Revolt in the Colonies

From the bankers' standpoint, the first nine years of RFC were the easiest. Jesse Jones always said: "We only take what the banks leave over." When excoriating the New Deal, the bankers always made an exception of their friend and fellow businessman, Uncle Jesse. But last week this beautiful friendship was strained.

Fortnight ago, Jesse Jones pulled a coup that made many a banker narrow his eyes. Its chief victims were Chase National Bank, Kuhn, Loeb & Co., Mercantile-Commerce Bank (St. Louis). For over two years they had been nursing a deal with the State of Arkansas for the marketing of $136,330,557 of bonds. But when it began to ripen, the bankers got worried, went to Friend Jesse and asked him to take $46,000,000 of the issue off their hands. Jones's answer: fine.

Then Jones studied the deal. Abruptly he announced that the coupon rate they proposed (3 1/2%) was too high. The bankers argued to no avail. Three days before the March i deadline, an RFC underling called the Chase and said that RFC would take the whole issue. Average interest rate: just under 3.2%. To the bankers, that meant good-by to two years' work, underwriting profits up to $2,000,000. It also meant the death of an illusion about Jesse Jones.

Last week some other bankers got a chance to pay Jesse back. It happened in Chicago, whose No. 1 bank, the Continental Illinois (chairman: Jonesman Walter Cummings), is almost a Jones colony (TIME, Nov. 27, 1939). One of the juiciest plums in town is the $35,000-a-year presidency of Federal Reserve Bank of Chicago, which fell vacant last month. Jesse already had the nucleus of a good organization built around Cummings (a Reserve Bank director) and First Vice President Howard Payne Preston, an RFC alumnus. For president he wanted his present RFC head, Emil Schram.

Chicago revolted. When Director Cummings marshaled the Jones forces for the first ballot, he found that instead of the five he needed, he had only four. The missing vote was vacationing in Florida. When Cummings offered a proxy for Schram, acting President Clifford S. Young, himself the and-Jones candidate for the job, declared it no election. At this point, the news leaked out to a Chicago Tribune reporter, who rushed it into print. Angry telegrams began burning up the wires to FRB in Washington, begging them to call off RFC's dogs. There was so much talk that Jesse Jones denied any interest in the whole affair. That was the end of the Schram candidacy.

Then the Jones crowd sought a compromise candidate who might get a unanimous vote. At length they hit on quiet, popular Menc Szymczak (pronounced Simchak), a Chicagoan who serves on the Federal Reserve Board in Washington at $15,000 a year. But after a tussle with his conscience, Menc Szymczak refused the $35,000 presidency. He feared being taken for a Jones man.

The Jones hand was played out. At week's end, his votes joined the bankers' and elected Clifford Young. However Arkansas may go in 1944, Illinois was not so safe for Jones as it had seemed.

Because the number of 65-year-olds who choose to keep working instead of retiring on Social Security has reached an unexpected 500,000, Government accountants are busy with a downward revision of the Act's cost.

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