Bill and Billy

Over the dimpled, apple-laden hills of Yakima, Wash, some 30 years ago a sandy-haired boy with a pinched, earnest face used to peddle papers for the Yakima Daily Republic to help support his impoverished family.. Two months ago when this same boy, now a lean, tousle-haired lawyer of 39, was rumored to be in line for an important Government post, the Yakima daily Republic sourly headlined an editorial: "Yakima Not at Fault." Reason for the daily Republic's lack of enthusiasm over the possibility that William Orville Douglas might become chairman of the Securities & Exchange Commission was perfectly plain. That stalwart Republican newspaper was echoing a widespread belief that Bill Douglas was a financial radical of as deep a dye as the New Deal has yet produced.*

As the Government's policeman of Wall Street, SEC has lately mellowed enough to be regarded with complacence, almost respect, even by brokers. But fortnight ago Bill Douglas actually was promoted to SEChairman. Last week, therefore, when he returned from vacation on Cape Cod to take over his new job in Washington, all Wall Street wondered whether the Policeman's Billy would not soon be whacking out stringent new reforms.

Joe, Jim & Bill. When the five-man SECommission was created in 1934 for the sole purpose of reforming Wall Street, worried speculators were mollified when one of their number--Joseph Patrick Kennedy--was made Chairman. A practical Irishman who was a close friend of Franklin Roosevelt, Joe Kennedy had no desire to affront Wall Street, but saw clearly that financial excesses must be curbed. Policeman Kennedy generally used the technique of catching his flies with honey. By the end of a year the job was largely organized. Virtually all listed securities had been registered, a simplified registration form for new security issues of old-line companies was in service, a study of over-the-counter trading was well under way. Then Chairman Kennedy stepped out and his right-hand man, Lawyer James McCauley Landis, became Chairman.

Landis, one of the most prominent of Felix Frankfurter's "happy hot dogs," was expected to prove a radical zealot. Instead, he mellowed under the mantle of office. Some of his oldtime liberal colleagues became bitter (he was eventually attacked by the New Republic), catalogued him as a conservative, denounced him for having lunched with Wall Street bigwigs. Although he worked prodigiously to keep the SEC's complex mechanism functioning, he did not launch any great crusade.

Meantime Mr. Douglas, who had been with the SEC almost from the beginning, had not made himself popular in Wall Street. Though he had already gone on record as considering customers' men of "unestablished value," Manhattan's Bond Club last spring held out the olive branch after Douglas became a Commissioner by asking him to speak at a luncheon. Though his careless dress and uncombed sandy hair undoubtedly distressed sleek bondsmen, they gave Bill Douglas a big hand when he rose to speak on "Democracy in Industry and Finance." Thereupon he launched on remarks which soon had his hearers speechless with fury. Talking tartly of "corporate kidnapping," he proposed what amounted to a complete remaking of U. S. investment banking. When he sat down there was hardly a clap from the audience.

Therefore, when Jim Landis resigned to become Dean of Harvard Law School, Wall Street hoped that anyone except Bill Douglas would replace him. But Douglas had Joe Kennedy on his side and Joe Kennedy has the ear of Franklin Roosevelt as few others do. Three weeks ago Douglas went to the White House for a conference with the President. Under the Securities Exchange Act, the President has no power to select the SEChairman, but a few days later, while Douglas was vacationing at Chatham, on Cape Cod, the other Commissioners met briefly, made him Chairman. At present there is one vacancy in the Commission and Commissioner James Delmage Ross, Republican, is expected to create another shortly by becoming administrator of the Bonneville (Federal) hydro-electric system. The two other Commissioners are Vermont Republican Robert E. Healy and Wisconsin Republican George C. Mathews, both appointed when the SEC was created.

Hustling to Washington, Douglas remarked: "Under Joe the gains made toward protecting the rights of investors through President Roosevelt's legislative program were consolidated. Under Jim we were taught how to get things done. And we're now going to go ahead and get them done."

Money No Obstacle, Like Landis, Bill Douglas is the son of a missionary--a threadbare Scotsman from Nova Scotia who was a Presbyterian "home missionary," a sort of religious circuit rider. The second of three children. Bill was born in Maine, Minn, on Oct. 16, 1898. Six years later his father died, leaving barely enough money to build a house in Yakima, where Mrs. Douglas had relatives. At in North Fifth Ave., Yakima. the Douglases lived until 1922 on a small income eked out by odd jobs done by all.

Young Bill did poorly on the high-school basketball team, so well on the debating team that he was class valedictorian. This won him a scholarship paying his tuition for one year at Whitman College in Walla Walla. With $5 and an old bicycle, he arrived in Walla Walla in 1916, landed a job washing windows and doing chores at Falkenburg's jewelry store for 10-c- an hour. He earned his meals by waiting on table at a hashhouse for day laborers. Freshman year he lived in a barnlike one-time dormitory which had no running water. The next three he lived in a tent. In summertime he worked at cherry picking, making fruit boxes, often slept in fields for weeks on end.

On finishing, college president of the student body, Beta Theta Pi, Phi Beta Kappa, he gave up graduate work to become an instructor at Yakima High School and support his family. After two years of saving he had $600. He resolved on an insurance selling venture, bungled it and lost all but $75. So he registered at Columbia Law School in Manhattan, expressed his trunk ahead, set out himself as "herder" for a shipment of sheep going to Chicago for slaughter.

He eventually arrived in Chicago riding the rods of a freight. Having learned from hoboes that this was too risky a procedure from Chicago to New York, he bought a ticket, got to Manhattan with 6-c- left. By extraordinary luck he encountered a Whitman classmate, borrowed $75. Tutoring and writing a textbook on the side, he had $1,000 when summer came round again. Back he went to Yakima to marry pretty Mildred Riddle, a fellow teacher in Yakima whom he had often taken picnicking in an antique automobile. When they reached Manhattan they had precisely 35-c-. This time, however, he knew the ropes and all was clear sailing. Working on the side, he finished Columbia second in his class and editor of its Law Review in 1925, easily landed a job with the crack Wall Street law firm of Cravath, de Gersdorff, Swaine & Wood. Planning to return to Yakima in two years, he set to work learning the fascinating intricacies of Wall Street finance and law, meanwhile teaching at Columbia on the side.

Finance and Law. During this period Douglas took his only fling in the stock market on margin. On a tip he put every available cent on a stock then selling at $9. In two weeks he sold it at $28.75. This was the peak and a few days later the stock was back to $9. Douglas had a fat profit but his analytical mind shuddered over the thought of what might have happened.

By 1928 his teaching-legal duties had worn him to a frazzle and he returned to Yakima to practice. After ten days he changed his mind, hustled back to Manhattan to teach full time at Columbia. A year later he idealistically resigned because President Nicholas Murray Butler appointed a new dean of the Law School without first consulting the faculty. Shortly afterwards at a party in Pelham he met famed Dean Robert Maynard Hutchins of Yale Law School. Next day Hutchins telephoned from New Haven, hired Bill Douglas to teach law at Yale. There he was director of bankruptcy studies, collaborated with the Department of Commerce in the same field, did so well that he achieved the topnotch berth of Sterling Professor of Law.

When Bob Hutchins became president of University of Chicago, he dubbed Douglas "the outstanding professor of law of the nation," offered him $20,000 to go to Chicago. Douglas refused because he wanted to complete his long studies in corporate reorganization and bankruptcy. A report he wrote on this subject in the Yale Law Review took the eye of Kennedy and Landis. Kennedy had never met Douglas and Landis knew him only slightly, but both were well aware of his record. In 1934, soon after the SEC got under way, Landis telephoned Douglas to come to Washington.

Conservative Bill Douglas today is tall, angular and reserved, has a certain resemblance to Sinclair Lewis. His face is lean and pinched, his chin sharp, his eyes a frosty, visionary blue. Seriousness lies very close beneath his skin and in conversation he often jars his listeners by the way his expression turns suddenly from genial negligence to tightlipped, hard-eyed grimness. Completely free of affectation despite his recent eminence, he still strikes matches on the seat of his pants as he did when he was a cherry picker. Even in such sober surroundings as Senatorial investigation rooms he is prone to twist himself in knots, sit on tables or drape his legs over the side of his chair when talking earnestly. Averse neither to whiskey-sodas nor to jokes about traveling salesmen, he allows neither to interfere with his work, at which he often labors 16 hours a day.

Too busy to mingle much in society even if he wanted to, he lives quietly with his wife and two moppets, Mildred, 7, and Bill II ("Bumble"), 5, in a handsome brick house in the country near Washington, plays bridge, poker and golf with gusto, reads biographies, has a Negro servant whose Christian name is Rochester. His few intimates are devoted to him. He in turn is devoted to his work with singleness of purpose in a way that has given him a reputation even among his enemies as honest and straightforward. Said he at his first press conference upon election:

"... What kind of a bird am I? To tell you the truth, I think that I am really a pretty conservative sort of fellow from the old school, perhaps a school too old to be remembered. I think that, from the point of view of investors, the one safe, controlling and guiding stand should be conservative standards of finance -- no monkey business. I am the kind of a conservative who can't get away from the idea that simple honesty ought to prevail in the financial world. I am the kind of a fellow who can't see why stockholders shouldn't get the same kind of fair treatment they would get if they were big partners instead of little partners in industry. ... I think that the SEC in the role of investors' advocate can do a great deal to preserve and revitalize the capitalistic system upon truly conservative standards. . . ."

A Democrat, a Rooseveltman, and, in believing that the Government should police finance, a liberal, Chairman Douglas is not to be taken so lightly as, say, Rexford Guy Tugwell, when he claims to be a conservative. He would not, for example, be likely to differ from a conservative accountant's view of a balance sheet. Another conservative trait appeared in him last week when he made it clear that his speeches represented his own personal ideas, that, unlike some New Dealers, he feels that "we should not employ the statutes to accomplish by indirection what Congress never empowered us to accomplish."

But conservative traits can make as much trouble for Mr. Douglas as radical traits. For the SEC is a small bark tossed on a very angry sea of opinion and politics. On one side there is Mr. Kennedy who is. as the New Deal goes, conservative. He doubtless would not dream of interfering in Mr. Douglas' administration. Yet he is one of the President's closest advisers, therefore a man of power whether he wishes or not, for when Franklin Roosevelt nods his head in confirmation, the Chairman of the SEC can hardly be unaware.

On the other side there is, within and without the New Deal, a vociferous and active group of financial reformers. If Mr. Douglas does not make Wall Street dance to his cat-o'-nine-tails, they will soon turn upon him as bitterly as they did on Chairman Landis, making his public life a burden to him. Both sides will attempt to circumvent him by intrigue, to drive him before them by direct assault. He is fortunate in having the temperament of a man who goes his own way, but anyway he treads will be paved with thorns.

What Now? Within the law there is little doubt that Chairman Douglas will do his job as rigorously as possible. Speaking for the Commission as its new chief he revealed the following immediate inten- tions :

Prospectuses. "We intend . . . whenever possible to cut down the length and increase the intelligibility of the prospectuses."

Accounting. "I think the commission must be the pacesetter in the accounting field, crystallizing the most conservative practices of the best elements in the accounting profession and seeking by education, by precept, perhaps by rule and regulation, to bring the accounting profession up to the highest levels of its best elements."

Pools and manipulation. "I can assure you that there will be direct, aggressive prosecution of any and every case we can discover."

Segregation of brokers and dealers. "The study of segregation is yet to be made. What course of action will be taken will depend upon . . . that study. . . ."

Over-the-counter market. "We have not forgotten the fact that the Act calls for regulation in the over-the-counter market similar to that in the Exchange field. We will press for that goal."

Underwriting. "I can tell you that the rules covering market operations of underwriters and others during the period of distribution of securities are definitely on their way."

Investment Trusts. "Judge Healy is fast completing the investment trust study and I am informed that the reports will be ready for Congress by Jan. 1 and that recommendations for legislation will accompany those."

Reorganization and protective committees. "I am confident that the Lea bill and the Barkley bill and the Chandler bill will be passed during the next session of Congress." (All three bogged down this year.)

Holding company death sentence. "As the Constitutional issues are resolved on the Public Utility Holding Company Act there will be expansion, if that act is upheld, in the utility division, where we will have a major job to do."

About the current state of the New York Stock Market, whose six-week decline has been attributed by many to thinness of trading brought on by SEC regulation, Chairman Douglas dropped several broad hints: "From time to time we hope to be able to get at the root of market trends. If it is natural, economic forces, that is one thing. If it is artificially caused, that is something else. You should remember that we are not interested in prices as such. . . . We want a free market, and prices will always go up & down in a free market, depending upon the health of particular companies and employment and so on. We don't want to interfere with that; we are not investment counsel . . . nor can we save a fool from his folly."

*Read the Republic's editorial in part: "The Yakima school system should not be held responsible for the career of the infant prodigy who seems destined to become chairman of the Security and Exchange Commission. It is true that William O. Douglas . . . acquired the rudiments of his education in the public schools of this city, but that does not account for the vagaries of his later life. . . . No, it must have been in the halls of Yale and Columbia that he acquired the idea of becoming a crusader and an irritant to all dealers in stocks and bonds.

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