Treasure Islands - Nicholas Shaxson [120]
Du Pont was popular, and Republicans weren’t that worried about the state election, but they did fret that if this story got out, it might affect the campaigns of other Republican candidates, including U.S. presidential nominee Ronald Reagan.
“Gordy was one of the unsung heroes of the whole story,” Hayward continued, “a good old pig farmer. Frank [Biondi] and Chuck Welch got into a helicopter in Wilmington and went to see him and said, ‘Bill, we want you to know what we’re working on. We’re here to ask you to keep your mouth shut and not make it an issue in the campaign.’ Bill Gordy, God bless him, said yes.”
The entire Democrat establishment in Delaware seems to have bought into the silence. And not just them. “If you go back and read the News Journal,” said Hayward, “you will not find one mention of it in the press in the campaign season.”5 This proposal was circulating among Delaware’s entire top business and political elite, including a couple of “populist” legislators who saw this—usury—as a threat to the basic consumer. “We had all these major bankers in Delaware through the whole summer,” said Glenn Kenton, another key player, reeling off names like Citicorp’s CEO Walter Wriston and Chase’s president Tom LaBreque. “Nobody found out about it. It’s just an amazing thing.”
Still, inside this rarefied secret circle, a pushback did materialize. “The most significant counterforce, though not overt, was the local banks,” said Swayze. “In the cold citadels of privilege there was a fear the big banks would run rings around them.”
Wall Street began to apply pressure. Chase stiffened Delaware spines at a meeting at the Wilmington Club in June, threatening to pull up stakes for South Dakota.6 “The banks would come down and say, ‘Now if we come [and build these institutions], are you guys, meaning the government, you’re not going to cut us off at the knees here?’” du Pont explained. He agreed to form an informal task force to look into Chase’s plan and promised to reply by September.
In the end, Wall Street and Delaware’s bankers settled on a compromise. To protect the local banks, they promised clauses to prohibit the outsiders from touting for local retail business. By mid-August the local banks were on board, and the task force turned to the legislative process. A special session of the legislative assembly was called outside of normal procedures to insulate this from the democratic process. As the Delaware Lawyer explained it, the special session’s purpose “was to prevent the proposal from becoming encumbered in the ‘horse trading’ that typically occurs in the regular session.”
While bigger states saw laws regulating economic activity as complex moral, political, and economic issues, Delaware was seeing them instead through an offshore lens: as pieces of sovereignty that could be sold to make locals rich.
Chase had opted for Delaware, not South Dakota, partly because it did not want to be following in Citicorp’s slipstream. “Chase said, ‘We’re not going to the same place Citicorp is going,’” Kenton remembered. Citicorp, he added, had said we’re “only out in South Dakota because we had to go someplace. But if you are going to open up, count us in too.”
As Wall Street interest grew, Delaware kept brainstorming for still more business. Biondi suggested talking to JP Morgan, where he had some connections: It did not issue credit cards, but Delaware hoped to find other business. “We went up to see Morgan and we said, ‘What do you want?’” Kenton explained. “And they said, ‘We’re just getting the heck taxed out of us up here and we need to have a low-tax environment.’” So Delaware served up the offshore classic of a regressive state tax structure: the richer you are, the lower your tax rate. They set the bank franchise tax at about 8 percent on income under $20 million,