On Oct. 29, 1968, national security adviser Walt Rostow received word from his brother, Eugene Rostow, who was Under Secretary of State for Political Affairs, about a tip from a source in New York who had spoken with "a member of the banking community" who was "very close to Nixon," Eugene Rostow wrote in a memo.
The source said Wall Street bankers -- at a working lunch to assess likely market trends and to decide where to invest -- had been given inside information about the prospects for Vietnam peace and were told that Nixon was obstructing that outcome. Eugene Rostow wrote...
"The conversation was in the context of a professional discussion about the future of the financial markets in the near term. The speaker said he thought the prospects for a bombing halt or a cease-fire were dim, because Nixon was playing the problem ... to block..."They would incite Saigon to be difficult, and Hanoi to wait. Part of his strategy was an expectation that an offensive would break out soon, that we would have to spend a great deal more (and incur more casualties) -- a fact which would adversely affect the stock market and the bond market. NVN [North Vietnamese] offensive action was a definite element in their thinking about the future."
In other words, Nixon's friends on Wall Street were placing their financial bets based on the inside dope that Johnson's peace initiative was doomed to fail. (In another document, Walt Rostow identified his brother's source as Alexander Sachs, who was then on the board of Lehman Brothers.)
A second memo from Eugene Rostow said the speaker had added that Nixon "was trying to frustrate the President, by inciting Saigon to step up its demands, and by letting Hanoi know that when he [Nixon] took office 'he could accept anything and blame it on his predecessor.'" So, according to the source, Nixon was trying to convince both the South and North Vietnamese that they would get a better deal if they stalled Johnson.
In a later memo to the file, Walt Rostow recounted that he learned this news shortly before attending a morning meeting at which President Johnson was informed by U.S. Ambassador to South Vietnam Ellsworth Bunker about "Thieu's sudden intransigence." Walt Rostow said "the diplomatic information previously received plus the information from New York took on new and serious significance." [To read Walt Rostow's memo, click here, here and here.]
An Angry President
That same day, Johnson "instructed Bromley Smith, Executive Secretary of the National Security Council, to get in touch with the Deputy Director of the FBI, Deke DeLoach, and arrange that contacts by Americans with the South Vietnamese Embassy in Washington be monitored," Rostow wrote.
The White House soon learned that Anna Chennault, the fiercely anti-communist Chinese-born widow of Lt. Gen. Claire Chennault and a member of Nixon's campaign team, was holding curious meetings with South Vietnamese Ambassador Bui Diem. On Oct. 30, an FBI intercept overheard Bui Diem telling Mrs. Chennault that something "is cooking" and asking her to come by the embassy.
On Oct. 31, at 4:09 p.m., Johnson -- his voice thick from a cold -- began working the phones, trying to counteract Nixon's gambit. The Democratic president called Republican Senate Leader Everett Dirksen and broached a concern about Nixon's interference with the peace talks.
Johnson said he considered Nixon's behavior a betrayal because he had kept Nixon abreast of the peace progress, according to an audio recording of the conversation released by the LBJ Library in 2008. "I played it clean," Johnson said. "I told Nixon every bit as much, if not more, as Humphrey knows. I've given Humphrey not one thing."
Johnson added, "I really think it's a little dirty pool for Dick's people to be messing with the South Vietnamese ambassador and carrying messages around to both of them [North and South Vietnam]. And I don't think people would approve of it if it were known."
Dirksen: "Yeah."
Johnson told Dirksen, "We have a transcript where one of his partners says he's going to frustrate the President by telling the South Vietnamese that, 'just wait a few more days,' ... he can make a better peace for them, and by telling Hanoi that he didn't run this war and didn't get them into it, that he can be a lot more considerate of them than I can because I'm pretty inflexible. I've called them sons of bitches."
Knowing Dirksen would report back to Nixon, Johnson also cited a few details to give his complaint more credibility. "He better keep Mrs. Chennault and all this crowd tied up for a few days," Johnson said.
That night, Johnson announced a bombing halt of North Vietnam, a key step toward advancing the peace process. The North Vietnamese government was onboard for a negotiated peace.
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