Act Out of Action

Fortnight ago the Federal Trade Commission told the Press that for the first lime it had invoked the Securities Act against a company which had already sold a bond issue. The company: Laclede Gas Light Co. The cause: failure to report in its bond registration that rate suits were pending against the company (TIME, Jan. 15). Last week the Federal Trade Commission backtracked when it discovered that it had made a mistake, that the bonds in question had not been sold. Laclede Gas, like many another company, was allowed to withdraw a bond registration that did not suit the Commission.

Special Work

Nelson Aldrich Rockefeller must have warmed his old grandfather's heart even before he graduated from Dartmouth. There he dug hard into economics and taught a Sunday school class of twelve-year-old girls. In his senior year he pleased his social-minded father, John Davison Rockefeller Jr., by winning a fellowship which exempted him from examinations and permitted him to dig into the fine arts as well. Just before graduation in 1930 he said: "I don't claim to have sprouted wings. . . . But I have de veloped a growing enthusiasm and appreciation [for art] which will stay with me."

Son Rockefeller's experience with Art in the big world was less fortunate. Although he is a trustee of Manhattan's Metropolitan and Modern Art museums, one of his first family duties was to blot off the walls of Rockefeller Center the Communistic murals of Artist Diego Rivera. He doled out prizes to Rockefeller Center workmen. He was tutored in showmanship by Samuel ("Roxy") Rothafel. He grappled the problem of populating his father's vast acres of office space with rent-paying tenants. And as an unofficial renting agent, he seemed to be an indisputable success.

Manhattan was overbuilt long before the Rockefellers broke ground for their city-within-a-city. With such notable exceptions as their British Empire Building, Palazzo d'ltalia and La Maison Frangaise their office space could be populated only by inducing tenants to move from Manhattan's other tall towers. The zeal of the Rockefeller renting agents became proverbial. But not until last week did any real estate man publicly voice his opinion of the Rockefeller methods. Then the opinion came from a capitalist who is almost as old as John D. Sr., and almost as philanthropic, who also found his fortune beneath the earth (zinc) and also ploughed a large part of it into midtown Manhattan. Pink-cheeked little August Heckscher put his protest in the form of a $10,000,000 suit against Rockefeller Center Corp., its officers, directors, backers and builders.

Filed by two of Mr. Hecksher's holding companies, which own not only the Heckscher Building at Fifth Avenue and 57th Street but also nine other midtown office buildings, the suits demanded, besides damages, an injunction to restrain the Rockefeller zealots "from using co ercion, threats, agreements, promises or other inducements . . . for the purpose of prevailing upon said persons, firms or corporations to cancel or ignore existing leases . . . from paying tenants ... to ignore leases. . . . From assuming or crediting the rental obligation of tenants . . . in [Heckscher buildings]. . . . From taking over and offering space in buildings owned [by Mr. Heckscher] ... or offering space in [Heckscher buildings] at rentals lower than sufficient to meet taxes, legal interest payments and actual costs of operation."

The methods of the Rockefeller zealots were by no means unique in the demoralized market for Manhattan office space. What interested Wall Street were the persistent reports that, of all the Rockefellers named in the suit, none was shrewder, none was closer in business philosophy to the family's founder than tall, blond Grandson Nelson. On the office door on the 56th floor of the tallest Rockefeller tower are the words "SPECIAL WORK, INC." This is Son Nelson's own company. Its staff consists of one or two assistants, a stenog rapher. To outsiders "special work'' is explained as special reports, special credit investigations. But Wall Street is convinced that Special Work, Inc.'s special work is largely an ingenious refinement of the ancient U. S. business principle of Reciprocity. John D. Sr.'s methods were effective but blatant. Wall Street sees no reason why, for a fee, Special Work. Inc. should not be able to persuade three or four of its clients to scratch backs all around to everybody's advantage. And since Rockefeller Center is one of many clients and Son Nelson is in a position to do some pretty good backscratching on his own account, it was by no means impossible that Special Work. Inc. has in its day turned up a tenant or two.

Jones's Parlor

"Step into my parlor and I will buy some of your preferred stock." So the RFC urged U. S. bankers last September. By last week over 4,500 banks had stepped into the RFC parlors. Only a few big banks had, like Manhattan's cautious First National, declined the invitation in toto. Most of the other big city banks at least put one foot into the parlor by selling the RFC a minority stock interest. But Chicago's Big Continental Illinois National Bank & Trust Co., trusting Jesse Jones's oft repeated promises that the RFC would not interfere in the management of banks in which it held stock, stepped right into the middle of the parlor with both feet and sold the RFC $50,000,000 worth of preferred stock, twice the amount held by its other stockholders. A month ago Continental Illinois' directors, still guilelessly believing that Mr. Jones did not want to interfere in the bank, set out to pick a new chairman. They settled on George Alfred Ranney, onetime treasurer of International Harvester, now vice chairman of Commonwealth Edison Co. Then they got a shock. From Washington sped a report that Walter Joseph Cummings, head of Federal Deposit Insurance Corp., was to have the job (TIME, Dec. 25). Again Mr. Jones repeated his promises, but by last week Continental Illinois knew that being in Mr. Jones's parlor was like being in the parlor of any other majority stockholder. He would exercise his right --soft speeches or no soft speeches--to name the bank's chairman. So a committee of seven directors waited on Mr. Jones in Washington. Head of the Committee was Col. Albert Arnold Sprague (of Sprague Warner, wholesale groceries) who at one time was head of Chicago's businessmen's committee to drive out racketeers, who for a short time was Chicago's Commissioner of Public Works, who once ran unsuccessfully for U. S. Senator. For two days Col. Sprague and his colleagues had the honor of conferring with Mr. Jones, the biggest businessman in the U. S. (see p. 16). Then they emerged with their orders. In their pockets they had the names of 17 of the bank's 34 directors who would be allowed to remain in office and of eight more who were to be elected because the RFC wanted them.* Moreover the committee was to invite Mr. Cummings to become not only chairman but "chief executive" of the bank. To hear was to obey. The committee issued the invitation and added an obsequious promise of "wholehearted support" for Mr. Cummings. Lest there be any misunderstanding, the RFC announced "Frankness . . . prompts the statement that the directors of the RFC felt that

some new faces and new ideas in Continental would be helpful and," Mr. Jones himself added, "the RFC is making no recommendations for changes in the official force of the bank. That will be the responsibility of Mr. Cummings and the directors."

Mr. Cummings snapped up the invitation the same afternoon. His first job as a youngster was with the Illinois Trust & Savings Bank (whence the "Illinois" in ''Continental Illinois'') but since then he has been a traction man, a manufacturer, not a banker. Of his 25 directorships not one is on the board of a bank. One of them, however, is on the board of American Car & Foundry Co. of which William Woodin was head. That contact seemed to explain why Mr. Cummings was made president of Federal Deposit Insurance Corp. The RFC in its announcement listed among his other qualifications the fact that he "enjoys the personal friendship of President Roosevelt, Secretary Morgenthau and the Comptroller of the Currency J. F. T. O'Connor."

Rumor had it that he and his "personal friend," the Comptroller of the Currency, did not get along together. Rather than have him resign, his other personal friends, William Woodin and Franklin Roosevelt, preferred to provide him with another good job, and Mr. Cummings had his eye on Continental Illinois. "Naturally," said Mr. Cummings, "I am pleased . . . that I have been invited by the entire board of directors of the Continental Illinois ... to be chairman of that institution's board." Then he rushed to Chicago where he was promptly elected to his new post.

Not to let the visitors in his parlor take too much alarm Jesse Jones hastened to send word to the stockholders of Chicago's First National who met last week to confirm the sale of $25,000,000 of preferred stock to the RFC (an amount precisely equal to their own holdings). His pledge: the RFC would not interfere in the choice of a chairman for their bank, a job that is also vacant. The First National stock- holders believed him, voted to sell the preferred stock.

*New directors: Mr. Cummings; John Quincy Adams. Iowa land owner: Samuel Thomas Bledsoe, president of Santa Fe: Edward A. Cudahy Jr., packer: Reuben G. Danielson, the bank's cashier; Edward Landsberg. president U. S. Brewing Co.; Judson F. Stone, McCormick estates: Willoughby George Walling, president of the Personal Loan & Saving? Bank. Among those retired: George McClelland Reynolds. Charles W. Nash, Robert Wright Stewart. Dennis Francis Kelly, George Fulmer Getz. Frederick Tudor Haskell.

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