The Fight Against Wallace

White-thatched Jesse Jones, the aging ex-Secretary of Commerce, stomped into the marble-walled Senate Caucus Room one day last week. He was half an hour late, and the jampacked crowd gave him a lusty cheer. Taking it; like a veteran trouper, Jesse quipped to Commerce Committee Chairman Josiah W. Bailey: "What about the gate receipts?"

Jesse was there, ostensibly, to testify on the George Bill to divorce the behemoth Reconstruction Finance Corp. from the Department of Commerce. But he, and everyone else, knew his prime purpose: it was to prove that Henry Wallace was not the man to handle the U.S. money, no matter how good a Commerce Secretary he might be. Jesse got to the point quickly:

"Certainly the RFC should not be placed under the supervision of any man willing to jeopardize the country's future with untried ideas and idealistic schemes.

"[The RFC] is bigger than General Motors and General Electric and Montgomery Ward and everything else put together, and you don't hear much about it because it is being run by businessmen, by men experienced in business, by men who haven't any ideas about remaking the world. . . ."

Remake the Country? This breathless, nonstop sentence brought sympathetic laughter and applause from the crowd. Jesse Jones had painted Henry Wallace as many U.S. citizens still see him--a sincere but somewhat aimless dreamer who might be all right as an amiable philosopher but who should be kept at least a mile away from a balance sheet.

Chomping on a bit of gum, Jesse Jones now settled back for questioning. Under Senator "Holy Joe" Bailey's skillful direction it was polite and to the point.

Senator Bailey: "Might the powers of the RFC chairman be used to determine the economic direction o." the country and affect its whole political and social structure?"

Jones: "I think they could affect it very seriously."

Senator Bailey: "Have you ever [thus] used your powers?"

Jones: "I certainly have not--except to the extent of being helpful."

Jesse Jones then launched into a description of RFC's vast and fabulously unrestricted powers and functions. The sole Congressional restriction on RFC is its top lending limit: $14 billion. In the 13 years of its existence, it has lent its present $14 billion revolving fund three times over (for a total of about $45 billion), made a profit of $500,000,000.

Jesse described how freely RFC worked --and presumably could still work: "Back in 1940 we started building war plants. And we would do it on the telephone. [Lieut. General William S.] Knudsen would call up, 'Can you do this? Can you do that--$100 million here, $200 million there?' Yes, that is the way we have run the business."

The Sky's the Limit. Chairman Bailey (like many another Senator who read the testimony later) was a shade awestruck. He asked: "Is there a limit? How far can you go?"

Jones: "We can lend anything we think we should."

Senator Bailey: "That means the sky, does it not?"

Jones: "Any amount, any length of time, any rate of interest."

Senator Bailey: "And to anybody?"

Jones: "To anybody we feel is entitled to the loan."

In the huge caucus room, shivers ran down the backs of the diehard anti-Wallaceites. Congress, usually jealous of the purse strings, had granted this freewheeling power to Jesse Jones because its majority trusted him--and because it felt that he had no ideology beyond the belief that an honest dollar should earn an honest return. But now, the diehards thought: give Henry Wallace a $14 billion revolving fund? Give him the sky? Jesse Jones's testimony on RFC powers was a stopper.

Jesse continued:

"We [the RFC] now own outright about 950 [war] plants and they cost $6 billion. We own about 960 or 970 parts of plants.

. . . In each case, the plant is ours, we can lock it up and keep it or we can sell it. . . ."

Senator Bailey: "Could you continue to operate them?"

Jones: "You could if you wanted to. Congress can do it, yes."

Bailey: "I mean, under existing law."

Jones: "I hadn't thought much about that. . . . But it would be very easy for the Government if they wanted to do it."

In other words, it might be very easy for Henry Wallace, were he head of RFC, to operate Willow Run, or the million-ton-a-year synthetic rubber industry, or aircraft factories from Bendix to Consolidated with a total RFC investment of $3 billion. The diehards' shudders increased.

What Is Your Purpose? This line of questioning had gone on long enough for Florida's New Dealing Senator Claude Pepper. He now moved in to apply the needle. He asked Jesse Jones for the names, backgrounds and capabilities of the men who really run RFC. Jesse turned out to be a little vague on details, but he finally came through with five top men:

Charles B. Henderson, onetime Nevada banker; Sam H. Husbands, onetime South Carolina banker; Henry A. Mulligan, onetime banker who served with the War Finance Corp. in World War I; Howard J. Klossner, onetime bank examiner; and Charles T. Fisher Jr., the "nonworking" president of the National Bank of Detroit.

Senator Pepper asked: "Now, did those men have any background . . . that you would describe as more important than the job of being Secretary of Agriculture?"

Replied Jesse Jones: "Just what is your purpose there, Senator?"

The Senator's purpose, it turned out, was to bring to light the fact that the Commodity Credit Corp. had lost money when it was under RFC supervision, but had made money in 1940 under Henry Wallace's Department of Agriculture. This Jesse Jones did not deny.

Finally Senator Pepper came to his key question: can one man capably fill the two posts of Commerce Secretary and Federal Loan Administrator?

Previously, Jesse Jones had referred to himself as a man who merely kept the "moochers" away. Now he threw all modesty to the winds: "I think it is possible if you will work . . . enough hours. I do not believe there is another fellow in the world that will do it except me."

As Senator Pepper kept barking away at the same question, Jesse Jones finally barked back: "If you are trying to ask me if Henry Wallace is qualified for both jobs, I will say no."

The Visionary. Next day it was Henry Wallace's turn. Having walked the three miles from his Wardman Park apartment hatless in a raw wind, he arrived pink-cheeked and just nine minutes late. He, too, got a cheer from the crowd--his friends, this time. He, too, got quickly to what he believed to be the point:

"There are some who have suggested that this separation of the lending functions from the Commerce Department is desirable because of my alleged 'lack of experience.' . . . This talk does not fool me or the American public. I know that it is not a question of my lack of experience. Rather it is a case of not liking the experience I have. . . ."

Wallace then pointed out that, as Secretary of Agriculture (1933-40) he had supervised more than 12,000,000 individual loans, totaling $6 billion. Said he: "I am proud of our financial record." He added: "But the real issue [at stake] is whether or not the powers of the RFC are to be used only to help big business or whether these powers are also to be used to help little business and to help carry out the President's commitment of 60,000,000 jobs. . . ."

Thereupon, Henry Wallace launched into as clear, bristling and forthright a political speech as he has ever made. (Even Senator Vandenberg complimented him on his " able presentation.") Henry Wallace talked of implementing the President's "Economic Bill of Rights": of more jobs and more foreign trade, of increased post war production and a continued high national income, of high wages and a guaranteed annual wage, of safeguarding free enterprise for private industry and blasting monopolies and cartels, of more houses and better roads, of public works and more TVAs, of health insurance and expended social security and more education. All this he promised -- and reduced taxes, too. Also a reduction in the national debt.

The Politician. It was a breathtaking vision, and the clear implication was that the huge lending powers of RFC could help to bring it all about.

Two hours of inquisition failed to shake Henry Wallace, except that Chairman Bailey forced him into a shadowy corner on the question of equity financing.

Then it came Senator Brewster's turn: "Is it correct that the chief emphasis on rewarding you with this job is for your political activities?"

Wallace: "I have never felt I was primarily a political figure, but I am glad to be recognized as having some competence in that field."

Brewster: "You will agree that the President is a pretty good judge of politicians?"

Wallace: "It looks like I have passed the first grade."

The Conflict. But at week's end there was some doubt that Henry Wallace would make the grade at all. He seemed certain to be shorn of the powers of Federal Loan Administrator. And the Commerce Committee, by a 14-to-5 vote, had also adopted an unfavorable report on his nomination for Commerce Secretary. There was a bare chance he might win confirmation in the full Senate, but his foes stoutly believed they had him licked.

Either way, in or out, Henry Wallace was by no means a dead duck politically. The two-day hearings had highlighted, as never before, the two utterly conflicting philosophies of government now at play in the U.S. Henry Wallace's comprehensive statement of his philosophy had confirmed the worst fears of his opponents. Probably it had also won him more friends.

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