World War I
President Woodrow Wilson appointed A. Mitchell Palmer, a political ally and former Congressman, Alien Property Custodian in October 1917. Palmer held the position from October 22, 1917 until March 4, 1919. A wartime agency, the Custodian had responsibility for the seizure, administration, and sometimes the sale of enemy property in the United States. Palmer's background in law and banking qualified him for the position, along with his party loyalty and intimate knowledge of political patronage.
The size of the assets the Custodian controlled only became clear over the next year. Late in 1918, Palmer reported he was managing almost 30,000 trusts with assets worth half a billion dollars. He estimated that another 9,000 trusts worth $300,000,000 dollars awaited evaluation. Many of the enterprises in question produced materials significant to the war effort, such as medicines, glycerin for explosives, charcoal for gas masks. Others ranged from mines to brewing to newspaper publishing. Palmer built a team of professionals with banking expertise as well as an investigative bureau to track down well-hidden assets. Below the top-level positions, he distributed jobs as patronage. Always thinking like a politician, he made sure his group's efforts were well publicized. For example, he appointed one of his fellow members of the Democratic National Committee to serve as counsel for a textile company and another the vice-president of a shipping line.
In September 1918, Palmer testified at hearings held by the U.S. Senate's Overman Committee that the United States Brewers Association (USBA) and the rest of the overwhelmingly German liquor industry harbored pro-German sentiments. He stated that "German brewers of America, in association with the United States Brewers' Association" had attempted "to buy a great newspaper" and "control the government of State and Nation", had generally been "unpatriotic", and had "pro-German sympathies".
Later criticism of Palmer's performance focused less on his appointments or the fees earned by political cronies than on his sales of enemy assets. He campaigned successfully to have his powers to dispose of assets by sale increased to counter Germany's long-term plan to conquer the world by industrial expansion even after the war. There were safeguards in place, but competitive bidding meant nothing when an auction was rigged by withholding information from all participants. More revelations took years to surface and the connections between Palmer and direct profits proved too tenuous to support indictments. Even after Germany's surrender, Palmer insisted on continuing his campaign to make American industry independent of German investment, with major sales in the metals industry in the spring of 1919, for example. He offered his rationale in a speech to an audience of lawyers: "The war power is of necessity an inherent power in every sovereign nation. It is the power of self-reservation and that power has no limits other than the extent of the emergency."
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