Tennessee Threat

Tennesseans are a sporting breed, and one of the most famed sporting places in that state used to be a Nashville gambling house and saloon known as the Southern Turf. Within that four-story, knife-thin building some 30 years ago Colonel Luke Lea founded the Nashville Tennessean. Where the roulette table once stood is now the city desk. Trick doors, gaudy ceilings, elaborate decorations furnish a lurid background. A telephone switchboard marks the spot where the Southern Turf's onetime owner killed himself.

In 1933 the Tennessean went into receivership and last year its founder was jailed for defrauding a North Carolina bank of $1,384.000 (TIME, May 21, 1934). When, at 55, Luke Lea put on the striped suit of Convict No. 29,409 to begin a six-to-ten-year term, he laid all his troubles to "persecution" by a Nashville banker-politician named Paul Maclin Davis and his elder brother, U. S. Ambas- sador-at-Large Norman Hezekiah Davis. Last week Banker Davis and RFChairman Jesse Jones, who, though a Texan, was born & bred in Tennessee, found themselves in water heated to the boiling point by the Tennessean's troubles.

As publisher of the Houston Chronicle, Jesse Jones long ago promised that RFC would make no newspaper investments, lest the New Deal be suspected of trying to control the U. S. Press. Month ago RFC secretly acquired a third of the Tennessean's outstanding bonds from a defunct New Orleans bank which had put them up as collateral for a Federal loan. After denying the transaction for weeks, RFC sold the bonds last week for their purchase price--$200,000--to President Paul Maclin Davis of American National Bank, which already held another $250,000 of the bonds. What made this set-up look bad to vigilant publishers was the fact that American National Bank's preferred stock is held by RFC which came to its aid few years ago with a $4,000,000 loan.

Secrecy of RFC doings is guaranteed by Federal law, but its doings in New Orleans were revealed last week under a Louisiana State law, drafted by Huey Long just before his death, making all RFC transactions with State banks a matter of public record. Confronted with positive evidence, RFC admitted the New Orleans deal, hastily announced sale of the newspaper bonds to Banker Davis. Quick to smell a rat was Delaware's Senator Daniel O. Hastings, who demanded a sweeping investigation of Paul Davis, his bank and RFC's interest in it. Said he:

"If the RFC intends to use Federal funds to get into the newspaper business, our boasted freedom of the press soon might be expected to disappear."

Hopping mad was Publisher James Hammond of the Memphis Commercial Appeal, whose prior bid of $200,000 for the Tennessean bonds had been rejected for no given reason. "It is plain," snapped Publisher Hammond, "that an agency of government has violated our national guarantee of a free press, and the revelation is shocking. We have had a situation which is a threat of Fascism. . . ."

Publisher Hammond failed to announce that he already held a third of the Tennessean's bonds, that he wanted the paper largely for political reasons. Meanwhile Federal Court hearings on a stockholders' plan to reorganize the Tennessean were jolted to a standstill when Banker Davis offered to buy it lock, stock & barrel for $440,000.

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