opportunity he sought. Chartered in 1880, the bank was owned by France’s Banque de l’Union Parisienne and was contracted by the Haitian government to finance the national debt and handle the fiscal operations of the state. It was continually dogged by scandal. Haitian politicians accused its directors of graft and fiscal malfeasance (at one point its foreign managers were jailed) and local political aspirants saw the bank’s currency reserves as a bounty for winning political office.

When a new contract was drawn up, the U.S. State Department intervened, claiming it placed an unfair burden on the Haitian people while giving too much leeway to the French to intervene in Haiti’s internal affairs. They also argued that the new contract didn’t represent the American interests that were then gunning for a share of Haiti.

As a result of State Department pressure, a new institution, the Banque Nationale de la Republique d’Haiti, was chartered. The Banque de l’Union remained the majority shareholder, but National City -- alongside a number of other U.S. banks and a German one -- was offered a minority interest.

Executive decisions at the Banque Nationale were made by a committee split between the Banque de l’Union in Paris and National City in New York. Chairman of the New York committee was Roger Leslie Farnham. He had spent a decade working as a lobbyist for the corporate-law firm Sullivan & Cromwell LLP before Vanderlip recruited him to National City in 1911. Farnham lobbied officials in Washington on behalf of the bank, and eventually took charge of all its Caribbean operations, including in Haiti.

With the onset of World War I, French interests in Banque Nationale receded. Farnham assumed a large role in its direction while National City slowly began buying out its stock. At the same time, Farnham was becoming a major influence on State Department policy in Haiti.

American Interests

In 1914, Farnham, who once described the Haitian people as “nothing but grownup children,” drafted a memorandum for William Jennings Bryan -- then U.S. secretary of state -- arguing for military intervention as a way of protecting American interests in Haiti. Sending troops, Farnham insisted, would not only stabilize the country, but be welcomed by most Haitians.

That summer, Bryan cabled the U.S. consul in Cap- Haitien, stating that he “earnestly desired the implementation of Farnham’s plan.”

Meanwhile, Farnham and National City worked to destabilize the Haitian government. They refused to pay government salaries over the summer, and in December they ordered the transfer of $500,000 of the republic’s gold reserves to National City’s vaults at 55 Wall St. The gold was packed up by U.S. Marines, marched to Port-au-Prince’s wharfs and shipped aboard the USS Machias to New York.

The bank argued that they owned the gold contractually and were bound to protect it from possible theft. The Haitians saw it as robbery, pure and simple, and indicative of a growing threat to the republic’s sovereignty.

Threat turned to fact on July 28, 1915. On that day, U.S. Marines landed in Haiti and initiated a period of military rule that would last 19 years. The immediate justifications for intervention included fears of encroaching German influence and a desire to protect American life and property -- especially after a spate of factional violence that included the dismemberment of the Haitian president in response to a massacre of his political opponents.

Once the occupation began, it was rationalized as a necessary measure to teach Haitians the arts of self- government. Sanitation reforms were enacted, education was promised and public-works projects were planned. In the short term, however, the most pronounced labor of the Marines was counterinsurgency. They waged a “pacification” campaign through the Haitian countryside to suppress a peasant uprising against the occupation. It left thousands dead and countless others tortured, maimed or homeless.

Lucrative Business

For National City, the occupation provided ideal conditions for business, offering the bank the authority to reorganize Haitian finances just as Vanderlip had envisioned in 1909. By 1922, National City had secured complete control of Banque Nationale and floated a $16 million loan refinancing Haiti’s internal and external debts. Amortization payments were effectively guaranteed from Haiti’s customs revenue, and the loan contract was backed up by the U.S. State Department.

Haiti proved a lucrative piece of business for National City during the 1920s. Yet by the beginning of the next decade, it began to reconsider its ownership of Banque Nationale. Following protests that pressured the State Department to disentangle itself from Haiti, the Marines departed in 1934.

National City soon followed. Fearful of losing the State Department’s protection, and wary of public criticism of their activities, the bank’s executives sold Banque Nationale de la Republique d’Haiti to the Haitian government in 1935 -- reluctantly closing a profitable chapter of Citigroup’s history.

(Peter James Hudson is an assistant professor of history at Vanderbilt University. The opinions expressed are his own.)

Read more Echoes columns online.

To contact the writer of this post: Peter James Hudson at peter.hudson@vanderbilt.edu

To contact the editor responsible for this post: Timothy Lavin at tlavin1@bloomberg.net


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