Locking the Door

When a $10,000-a-year official of the RFC, John Hagerty, took over the $30,000-a-year presidency of Waltham Watch Co. (TIME, May 9), many a congressional temper flared. For Hagerty, as the RFC's Boston manager, had recommended the $9,000,000 loan (later cut to $6,000,000) that enabled Waltham to reorganize. A Senate committee began digging into the RFC's records, found that the RFC had been an open door to high-salaried jobs in other companies which it had bailed out. In 4 1/2-years, 20 RFC employees had joined companies that were in debt to the RFC. Like Hagerty, many of them had recommended loans for their future employers. Examples of other shifts:

P: Sterling Foster, ex-chief of the RFC's loans operations division, to the presidency of South Carolina's Plywood Plastic Co., which has $3,000,000 in RFC loans.

P: Ben Shallit, RFC engineer who recommended a $200,000 loan to Alaska's Usibelli Coal Mines Inc., to assistant manager of the company.

P: RFC's Merl Young, an $18,000 vice-presidency at Ohio's Lustron Co., which has a $34.5 million RFC loan.

Last week, the Senate Banking & Currency Committee decided it was time to lock the RFC's job-placement door. It approved a bill that would bar RFC officials who have lending discretion from accepting jobs with RFC borrowers for two years after loans are made. Speedy congressional passage was likely.

A few Senators were also looking for other doors to lock. With the Army tracking down the shennanigans of "Five-Percenters" (see NATIONAL AFFAIRS), Nebraska's Senator Hugh Butler thought the Government ought to go after its own ex-officials who practice law before the same agencies they once bossed.

Specifically, Butler mentioned ex-CAB Chairman James Landis, ex-Trustbuster Thurman Arnold, ex-OPA Boss Paul Porter and ex-Under Secretary of the Interior Abe Fortas. He called them "the real influence men ... the professional bleeding hearts of the New Deal who have been converted to the private enterprise system by ... fat legal fees." Butler wanted to outlaw all such representation for at least two years after officials left federal service.

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