Thorny Money

In Houston, rough, tough Oilman Glenn McCarthy is known as a man with plenty of irons in the fire and plenty of greenbacks to stoke it. He had built the $21 million Shamrock Hotel, put millions of his own and borrowed money into chemical plants, a radio station, oilfields, natural gas, real estate. But last week many a Houston citizen blinked in surprise. Glenn McCarthy had asked RFC for a $70 million loan.

Though both RFC and McCarthy were mum on why he needed such a whopping amount, oilmen gossiped that he wanted to pay off his corporate debts (estimated to be upwards of $50 million) and use the rest to develop two promising new oilfields. Why had he gone to RFC? The fact that he had done so seemed to mean that he could not get the cash from private sources, since RFC lends money only when private sources won't.

Though McCarthy's request has yet to be passed on by RFC, it brought up a thorny problem of Government policy: Should RFC make such loans? The New York World-Telegram and the Sun was ready with a loud no. RFC has already lent $15 million for oil development to the Texmass Petroleum Corp. and, said the Telly, apparently RFC doesn't know that private "oil-country banks have plenty of money to lend ... If it is a good loan, how did the RFC get a chance at it? If it is not a good loan, what does the RFC mean using taxpayers' money to get into that risky business?"

Another protest came from the U.S. Senate, where Arkansas' Democrat J. William Fulbright asked for a full-dress investigation of RFC loan policy. He wanted more details on McCarthy's $70 million request, as well as the facts behind such loans as $44 million to Kaiser-Frazer Corp.; $37.5 million to Lustron Corp. (see below); $12 million to Northwest Airlines; $6 million to Waltham Watch Co., and the Texmass loan.

Apparently, said Fulbright, RFC has "strained" its authority by making loans wherever the money would seem to increase employment. "Under that construction of the law," he said, "almost anybody can get a loan." Fulbright hoped that the investigation would show Congress how to put definite curbs on RFC's powers.

With great reluctance, RFC last week made a long-expected decision: it got ready to seize the assets of Lustron Corp., which had repaid none of the $37.5 million it borrowed to build all-steel houses. RFC's announcement was far overdue as Lustron had never showed more than a 50-50 chance of success.

RFC sadly admitted that its foreclosure of Lustron would yield less than $10 million in machinery and houses on hand. The only way foreclosure could be avoided, said RFC, would be for some private company to take over the $37.5 million Lustron debt. RFC didn't "see any sign of that happening."

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