Man with the Purse

(See Cover) A mild midwinter sun glinted on the sumptuous Uruguayan resort town of Punta del Este, 65 miles east of Montevideo. It was an odd setting for talk about poverty, but there last week, in the blue and white assembly hall of Punta del Este's Cantegril Country Club, the economic ministers of 21 hemisphere nations gath ered to launch a historically dramatic new program of massive aid for Latin America's underdeveloped nations -- the Alliance for Progress (see THE HEMISPHERE).

The U.S. spokesman was Treasury Secretary Douglas Dillon. While Cuba's spinach-bearded economic commissar, Che Guevara, glowered in his chair, Dillon opened the conference with the most gen erous offer of help in U.S. history. In a flat, toneless voice that failed to hide the tre mendous promise of his words, Dillon vowed that the U.S. would take the lead in securing $20 billion in low-interest loans over the next ten years to raise Latin America's living standards. "We welcome the revolution of rising expectations" he said, "and we intend to transform it into a revolution of rising satisfactions.''

Plans & Policies. Over the years, the U.S. has been an indifferently good neighbor to Latin America, misunderstanding and misunderstood, pledging much but producing little in the way of desperately needed capital investment. But there was a new tone to the U.S. commitments made at Punta del Este--and this tone reflected the convictions and attitudes of both Democrat John F. Kennedy and Republican Douglas Dillon. As custodian of the world's richest treasury. Dillon presides over the fiscal plans and policies of a nation with a record gross national product of $515 billion; as the fiscal housekeeper for the U.S. Government, Dillon works within the roomy confines of the largest peacetime budget in history--$87.7 billion. But unlike most of his Treasury Department predecessors, Dillon does not consider himself simply a watchdog of the taxpayer's dollar. "He believes in good housekeeping," says a Treasury staffer, "not just to admire the house, but in order to utilize it.'' To Dillon, the U.S. economy is a dynamic weapon in the cold war, an arsenal of dollars that must be strategically employed against world poverty to halt the spread of Communism. Under Doug Dillon, the staid U.S. Treasury is no longer just the Government's check-cashing and revenue-gathering arm: it is an active, shaping force in U.S. foreign policy.

Treasury's present boss may well be the most paradoxical picket on President Kennedy's New Frontier. For the past 8 1/2-years, shy, spare (6 ft. 2 in.. 185 Ibs.) Clarence Douglas Dillon. 51, has ably served the public in posts of enormous influence and responsibility, but he is virtually unknown, and even less understood, by the public he serves. Dillon is a pragmatic, liberal Republican who holds down one of the most sensitive jobs in a Democratic Administration (not all Republicans can forgive him that). He can coldly and calmly approve a $6 billion deficit for the nation; he can also fret over the health of the honey locust trees near his home. Steeled in Wall Street's rough and tumble, Dillon preserves a diffident professorial manner, and revels in tastes that few of his countrymen share: vintage wines. Savile Row suits (from Henry Poole & Co.). fine paintings and finer porcelain.

Ghettos & Genius. For all his aura of patrician wellbeing. Douglas Dillon is only two generations removed from the ghettos of Poland, where Samuel Lapowski. his paternal grandfather, was born. Migrating to Texas after the Civil War. Lapowski set up shop as a clothier, first in San Antonio and later in Abilene, took his mother's maiden name of Dillon, prospered enough to send his only son Clarence to Harvard. Shrewd, smart and blessed with a good poker player's sense of timing, Clarence ("Baron") Dillon was the only boy in his class ('05 ) to own a car--and the one who perhaps drove ahead the farthest. The Baron was an authentic Wall Street genius: he built Dillon. Read & Co. into one of the nation's largest investment firms, retired with a personal fortune of more than $100 million.

Clarence Dillon's only son was born Aug. 21, 1909 in Geneva, while the Baron and his bride were on a two-year post-honeymoon "health tour" of Europe. "My father was injured in a bizarre accident just before his marriage," Doug Dillon explains. "He was at a railroad station in a small resort outside Milwaukee when an express went by the station at full speed. A Saint Bernard had wandered onto the tracks; the train hit him and threw him into the crowd. The dog's body knocked my father against a pillar, breaking his skull. He was unconscious for a week."

Doug Dillon spent a secluded, affluent childhood in a series of suburban homes around New York City. The grandest o'i them all was Dunwalke. an estate in Far Hills. N.J.. that his father has owned since 1920. A wiry child who could read swiftly and understandingly at the age of four, Dillon was sent to be educated in private schools. The most challenging was the Pine Lodge School in Lakehurst. N.J., whose headmaster insisted that his every pupil learn the art of reading fast--and Dillon today riffles through even technical papers at 400 words a minute. While at Pine Lodge. Dillon met and became friends with three heirs to another no table fortune: Nelson. Laurance and John Rockefeller III.

To Harvard, Inevitably. Dillon went on to Groton, where he graduated second in his class, and then, inevitably, to Harvard. Around the Yard, recalls a former professor, he was known as "a terribly able fellow." Too weedy to play football, he managed the freshman and varsity teams, played squash and tennis (when he was 15. he had qualified for the National Junior tennis championships). Dillon's academic interest was American his tory and literature. He had no care then for fiscal theory, and even now likes to boast that "I never took a course in economics in my life."

Dillon was a bridegroom before he was a bachelor (of arts). Three months be fore he graduated magna cum laude, he married pretty, buoyant Phyllis Chess Ellsworth of Boston. Doug took his bride on a European honeymoon, stopping off at Monte Carlo to try out his system for winning at roulette. The young couple cashed in enough chips to buy a set of Napoleon-era china, which they still use --but the future custodian of untold U.S. billions decided that the system was "too boring." and has not used it since.

Before World War II, Dillon made many trips to France; a favorite stopping point was Chateau Haut-Brion, a 104-acre estate in Graves that produces one of the most subtle and exhilarating wines of Bordeaux. Once owned by Talleyrand, the chateau had been bought by Dillon's father in 1933. Over the years, Doug Dillon has taken deep personal interest in the property, and still reserves a large share of Haut-Brion's output for his own use. He takes a connoisseur's quiet pride in his knowledge of wines. "I can tell the year of a given Bordeaux or the district it came from," he says, "but I can't spot both the year and the vineyard."

Parental Shadow. In 1931 Dillon bought himself a seat on the "big board" with a fatherly gift of $185,000, served an apprenticeship with smaller investment houses before joining Dillon, Read as a junior partner. The parental shadow loomed large over the firm--the Baron was board chairman--but Doug Dillon proved that he could hold his own as a Wall Street expert. When Britain, at the start of Lend-Lease, was trying to dispose of some U.S. corporate assets, he took on the delicate $40 million deal that set the American Viscose Corp. (until then a subsidiary of Courtaulds, Ltd.) on its own feet. Dillon, who was then 31, handled the complex transaction without a flaw.

In 1940 the president of Dillon, Read, James V. Forrestal (later the nation's first Defense Secretary), went to Washington as Under Secretary of the Navy.*Doug Dillon went along with him, helped form the Office of Strategic Services (predecessor of the CIA), spent three frustrating years behind a desk before he wangled an escape into action in the southwest Pacific. Serving as an air-operations officer of the Seventh Fleet, Dillon flew on "black cat" (night reconnaissance) missions, took part in bombing runs against Japanese installations in the Philippines. "We were shot at a little," he recalls modestly. "I know what tracers look like." By the time he was mustered out, Dillon had risen from ensign to lieutenant commander.

Dillon went back to investment banking as Dillon, Read's board chairman, soon took on the added job of handling the huge U.S. & Foreign Securities Corp. Dillon managed both jobs with apparent ease--and actually doubled Dillon, Read's investment portfolios in six years. "Anybody else who treated Dillon, Read as a part-time job would have been a drag on us," recalls a partner in the firm. "But Douglas would sit down with all the documents of a transaction, and in 20 minutes he'd have a real grasp of the problem. It was incredible."

Victory's Spoil. Another growing interest of Dillon's was politics. "I imagine he was bored as hell with banking," says a friend. A lifelong Republican, Dillon worked with John Foster Dulles on the 1948 presidential campaign of New York's Tom Dewey; a year later he won an election as a G.O.P. state committeeman. In 1952 he helped secure New Jersey's Republican delegation for Presidential Candidate Dwight Eisenhower, contributed heavily to Ike's campaign chest. After the election, on Dulles' recommendation, Dillon got an impressive spoil of victory: the ambassadorship to Paris.

To many, he did not seem an auspicious choice. Despite his love of France and his connection with Chateau Haut-Brion, Dillon spoke schoolbook French. He also seemed too young (43) and inexperienced to handle a post made all the more touchy by the growing troubles of France's Fourth Republic.

Dillon made a doubtful start as a diplomat. "Whenever a difficult problem came up." recalls one former embassy staffer, "he got a cold in the head." But as France's problems--notably in Indo-China and with the European Defense Community--grew worse, Dillon stepped up to the challenge of his assignment. He and Phyllis spent an hour daily with a French tutor; within weeks Dillon was visiting the Quai d'Orsay without an interpreter. In a social swim where lavish entertainment was a matter of courses, the

Dillon dinners were worth a star, perhaps two, in the Guide Michelin. Dillon was what bureaucrats call a "quick briefer." He read every cable that left the embassy, demanded hyperaccurate reporting from subordinates. He had a habit (as he still does) of catching up aides on small--but often significant--errors. Eventually, even the Foreign Service pros gave him their respect.

Unifying a Tangle. In 1957 Dillon was called home to take over the post of Deputy Under Secretary of State for Economic Affairs (later upgraded to Under Secretary), and put to unifying the U.S.'s well-meaning but tangled foreign aid problems. Secretary of State Dulles relied heavily on Dillon's fiscal experience; so did Dulles' successor, Christian Herter.

During those latter Eisenhower-era years, Douglas Dillon laid down U.S. policy for negotiations under the 38-nation General Agreement on Tariffs and Trade (GATT). He teamed up with the Export-Import Bank and the International Monetary Fund to work out loan deals that eased temporary balance-of-payments problems for Brazil, Colombia, Britain, the Philippines, Chile and India. He took an immense interest in Latin American affairs, represented Ike at last September's Bogota conference, which programed the spending of $500 million in U.S. development grants. Dillon's monument was the Organization for Economic Cooperation and Development--a Marshall Plan successor that now molds the foreign aid programs of the free world. Dillon helped draw up plans for the program, and last December, weeks before he moved into Treasury, proudly signed the OECD charter.

Trooper in Skirmishes. Thanks largely to his passion for unadorned fact, to his careful homework (he likes to field questions without having to whisper to aides for an answer), and to his polite and unruffled demeanor, Dillon proved to be one of Ike's most valuable troopers in skirmishes with Capitol Hill. He is not a man to make memorable quotes, but accomplishes more by not drawing attention to himself. One time he did not entirely escape the limelight was during the U-2 spy case last spring. Christian Herter was at a NATO foreign ministers' meeting in Istanbul, and Dillon was Acting Secretary of State when word reached Washington that the Russians had shot down a U2. Dillon, who had been fully briefed on the plane's real reconnaissance mission, nonetheless allowed State Department spokesmen to release a trumped-up cover story that the U-2 was merely on a weather-scouting flight. He did not tell his press officers the real truth until after Nikita Khrushchev announced that Pilot Francis Powers had been taken alive. Caught mouthing a useless lie, State was roundly scored for the gaff.

During last fall's presidential campaign. Republican Dillon loyally contributed $11,000 to G.O.P. campaign funds. Actually, he was a safe bet to stay on in a top Government job no matter which candidate won. Dick Nixon thought of him for a top Cabinet post. So also--after New York Bankers Robert Lovett and John McCloy turned down the job of Treasury Secretary--did John Kennedy, who desperately wanted to forestall criticism of the New Frontier by placing a sound-money man in the sensitive Treasury job.

"He Needs You." Dillon, with his banking and diplomatic experience, was obviously an excellent choice for Kennedy's purpose. They had first met in 1956 at Harvard, when Dillon was grand marshal at the 25th reunion of his class and Senator Kennedy the winner of an honorary degree. After the ceremony, they dropped by the select Spec Club (both men were members) to chat, later became friends and occasional golfing companions. But when President-elect Kennedy asked to come to Dillon's house (Dillon thought it should be the other way around) and came through several days later with an offer, Dillon, as a good Republican, had plenty of doubts. He got only lukewarm encouragement from Nixon. Ike also was cool, but told him: "You can hardly refuse if the President of the United States says he needs you and you can serve conscientiously." Aft er a week of soul searching, Dillon took the post.

Before the inauguration, questions about Treasury's new chief were plentiful. Republicans--and conservatives generally --wondered how Dillon could live with the free-spending Democratic platform commitments. Easy-money liberals asked whether Republican Dillon would stand in the way of the new Administration's efforts to get the country out of a recession. But at his senatorial confirmation hearing, Dillon managed to seem both fiscally sound and fiscally imaginative, came out in favor of the balanced budgets that conservatives wanted and the recession deficits that liberals felt necessary. He was approved without dissent.

A Free Hand. Moving into his spacious office in the grey, temple-fagaded Treasury building next door to the White House, Dillon called for every document since 1789 that provided a job description of the Secretary's portfolio, then set out to make the department his own. Unlike Secretary of State Rusk, Dillon did not have his top echelon of aides picked in advance by Kennedy. He took advantage of his free hand to build a Treasury staff that moneymen rate as possibly the best since the days of Alexander Hamilton. Dillon's right-hand men:

sbHENRY FOWLER, 52, Under Secretary. Witty, white-haired "Joe" Fowler is exactly the kind of tested, Washington-wise administrator that Dillon needs to run the daily routine of the department. A onetime lawyer for TVA, Fowler has served as counsel for a Senate subcom mittee, the Federal Power Commission and the War Production Board. He headed the Office of Defense Mobilization during the Korean war. Thorough, cautious and sound, Fowler worked on the task force that John Kennedy set up before his inauguration to consider antirecession plans.

sbROBERT V. ROOSA, 43, Under Secretary for Monetary Affairs. The selection of bow-tied, scholarly Banker Roosa (pronounced Roza) to be Treasury's No. 3 man was audibly cheered by the U.S. financial community. A former teacher at both Harvard and M.I.T., Roosa was for four years research director for the Federal Reserve Bank in New York, earned a reputation in his trade as "the best central banker in the world." He has a good teacher's ability to talk lucidly on complex subjects, makes a brilliant congressional witness. Roosa has been the man behind Dillon's efforts to lower long-term interest rates, improve the management of the national debt.

sbJOHN LEDDY, 47, Assistant Secretary for International Affairs. Bookish, boyish John Leddy has been making or carrying out foreign policy all his working life. He spent four apprentice years as a press-agent for the old Pan-American Union, then went to the State Department as a division assistant for trade agreements. Serving on a variety of State's economic desks, Leddy helped plan for GATT, the Marshall Plan, did spadework for Dillon in shaping the Act of Bogota, the Colombo Plan, the OECD.

With such men at his side, Douglas Dillon has established himself as one of President Kennedy's most efficient Cabinet operators and as a trusted voice in White House conferences on everything from Berlin to school aid. Unlike some other Cabinet officers, says one Washington onlooker, "there is no one between Dillon and Kennedy." He created a smooth working relationship with careful, conservative William McChesney Martin, boss of the Federal Reserve Board. To the surprise of Washington trouble watchers, Dillon did even better with Liberals David Bell, director of the Budget Bureau, and "the Professor," Walter Heller, chairman of the Council of Economic Advisers. Last week, just before he left for Uruguay, Dillon walked out of a presidential conference with his arm around Heller's shoulders, jocularly asked him to "keep the shop while I'm gone." Says Heller: "We're on the same wave length. We may not see eye to eye on all the problems, but we see the broad objectives clearly."

Out of Recession. The first New Frontier objective Dillon faced was guiding the economy out of the recession. He happily went along with such Administration pump-priming gestures as fast payment of G.I. insurance dividends and a defense spending speedup. But he argued strongly against the $1 billion public works program that both Heller and Labor Secretary Arthur Goldberg favored. Dillon won: Kennedy refused to embark on make-work spending.

A major aftermath of the recession was a budget deficit. Counting heavily on tax measures that Congress was unlikely to pass, Dwight Eisenhower had optimistically submitted a balanced budget for fiscal 1961. After his initial review of the estimates last February, Dillon announced that the nation in reality faced a deficit of $1 billion, later raised the figure to $3 billion. Dillon is quite willing to let the deficit ride as high as $6 billion. Last month, during the planning for President Kennedy's televised speech on Berlin (TIME, Aug. 4), he argued against the tax hike that other voices called for on the ground that the economy would recover faster from the recession without a new limitation on spending. But Dillon hopes to bring in a balanced budget next year, when the economy should be both boom-ward bound and ripe for a sweeping tax reform that he hopes to nudge past Congress. "Under an extremely conservative system," he says, "budgets are balanced every year. In others, a permanent balance is not the number-one goal. Our aim is to bring it into balance regularly, depending on the state of the economy."

Crusade for Trade. Dillon is also attempting to stem the outward flow of U.S. gold, but admits that current efforts to prevent any further drain on Fort Knox are "not satisfactory." This year, thanks, among other things, to a one-shot $587 million prepayment of postwar loans by West Germany, the payments deficit (which last year ran to $1.5 billion) may be brought close to a balance. But to keep a permanent balance, the U.S. will have to undertake a crusade for trade. "We have got to keep our export total high," Dillon says. "We can do this by keeping our prices as competitive as possible, and this will mean a restraint on wages and prices. We have also got to watch our overseas expenditures as carefully as we can. Some of these expenditures are necessary for security, but there are ways in which the military can cut down."

At Treasury, Dillon pays lip service to the work-all-night attitude of the Kennedys, but gets his job done without too great a sacrifice of his own long-held habits. He reads three newspapers before reaching his desk by 8:45. Dillon is notoriously demanding of subordinates, often interrupts oral reports with a sharp "That's not what I've asked for."

Down in the 80s. Doug Dillon tries to get home by 7:30; his Washington residence since 1957 has been an embassy-sized villa in Washington's Kalorama section, lavishly decorated with 18th century French furniture, his wife's collection of porcelain, paintings by Renoir and Monet.*Sundays, Episcopalian Dillon worships at Washington's National Cathedral, makes fitful efforts to keep his golf game down in the 80s. He also does his heavy reading on weekends; aides have come to dread Monday mornings, when the Secretary invariably shows up with a dozen or more memos with demands for immediate action.

Despite his quiet success, Banker-Diplomat Dillon has not yet stilled all the doubts and criticisms about his fitness for the Treasury job. On Capitol Hill, a few G.O.P. Congressmen joke bitterly about a "Dilloncrat"--meaning "a Republican big spender." The cautious Fed suspects that Dillon does not worry enough about the inflationary danger that trails after big deficits. "The Treasury line now is not so clearly defined as in the past." complains one member of Ike's Treasury team. "When we were over there, maybe we were a bunch of fuddy-duddies. But "by God, there was no question where the line was. Certain things were sin."

"Multiple Objectives." Dillon's defenders--and the Washington woods are full of them--answer that such criticisms are beside the point. In the new Administration's view, Treasury no longer has the negative function of just guarding the dollar. "Treasury policy." explains one White House adviser, "is moving toward multiple objectives. It seeks a sound dollar, a reasonable balance of payments, the checking of inflation, full employment, a reasonable rate of growth. What Dillon stands for is the best possible performance in all directions."

So far, Doug Dillon has managed to keep track of those directions without losing sight of the ultimate objective of his economic policy: convincing the uncommitted nations that U.S.-style free enterprise is both healthy and helpful, and better than Soviet-style Communism. "This is the challenge," Dillon once said, with his customary earnestness. "Are we going to persevere in our efforts to help the one billion people in the free world's less developed areas place themselves firmly on the road to progress? If we do not measure up to the challenge--if through unwise or inadequate actions on our part we allow the newly emerging nations to be dragged one by one into the Communist orbit--then, as surely as night follows day, our own freedom cannot long endure."

*Other Dillon, Read alumni to serve in top Government jobs include William H. Draper Jr., who was Harry Truman's Under Secretary of the Army, and Paul Nitze, currently Assistant Secretary of Defense for International Security Affairs. *Dillon is the only Cabinet member who can match homes with Millionaire Jack Kennedy. Besides his Washington residence, he has an apartment on Manhattan's Fifth Avenue, a winter retreat at Kobe Sound, Fla., called La Lanterne, a summer place in Darkharbor, Me., an estate in Far Hills, N.J., a "cottage" at Versailles, France.

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