Article — From the January 1933 issue

Inside the R.F.C.

An adventure in secrecy

( 2 of 4 )


On June 7, 1982, Charles G. Dawes announced that his work as head of the R.F.C. was finished. His letter of resignation was a masterpiece. The budget was balanced, the country moves toward recovery, he observed. He desired to reenter the banking business in Chicago. “It has been a privilege,” he added, “to participate in the earlier stages of the organization of the corporation and its work.” But Mr. Dawes was now about to do some real participating. Less than three weeks later the R.F.C. authorized a loan to his bank of $90,000,000. The President has recently revealed that Dawes resigned not because his work was finished, but in order to look after his bank. Other stories have it that Dawes asked for no money from the R.F.C., but that the request came from other bankers in Chicago. As nearly as I can make out, that is true. But the size of the loan was, nevertheless, remarkable. It was given as $80,000,000 in reports which leaked out at the time. How much Dawes actually got I do not know. But the loan authorized was $90,000,000, which covered almost the entire deposits of the bank, which were only $95,000,000.

Certainly no citizen could have guessed that such vast public sums were made available to just two banks, from the President’s pronouncements about helping little banks and not big ones.

The President has defended this loan on the ground that the fate of 725 country banks were at stake and, through them, the fate of 21,000 other banks. The defense, however, fails to give an adequate answer to a pertinent question. What, may we not ask, was Dawes doing on the Reconstruction Finance Corporation?

Some parts of the Dawes loan story have leaked into the newspapers. Here are a few stories that have not leaked out. On February 15th, Mr. Amadeo Giannini won a bitter battle in Wilmington to regain from Elisha Walker his old control of that famous Delaware corporation, the Transamerica Corporation. The Transamerica Corporation is one of those holding companies which controlled a vast tangle of banks, insurance companies, realty concerns, utility enterprises, security and investment companies, and what not. Its chief prize was the Bank of America in California. The story of Giannini’s victory was of course in all the newspapers. What was not in the newspapers, however, was the fact that on that very day the R.F.C. authorized the lending to the Bank of America of $15,000,000. Nor has the public ever been told that before the Reconstruction Finance Corporation got through ladling out money to this bank it authorized a series of loans–one a month–aggregating $65,000,000.

These two loans authorized to Dawes and Giannini totalled $155,000,000. Certainly no citizen could have guessed that such vast public sums were made available to just two banks, from the President’s pronouncements about helping little banks and not big ones. But there is a good deal more. A loan of $14,000,000 was authorized to the Union Trust Company in Cleveland. Interest in this loan rises when we are told that the Chairman of the Board of this bank, up to June 16th of this year, was Mr. Joseph R. Nutt, treasurer of the Republican National Committee.

Much curious comment attended the naming of the Honorable Atlee Pomerene as head of the R.F.C. to succeed General Charles Ninety-Million Dawes. The Honorable Atlee is a noble Roman of true senatorial exterior, a measure of whose statesmanship may be deduced from his pronouncement after taking the reins which had fallen from the hands of Dawes. If I were a Mussolini in this country, he thundered, I would compel every merchant in the land to increase his purchases now by thirty-three per cent. Why the Democrat Pomerene was chosen, however, was never wholly made clear. But he was, in truth, the ideal Democrat for the job. A loan of $12,272,000 was authorized to the Guardian Trust Company of Cleveland, the Honorable Atlee’s home town. And Atlee Pomerene was a director of that bank.

There were others. In Baltimore the Baltimore Trust Company, of which that Republican stalwart, Senator Phillips L. Goldsborough, was vice-chairman, was authorized to receive $7,402,345 in April.

In Detroit the Union Guardian Trust Company of which Mr. Roy D. Chapin, now Secretary of Commerce, was a director, was authorized to receive a loan of $12,983,000. In Akron–one of Mr. Hoover’s “little” towns–the First Central Trust Company, of which Mr. Harry Williams was chairman and Mr. Harvey S. Firestone, Jr., a director, was authorized to receive $19,000,000.

Among insurance companies, very little help was needed or given to life insurance companies. A large loan, however, was made to a casualty insurance company, one which signs bonds, etc. It was authorized to receive $8,880,000, and among its directors are such worthy objects of government aid as Percy Rockefeller, Elisha Walker, Sidney Z. Mitchell, Charles Hayden, W. A. Harriman, Robert Goelet,

George B. Cortelyou. It is worth observing that almost at the moment this company was seeking millions from the government, one of its directors at least was answering to a Senate Committee for his bear operations in Wall Street.

One large fire insurance company got a cut of $7,000,000–the Globe and Rutgers Fire Insurance Company. The head of this company, E. C. Jameson, will be remembered as the big-hearted patriot who handed out $68,000 to Bishop Cannon in 1928 to carry Virginia for Hoover and the Lord.

Is it not worth a passing thought that almost all of the big banks which had to seek help were under the dominion of those political financiers who clustered round the throne and who coyly admit that they are the architects of our prosperity?

(1882-1964), who wrote for The New Republic, Collier’s Weekly, and other magazines as well as for Harper’s, was one of the leading political commentators of his era.

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