A Time for Talent

(See Cover)

One day in 1836, near the end of his second term, old President Andrew Jackson walked across the street from the White House, struck the earth with his walking stick and said: "Right here is where I want the cornerstone." Then & there it was laid, and around it was built the columned granite pile of the U.S. Treasury Department.

Old Hickory had good reason to want the Treasury under his eagle eye. Ever since Alexander Hamilton became the first Secretary of the Treasury in 1789 (and regarded himself as second only to the President in importance), the Treasury had been at the center of the nation's high politics. Jackson staked his political career on a showdown battle over fiscal policy, and shuffled Secretaries like poker cards until he got one who agreed with him. And so, embroiled in one vital question or another, the Treasury was at the heart of politics in subsequent administrations; Treasury & tariff, Treasury & greenbacks, Treasury & free silver, Treasury & the gold standard were hotly argued at the nation's dinner tables through the generations, and into the first months of the New Deal.

Then, abruptly, that kind of argument shifted. It no longer turned around the Secretary of the Treasury.

Forgotten Men. Early in Franklin Roosevelt's Administration the U.S. began to forget how to argue its most important issues. Where politics used to be fought out in terms of the economy, economics were argued in terms of politics--first in the language of the social reformers, then of World War II's soldiers, and finally of the Marshall Planners and the diplomats. The succession of Treasury Secretaries--F.D.R.'s Henry Morgenthau and Truman's Fred Vinson and John Snyder--became, fiscally speaking, all but forgotten men themselves, charged mainly with paying the bills and borrowing money at the lowest possible interest rates.

How did the Treasury come to lose prestige in a generation when it handled more money than Andrew Jackson--or Theodore Roosevelt--could have conceived of? One significant answer: a government that accepts private business as the mainspring of the economy can use the Treasury as a regulator, but a government that considers itself the economic mainspring will put its economic power in the hands of the planners and managers. The passage of the Government's fiscal power from the Treasury to Harry Hopkins of WPA and Harold Ickes of PWA symbolized a whole new philosophy of the relation of government and business.

Now, perhaps, another and reverse shift is due. Eisenhower has named to the job a stocky, straight-shouldered man with a strong nose, bleak blue eyes and a disarming smile. George Magoffin Humphrey, 62, is the 55th U.S. Secretary of the Treasury. By all readable portents he will be the first in a generation to restore Treasury to its function of high policymaking--by fiscal leadership--not by bureaucratic control of business.

The Quiet Type. George Humphrey is from the Midwest heartland of coal and ore which supports the kingdom of steel. Since the '20s he has converted Cleve land's M. A. Hanna Co. from a foundering hodgepodge of mines and miscellany into a skillfully integrated corporation with holdings worth $250 million. The M. A. Hanna Co. dominates coal and iron mines, ships, banks, chemical plants, a rayon plant, a steel corporation--and is now deep in an enormous ore project in Labrador. Humphrey's exploits made his name magic among the planners and visionaries of U.S. industry, but the public knew him hardly at all. "Business," Humphrey used to say, "is judged by performance and if you perform you don't need to talk . . . I've always discouraged the people I know from making speeches." Humphrey will find that public life is different; that performance doesn't count unless the public understands the what and why and how of it; that education--and speeches--are a very important part of a public official's job.

Ike Eisenhower heard about the little-known Humphrey from his chief talent scout, General Lucius Clay. Clay first spotted Humphrey during World War II while Humphrey was serving with quiet effectiveness on the Department of Commerce's Business Advisory Council. Clay saw Humphrey again in postwar Germany; Clay was in command of the U.S. occupation zone, and Humphrey was making a survey of German industry for ECA's Paul Hoffman. Clay knew Humphrey only slightly--and still does--but he was impressed by the rare combination of "forward-looking imaginativeness" and "complete normalcy."

Ike agreed enthusiastically after chatting with Humphrey in Manhattan for a few minutes last November. Ike not only offered him a seat in his Cabinet, but threw an arm around Humphrey's shoulder and, looking at his balding head, said, "I see you part your hair the same way I do." Later, on board the cruiser Helena returning from Korea, Ike and Humphrey cottoned to each other even more. Hum phrey's dry, quick sallies in the wardroom often broke the atmosphere of heavy deliberation, to Ike's relief. And on deck, to Ike's surprise, Old Hunter Humphrey turned out to be every bit as good a skeet-shooter as Old Soldier Eisenhower.

Like Ike, George Humphrey is likely to feel frustrated and uneasy at a cocktail party and happy when he is in the field or at the bridge table. Like Ike, he likes the far-ranging operation, is in his element when he is outbound for Labrador in the Hanna Co.'s speedy converted Lockheed patrol bomber. His nonbusiness passion is horses; he is a scientific horse breeder and an excellent horseman. His rambling, two-story country home in Kirtland Hills, just outside Cleveland, is a horsy household dominated by murals, pictures and statues of horses. Above the living-room mantel is a lighted oil painting of George Humphrey on his own Richmond Boy. He spends most of his vacations on his 3,000-acre estate, "Milestone," near Thomasville, Ga.--usually riding and hunting.

Humphrey has little time or concern for the arts, confines his nonbusiness reading mostly to the sprightly trade magazine of the thoroughbred-horse-breeding industry, The Blood Horse. (When he caught Mrs. Humphrey reading Hemingway's The Old Man and The Sea, he asked, with a wink: "Why would anybody be interested in some old man who was a failure and never amounted to anything?") He revels in the role of head-of-the-family, loves to gather his son and two daughters and his eight grandchildren at Kirtland Hills on Sundays.

One friend describes Humphrey's approach to anything--horses, children or coal mines--as "imaginative orthodoxy." Humphrey pays almost no attention to the day-by-day exercises of the stock market, and he made some of his best business moves during the 1929 market crash. In 1947 he shocked the coal industry by settling directly with John L. Lewis for a 15-c--an-hour pay raise and an eight-hour day. Hauled up before a congressional committee to explain, he gave two prime reasons: 1) he had observed, he said, that once the Government intervened in labor disputes, the unions generally got their demands anyway; and 2) the miners deserved an eight-hour day, and probably would be more productive for it.

"He starts with a tradition," said a fellow Clevelander last week, "and strikes out from there on his own experience."

Pony Boy. If George Humphrey were just a traditionalist he probably would now be the best known and most prosperous lawyer in mid-Michigan. George was born in 1890 in Cheboygan and raised in Saginaw, where his father, Watts Humphrey, was a hearty, roaring trial lawyer with an excellent practice. His mother, a former schoolteacher, was a wise and gentle parent and a political diehard (all through the New Deal she spelled Roosevelt with a small "r").

As a youngster, George was popular, bright and unspoiled--even though he got his first pony when he was only eight. At Saginaw High School he got top grades and was twice president of his class. He played some tennis, and was a steady ground-gaining halfback on the 1908 Saginaw championship football team. At the University of Michigan he took three semesters of engineering, then switched to law and graduated (1912) into a job in his father's firm.

From the start, he was a successful lawyer, with every incentive to settle down to a respected life in Saginaw. Six months after graduation he married his childhood sweetheart, Pamela Stark, daughter of another wealthy Saginaw attorney, who provided them with a new house. But a disturbing influence came to Saginaw in the guise of one Dick Grant, a friend of the family and general counsel of the M. A. Hanna Co. in Cleveland. Grant offered George a job as M. A. Hanna's assistant counsel. George accepted, for reasons that he could not quite explain to himself at the time.

Later he could explain: "In the law," he says, "you put your heart and soul into a client, then you go through it again with the next client. All you could build in the law business was a personal reputation I have never been particularly interested in merely building a personal reputation. In business you develop a mine or a plant, or an entire industry. I was more interested in building something you could see or touch."

Junked Cats. The Hanna company was originally one of Cleveland's "ore houses," built up by Mark Hanna, who became the G.O.P. political power in William McKinley's day. When Humphrey arrived in 1917, the company was thriving on the wartime boom. Humphrey was put to work unraveling the company's World War I tax problems and became an expert on all the details of Hanna's operations. In 1920, at 30, he was made a junior partner just in time to watch Hanna slip into the postwar inventory depression.

By 1925, Humphrey says, "the corporation was in a bad way." It was losing some $2,000,000 a year. Humphrey was installed as executive vice president with wide powers. He set about junking millions of dollars worth of unprofitable cats & dogs, wrote off inventories and cut payrolls. ("He'd fire his grandmother if she wasn't doing a good job," said a friend, "but he'd put her on a pension.") Hanna never again lost money, even during the depression of the 1930s. On the solid foundation Humphrey started building up a new Hanna, drawing on his understanding of basic U.S. industry and his self-acknowledged talent for picking good partners. ("I'm as good at picking partners," he says, "as any man in the U.S.")

In 1929 he linked Hanna's ore and coal mines with a sheet-steel plant in Detroit and Ernest Weir's assortment of steel plants in the Pittsburgh area, forming the National Steel Corp. Hanna owns a controlling interest (27%) in National Steel, and in 1951 earned $6,000,000 in National Steel dividends. In Pittsburgh, Humphrey spotted a young coal-company executive named George Love. He spent years on a carefully drawn plan to buy two Pittsburgh coal companies and form them into Pittsburgh Consolidation Coal Co.--for George Love to run. Humphrey's own account of the operation is typical: "We took two busted coal companies and put them together to build the greatest coal company in the world."

Iron for Gold. For simple survival, an operator of Humphrey's caliber must have an instinct for projecting trends--political as well as economic--into the future. "In extraction industries," he says, "you have to look ahead or you will find that you have got everything out of the ground that is to be had--and you're out of business." The rich Mesabi iron-ore lode in Minnesota is wearing thin as the nation's (and Hanna's) prime ore source. Twenty years ago Hanna proved the big ore field which Bethlehem Steel is now operating in Venezuela. ("We didn't develop it," says Humphrey, "because there were political difficulties in Venezuela.") Then Humphrey heard about a Canadian named Jules Timmins, who held the mineral rights to 24,000 square miles of land along the Labrador-Quebec border. Timmins had been looking for gold and all he was able to find was a fabulous deposit of iron ore.

Humphrey flew to Canada to buttonhole Timmins. The land lay in desolate territory some 300 miles north of the Gulf of St. Lawrence, in an area called "Ungava"--Eskimo for "faraway." Said Humphrey to Timmins: "What if you found $100 million worth of gold up there? Would anybody build a railroad to bring it out?" He answered his own question. Hurrying back to the U.S., he got the backing of five big U.S. steel companies, a $200 million loan from insurance companies, and formed a corporation with Timmins' Hollinger Consolidated Gold Mines, Ltd. to bring out the iron ore. ("It's a certainty," says one of Humphrey's admirers, "that nobody else in the U.S. could have raised so much capital so fast for a project in Labrador.")

The project is among the most ambitious feats in the history of private capital. The company operates its own air transport service for personnel and supplies. And it is now in mid-construction on a 358-mile double-track railroad to bring the ore down to dockside in the St. Lawrence Gulf. First ore shipments are due in 1954. Soon afterward, production will rise to about 10 million tons a year, and can be boosted to 30 million.

In terms of business, Ungava may yet be a gold mine. In terms of national security, it offers an invaluable new ore source for the U.S. steel industry, which uses 121 million tons of iron ore a year.

"Do You Want a Highway?" The Ungava project involved Humphrey in one of his rare appearances before a congressional committee, to testify in favor of the St. Lawrence Seaway. He admitted he had once been against the seaway and now favored it. "It's perfectly simple gentlemen," he said. "You've got some material up there that you need down here. The only question is do you want a highway between the points or not?"

Humphrey always regarded "that thrilling thing up in Canada" as his last big accomplishment. Once the Labrador project was rolling, he planned to retire. "I was going to shoot some quail and raise some horses," he says. Then Ike asked him to take Treasury. Humphrey went off to Thomasville for a day to think it over. Convinced that "the spirit of this election is the greatest thing that has happened." he agreed to take the job.

The Basic Problem. Humphrey will find enough work in the Treasury to make him feel at home. He will be top boss of--among others--the Bureau of Internal Revenue, the Secret Service, the Bureau of Narcotics, the Bureau of Engraving & Printing (which printed $9,441,380,000 worth of currency in fiscal 1951), the Bureau of the Mint (a billion pennies alone), the U.S. Coast Guard (35,000 officers & men, 192 cutters, 62 patrol boats and 36 lightships) and the Coast Guard air arm (113 planes). He will preside over a domain of 88,000 people. He will have his own flag, serve as a trustee for some $18 billion in Social Security funds, and as chairman of the National Advisory Council on International Monetary & Financial Problems.

But all of these jobs are minor compared with the real job of restoring the Treasury to effective leadership. John Snyder had a preoccupation with borrowing money at low interest rates. To his credit as a banker, he kept the cost of servicing the debt low, but the policy itself contributed to a postwar inflation.

Humphrey is eloquent on the perils of inflation, but he senses another peril in slamming the U.S. economy against the dashboard if he puts on the brakes too fast. He has a businessman's horror of running a government by deficit, and is a devout believer in the balanced budget (even to the point of personal conviction that defense spending should be cut if necessary, to balance the budget). But Humphrey knows that Harry Truman's $78.6 billion budget, with its $9.9 billion deficit, is another factor which makes quick economic change impossible. "You can't set a hen in the morning," he says "and have chicken salad for lunch."

The Magic Sound. As soon as he sits down in his office, problems are ready to pop out at him like clay pigeons at a skeet shoot. For example, some $69 billion of the $267 billion public debt will come due during 1953-Since the $69 billion obviously can't be paid off, it will have to be refinanced.

Another imminent problem is the tax with the most popular name and the most unpopular results: the excess-profits tax. The Government in one way or another has to advance billions to industry to make up for the new capital that is dried up by a tax that falls on an efficient expandable business. Humphrey, like most businessmen, is violently opposed to E.P.T., and would--on principle--love to drop it when it expires June 30. But the New Deal era has given "excess profits" such a magic sound that Humphrey will have to make the real meaning of E.P.T. clear to the Congress and the country.'

At a still higher level of policy, Humphrey's Treasury will have to wield the Government's influence over international trade. Some U.S. economists are suggesting that the U.S. would find itself with some $35 billion in extra cash if the Treasury would raise the price of gold i.e., devalue the dollar. Then, as the theory goes, the U.S. could use the $35 billion to set up a stabilization fund to let European countries sweep away currency restrictions. This plan has been vigorously attacked as adding to U.S. and world inflationary trends. It finds little or no favor among Ike's advisers. But they are deeply concerned about how to lower barriers to world trade, and nonconvertible currencies are a serious barrier. (The tariff is another.) For months there have been rumors of a new British effort to make the pound convertible. Humphrey may soon find himself involved in negotiations for essential U.S. help on this problem.

Humphrey has already used his talent tor scouting out partners to build what is urrently the strongest executive team of any branch of the new Administration, ^or his Under Secretary of the Treasury e got Marion Bayard Folsom, 59 treasurer of the Eastman Kodak Co. and chairman of the Committee for Economic Development. (C.E.D. has a healthy respect for military preparedness but wants a pay-as-you-go policy.) For Assistant Secretary Humphrey brought Horace Chapman Rose, 45, from Cleveland. "Chappie" Rose, a lawyer, was once secretary to Justice Holmes, but has been at Humphrey s elbow at M. A. Hanna for five years For special adviser on debt management and monetary policies Humphrey called m W. Randolph Burgess, 63, chairman of the executive committee of the National City Bank of New York. Burgess, a dauntless graduate of the classical economic school, calls a balanced budget "the most sacred principle of sound money."

Problems of Influence. This week when Humphrey came up for confirmation before the Senate Finance Committee he gave the Senators a pleasant surprise by knowing all of their names, and gracefully fielded the routine questions about his holdings & finances. He had resigned all of his official positions (which paid him about $300,000 annually), and all of his directorships. He would keep his stock in Hanna and its principal affiliates. Obviously, the Hanna companies would have tax dealings with Treasury, but Humphrey thought these would be settled at levels below his office. If the decisions came to him, he said, he would consult with the appropriate congressional committees.

"Suppose I sold all my stocks," Humphrey went on. "I've thought of it. What would I do with the money? If I left it in cash in the bank, someone could say I was unduly influencing the bank as Secretary of the Treasury. The Secretary has a lot of authority over banks. Or suppose I put it into Government bonds. Certainly there is no one in the country in a better position to influence the bond market than the Secretary of the Treasury."

At one point Colorado's Eugene Millikin addressed Humphrey as "Mr. Hanna." Millikin laughed with the rest at his mistake, and said: "Well, it's a good Republican name." Replied Humphrey:

"That's right, and I'm proud of it."

The committee confirmed him unanimously, and George Humphrey headed off toward downtown Washington to make a good Republican name for himself at the U.S. Treasury.

This file is automatically generated by a robot program, so reader's discretion is required.