Texas Titan

(See front cover) Like a great drowsy giant, the Reconstruction Finance Corporation, oldest and costliest of U. S. recovery agencies, last week stalked forth to stretch its huge bulk to the public gaze for the first time. Not until this startling exhibition did the country fully realize to what an extent its Government, through RFC, had committed it to State capitalism. In two short years the RFC had outstripped private capital, was well on its way to become not only the largest single investor in U. S. finance and industry but also the Biggest Business organization in the land. RFC announced that from Feb. 2, 1932 to Dec. 31, 1933 it had disbursed, or authorized disbursements, to 8,541 institutions of $6,000,000,000. Some $1,500,000,000 had been distributed in 1932-- 55% to banks, 20% to railways, the rest to insurance companies, building & loan associations, mortgage loan companies, farm credit organizations, relief agencies. Again in 1933 there was a $1,500,000,000 outlay. This time banks got 40% while another 15% was invested in bank stocks and notes. Railways received 9%, the remaining 36% being split up among miscellaneous borrowers from sovereign states to indigent farmers. To date, more than. $1,000,000,000 of RFC loans had been repaid. But RFC was pledged to $3,000,000,000 in future commitments to finance which it had a cash balance of only $9,674,518. Not only did the giant need more money in a hurry but it also needed more life. By law it must die Jan. 22 unless the Congress granted it a reprieve. To get that reprieve and additional cash to make it worthwhile, Chairman Jesse Jones last week marched out of his dilapidated office in the old Commerce Building, descended nine perilous floors in an ancient and asthmatic elevator, rode up Pennsylvania Avenue to Capitol Hill and the rooms of the Senate Banking & Currency Committee. There he was closeted in executive session until 5 p. m. Next day he took the same trip, talked with the House Banking & Currency Committee. He called most of the members by their first names, told a joke on an associate who had inadvertently related a dirty story in front of his stenographer, left at 4 p. m. His legislative gardening bore handsome and unprecedented fruit in the form of identical House and Senate bills extending RFC's activities until Feb. 1, 1935, permitting it to sell another $850,000,000 worth of debentures to the Treasury. This sum, plus expected repayments on out standing loans, would get the RFC well forward into its third year. The bill speedily slid through House and Senate. As is the case of all governmental authority under the New Deal, RFC's new potency naturally fell into President Roosevelt's strong grip. But everyone be lieved that the President would continue to delegate RFC's power of life & death over U. S. finance and industry to one man and one man alone. RFC's board is no collection of straw men. An ex-officio director is Henry Morgenthau Jr., who takes time out from, his job at the Treasury to serve. Onetime Republican Senator John James Elaine of Boscobel, Wis., an old La Follette warhorse, represents on the board the Left-wing politics of the New Deal. But--as if to suggest that capitalistic enterprise can be carried on more honestly on the outskirts of civilization--the board takes its coloring mainly from the plains and mountains of the wide open spaces. The three Hoover-appointed Democrats whom President Roosevelt allowed to con tinue on the board are all big businessmen. West by Southwest. Wilson McCarthy is one, a smart Salt Lake City lawyer whose pony-express riding father left him a cattle fortune. Another is that husky lover of detective stories, rich Public Utilitarian Harvey Crowley Couch of Pine Bluff, Ark. And from the most spacious State of all is the man who dominates RFC's policies, has dominated them since the agency's re birth--Chairman Jesse Holman Jones, a Texan now become a titan. When Jesse Jones is out of Washington, RFC is out of Washington; no decisions are made, no major business transacted. Just as Hugh Johnson is NRA, Jesse Jones is RFC. Farm Boy to Financier, Like most of the Southwest's first generation of indigenous tycoons, Jesse Jones's origins were humble. He was born 59 years ago on a farni in Robertson County. Tennessee. His father moved over into Kentucky where he heard there was money to be made in Burley tobacco. He died before he made much, leaving a farm to his three daughters, $2,000 each to his two sons. The sons applied their inheritance to paying off the mortgage on the sisters' farm, set off to shift for themselves. Aged 20, a brawny big youngster, Jesse found himself in Dallas, Tex. He had no money but he did have a well-connected uncle. The uncle ran the M. T. Jones Lumber Co., gave Jesse a job in one of its yards. In a year Jesse was yard manager. In three years he was general manager of the whole concern, planning to extend the company further through Texas and Okla homa. It was then that he moved the scene of his operations south to Houston, a growing railway and shipping town connected with the Gulf by shallow Buffalo Bayou.

Jesse Jones's expansion from the lumber business to the building business was natural. And the mammoth Jones's ideas of building made expansion into the banking business inevitable. Between 1909 and 1918 he founded Texas Trust Co., now Bankers Mortgage Co., of which he has temporarily resigned his board chairmanship. He became an officer of two other Houston banks and board chairman of a third. He built hotels at Fort Worth and Eastland. Through Houston Properties Corp. he invaded New York City, where he has interests in no less than 45 structures. But the Jones building monument is Houston, where he erected the city's three biggest hotels--Rice, Texas State, Lamar (where he lives)--and a round dozen of the biggest office buildings and theatres. In one of those structures is housed his Chronicle. There are only two pictures on the walls of Jesse Jones's RFC office. One shows Houston's skyline as Jones found it. Another shows the skyline as Jones left it. By 1928 he was said to be worth $100,000,000, the richest man in the biggest U. S. State.* It was also in 1928 that the name of Jones first rose in the national political firmament. Having practically financed the Democratic Presidential debacle of 1924, he tendered the Democratic National Committee his certified check in blank to get the 1928 national convention for Houston. When the Democratic delegates settled down in a vast auditorium which he had rushed to completion for them, Jesse Jones got his reward in the form of a courtesy nomination for the Presidency, engineered by such friends as onetime (1927-31) Governor Dan Moody, onetime (1931-33) Governor Ross Sterling. More practical recompense was the whopping business his hotels did during convention week. Financier to Bureaucrat. It was House Speaker John Garner of Texas who persuaded President Hoover to make Jesse Jones a director when RFC was organized in the dread month of February 1932, to lend $2,000,000.000 to paralyzed banks and railroads. Mr. Jones has seen the thing through. He has seen the personnel expand from 100 clerks to 1,400 clerks and 1,400 field agents. As a director, he first served under Charles Gates ("Hell 'n Maria") Dawes, who retired when his Chicago bank sorely needed RFC assistance. In midsummer, 1932, RFC got another $1,800.000.000 to advance for public works and relief, and a new chair man, bald, bumbling Atlee Pomerene of Ohio, a Democrat whom Senate Democrats would not confirm and a Democratic President would not continue in office. Under bumbling Mr. Pomerene and his pinchpenny conservatism RFC prestige hit rockbottom. When President Roosevelt took office, RFC entered its dog days. Mr. Roosevelt was not inclined to continue Mr. Hoover's innovation. He was about to scrap RFC, turn over its functions to Public Works Administration and other of his own burgeoning crop of agencies, when Jesse Jones (no mean politician himself) got his ear. With Jesse Jones elected Chairman, RFC entered a new phase. No longer was it interested primarily in patching up crumbling banks. From rescue it turned to expansion, became the ready means of financing a dozen different projects of the New Deal. It used its credit to force down the price of the dollar, tossed off a few millions to finance the sale of agricultural commodities in foreign markets, poured out hundreds of millions for preferred bank stock in order to set up a new banking system whose deposits could be guaranteed. Thus in use the RFC became the financial heart of a vast experiment in State Capitalism. Colossus. As controller of a prodigious one-man corporation, silvery-haired Jesse Jones has in his potential portfolio $394.000,000 worth of holdings in 67 railroads --enough to make Messrs. Gould and Harriman turn enviously in their graves. In three months he has bought at prices he himself increased from week to week $100,000,000 of gold. He has more bank stock than any man in the history of the world--$475,000,000 worth in 2,235 institutions. Last week he began to use his new power by dictating who should be board chairman of the biggest bank in the Midwest (see p. 43). But colossi often have foot-trouble and Jesse Jones's 6 ft. 3 in. is no exception. On the days when he works ten or twelve hours--a habit his childless wife, whom he married when he was 46, has not been able to break him of--his feet bother him. An earthy humorist, he likes to tell stories on his feet. Once he leaned out of his car in Manhattan and startled a policeman by enquiring in a soft drawl: "Officer, what kind of shoes do you wear? I have lots of trouble with my feet and just won dered how you manage to stand on yours all day long." The scene of the best Jones foot story is laid in Buckingham Palace. Colonel Edward Mandell House of Austin had recommended to President Wilson that Jones be put in charge of the U. S. Red Cross's huge military relief activities in Europe. Jones had an appointment to meet the President at Buckingham Palace, whither Wilson had gone to confer with George V. It was winter and on the way to the palace in a taxi the bitter cold seemed to centre in Jesse Jones's feet. He was shown into a small parlor where he was to meet Wilson. There he removed his shoes before a cozy fire. When the President of the U. S. unexpectedly entered the room with His Britannic Majesty, there was big Jesse Jones of Texas, sprawled in a chair, dozing in his stocking feet. Besides his feet, Mr. Jones's spine troubles him. A dislocated vertebra has for some time prevented him from exercising. He is anything but sensitive about such things for in all his dominant doings he employs the homely, intimate touch. And he would be the last to approve titanic descriptions of himself. He masks, or maybe unmasks, his will-to-power with an air of modest deliberation and open-minded reticence. He listens carefully to the reasoning and suggestions of his colleagues, especially Colleagues Couch and politically important onetime Senator Elaine. He humbly accepted and executed the gold-buying program of his President's Professor Warren. Never does he talk big, like his fellow titan General Johnson, well knowing that lest some upstart Jack arise to climb a beanstalk of prejudice and perhaps calumny, the RFC had best be known as a gentle giant.

*Like everyone else, Mr. Jones has suffered a sharp shrinkage in his fortune. Of the 70-odd real estate holding companies in which he is interested, some have defaulted. Last November the Senate Banking & Currency Committee investigated authorization of two RFC loans, totalling $1,500,000 to Midland Mortgage Co., subsidiary of Bankers Mortgage Co. which Mr. Jones founded. Mr. Jones was able to show that he had severed connection with the company when he joined RFC.

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