Independent Man: The Life of Senator James Couzens

• 31. THE CRUSADER AGAIN
• Chapter
• Wayne State University Press
• pp. 200-207
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CHAPTER XXXI

THE CRUSADER AGAIN

Their first major clash was on the old question of Muscle Shoals. For Hoover held to the same view on Muscle Shoals that Coolidge had advocated, that it should not be operated as a government power project, but should be turned over to private power companies, if developed for power at all.¹ In his very first message to Congress, Hoover denounced the idea of government ownership of Muscle Shoals with a characteristically unfortunate phrase, calling it “degeneration”² This was galling to Couzens and he said so.

Early in the administration, he also broke with Hoover over another issue carried over from the Harding and Coolidge days—that of the railroads. Then chairman of the Senate Committee on Interstate Commerce, he had begun an intensive study of the railroad problem. In principle, he favored a program of consolidations, for getting rid of unnecessarily competing lines. But at the same time, he was against combinations which would mean “killings” on the part of speculators in railroad securities and the perpetuation of “watered” capitalizations. He was also on the alert against a program that would “solve” the railroad financial problem at the expense of the railroad workers.³

While Couzens’ committee was engaged with this problem, Hoover came out with a proposal for consolidating all railroads east of the Mississippi into four systems.⁴ Couzens criticized Hoover’s program. It was solely “a proposal to help the railroads out of their financial difficulties,” rather than a program that considered the railroad problem in its larger aspects, he said. He added that the Hoover program would result in fewer jobs for railroad workers at a time when unemployment was becoming a major problem.⁵

Hoover defended his program and, in doing so, attacked Couzens. “If Senator Couzens blocks it, that will add sensibly to our depression difficulties,” he said.⁶

Supported by the railroad brotherhoods, Couzens made sure that the Senate did block the Hoover plan. “A victory very pleasing to me,” he wrote to Madeleine.⁷

Reflecting Hoover’s attitude was the observation made twenty years later by a friendly Hoover biographer:

The radical bloc in Congress, led by Senator Couzens of Michigan and supported by the Democrats, defeated the proposal. Their evident purpose was to keep the railway industry demoralized in the hope that eventually the government would have to take them over. Socialism was in the air then, as it is today.

This, of course, proved nonsense of a type that would have been especially irritating to Couzens.

2

On the soldier’s-bonus issue, Couzens again broke with Hoover. Normally, he was as opposed as anyone else to “veterans’ raids” on the Treasury, for he had none of the politician’s fear of the so-called veterans’ vote. But he felt that with the government failing to provide adequate depression relief generally, prepayment of the Soldiers’ Bonus, as provided by the bill in Congress, was a practical, if inefficient, way of getting funds to needy citizens who happened to be war veterans.⁸ Hoover, however, took the position that this would seriously impair the federal credit. He cited Secretary Mellon as his authority on this.

Couzens was scornful. If the outlay for the bonus would bankrupt the nation, he asked, what was there to the earlier argument that Mr. Mellon was “a wizard” in his conduct of the finances of the country? He unburdened himself in the Senate of a sarcastic thrust at both Hoover and Mellon:

“In view of the great Secretary Mellon being alleged to have served under three Presidents, I desire to point out that the fact is that three Presidents have served under the Secretary of the Treasury.”⁹

When Hoover vetoed the Bonus bill, Couzens was lined up with the senators who re-passed the bill over the veto.¹⁰

3

He was especially outraged when Hoover advocated a national manufacturers’ sales tax on all commodities “except necessary food” and possibly “some grades of clothing,” as a way to balance the budget.¹¹

The sales tax was a “monstrosity,” a levy that mainly hit the poor, Couzens declared. “When we scratch down below the surface of this question of a sales tax, we find an effort to get rid of the income tax.” “Whenever anyone mentions a general sales tax I become irrational,” he once wrote.¹²

He was a leader in the revolt in Congress that blocked enactment of the sales tax.¹³

To his personal lawyer, Arthur Lacy, who that year was unsuccessful Democratic candidate for governor of Michigan, Couzens commented acidly on senatorial colleagues who had voted against an amendment of his to forbid the sales tax and to substitute a 10 per cent increase in surtaxes on large incomes. “What I think of some of my colleagues who voted against my proposed amendment could hardly be dictated to a female stenographer. ‘Wealth’ certainly has an enormous number of friends, even among those who are not wealthy. It seems that practically every publisher, nearly every lawyer, nearly every public official and nearly everyone who has the public ear is on guard, in defense of ‘wealth.’”¹⁴

4

But it was over unemployment relief that he found himself in sharpest division with Hoover. In principle, he believed, with Hoover, that the federal government should not undertake direct unemployment relief and that relief funds should be distributed by the state and local governments. But he parted from Hoover by vigorously taking the view that relief by whatever means, had to be made available even by federal handouts, if the need existed, precisely his position during the depression of 1921 as mayor of Detroit. The victims of the depression could not be fed and sheltered on political philosophy, he asserted.

To Couzens, the spectre of jobless men, the sight that had caused him to initiate the five-dollar-a-day plan at the Ford Company, still was a haunting thing. That his and Young Bob La Follette’s 1928 report on unemployment, urging a social security program, was gathering dust did not surprise him. But he did expect Hoover, whose reputation as a public figure was built largely on his humanitarian zeal for getting food to the people of Europe during and after World War I, would come up with some imaginative program for relieving similar distress in America. Yet Hoover even opposed a proposal for appropriating $20,000,000 to the American Red Cross for assisting the poor in drought areas with food. The President took the position that it would violate the “American way” and desert the principle of “private charity” if the Red Cross received support from the government.¹⁵ To Couzens, this was carrying “rugged individualism” to absurd lengths.

In August 1931 Couzens was one of several senators who urged Hoover to call a special session of Congress to enact legislation for federal funds to be distributed through municipal governments. He acted after Mayor Frank Murphy of Detroit advised him that the city was unable to raise funds to provide unemployment relief, that at least $10,000,000 was needed to tide Detroit over the winter.

“We have played ostrich enough,” Couzens said. “Families cannot be allowed to starve.”¹⁶

But Hoover refused to call the special session. In his view, the suggestion had come from “radicals.” “We cannot legislate ourselves out of this depression,” he said.¹⁷

Couzens was all the more angry over this because he had just had a personal experience with appeals to private relief. To meet the situation in Detroit, he advised Mayor Murphy that he personally would contribute $1,000,000, if other wealthy men of the city would contribute an additional $9,000,000. Not only was the $9,000,000 not forthcoming, but at a meeting called by Mayor Murphy, Couzens was criticized—for having made such an “embarrassing offer.”¹⁸

In November 1931, over the radio, Couzens spoke out vigorously against Hoover’s tendency to minimize the seriousness of the depression. “Conditions today seem to indicate the bankruptcy of business genius and leadership in this country,” he said. He criticized leaders who “take refuge inside their storm cellars of wealth and tell those on the outside not to be alarmed, because the country has always pulled through and will do so again.”¹⁹

5

By the time Congress convened in December 1931 conditions had become much worse. Even Hoover then admitted that extraordinary measures were needed and proposed the creation of the Reconstruction Finance Corporation, by which the government would make available millions of dollars to banks and other financial institutions. Although reluctantly, he went so far as to recommend that the RFC be empowered to loan up to $300,000,000 to states and municipalities for relief expenditures, if these local units were unable to sell bonds on their own account in the regular market.²⁰ Indeed, here was the real start of the later New Deal. But such concessions by Hoover came too late.

As 1932 moved forward, the worst fears of Couzens and others came to pass. Unemployment in the United States reached, according to some informed estimates, the unprecedented total of 17,000,000 persons. Banks by the hundreds failed. The Insull empire in Illinois collapsed.²¹ Farmers in some instances threatened to hang judges who foreclosed mortgages, in others halted the shipment of farm products to the cities because of the ruinous prices.²² In Chicago, the city police were alerted and held in stations to be prepared for rioting. To save the banks there, the RFC loaned $90,000,000 to Charles G. Dawes’ bank, just after Dawes resigned as RFC president.²³

6

Detroit in particular was shaken. For Couzens, this was doubly jolting. He had helped to make Detroit the great industrial center that it had become, one that had attracted thousands of workers. Now, it seemed, it had all added up to a social disaster.

Although only a few knew it, the banking structure of Detroit was in a state bordering on collapse. More obvious as to Detroit’s distress was the fact that the Ford plant closed down.

With amazement, Couzens read the startling news. Ford had even abandoned the five-dollar-a-day plan! No longer was it true that “the commonest laborer who sweeps the floor shall receive his five dollars a day.” Instead, the minimum rate for common labor was cut to fifty cents an hour, or four dollars a day.²⁴ In May 1932, 80,000 unemployed workers gathered in Cadillac Square, in front of the Detroit City Hall, for a demonstration to demand action by the government. Not long after this there occurred a riot at the Dearborn plant of the Ford Company in which four men were killed.²⁵

A number of magazines and newspapers carried sober articles that discussed whether or not America was on the verge of revolution, and how a revolution might be staged.²⁶ Dwight P. Morrow, a House of Morgan partner turned United States Senator from New Jersey, wrote: “Most of my friends think the world is coming to an end.”²⁷

Couzens’ reaction to all this was more indignation. In his view, many of the individuals who then talked of the “need” for a Mussolini, or who were fearful of a revolution, were the very ones who had produced the crisis.

7

His attitude in this respect was considerably reinforced by the results of an investigation, begun in December 1931 by the Senate Finance Committee, with his participation, which examined procedures used by American banking and investment firms in the floating of foreign loans. A legislative result was the Johnson Act of 1934, which barred the sale in the United States of the bonds or securities of any foreign government which had defaulted on the payment of its debts to the United States.²⁸

Still another result, indirectly, was one of the most important reforms of the future New Deal, divorcement of investment affiliates from commercial banks. But what interested Couzens primarily was not the foreign-relations aspect of this branch of the securities field, but the morals and patriotism of the investment bankers. Thousands of Americans had their savings wiped out by defaults of the foreign governments whose bonds they had purchased on the endorsement of leading investment firms. By 1932, more than a billion dollars worth of foreign bonds, issued by Brazil, Bulgaria, Chile, Colombia, Ecuador, Greece, and El Salvador, among others, had become all but worthless. Couzens wanted to know if “world conditions” alone were responsible, or if, in truth, investors had been swindled.²⁹

The investigation confirmed his suspicions, he felt. It brought out that the bankers in certain cases had literally forced loans on foreign countries, so eager were they for the profit from floating the resultant securities in the American market. In some cases, the bonds were sold to American investors after the State Department had warned that the issuing governments were shaky, politically as well as financially. Instances were uncovered showing that some of the most respectable banking houses of the nation were not above using peculiar, if not illegal, methods.³⁰

Couzens was especially indignant when it came out that Charles E. Mitchell of the National City Company not only personally profited to the extent of $4,418,732 in bonuses for his operations during the years 1926–1929, but also managed, by the device of selling some bank stock to a member of his family, to avoid paying an income tax in 1929.³¹ His National City Company, as said by Thomas L. Stokes, spurred on its stocks salesmen “by contests, just as if they had been selling soap or vacuum cleaners.”³² Also, to keep up the “morale” of its officers, as Mitchell testified, it maintained a “management fund,” out of which the executives received extra compensation on the basis of the earnings of the company. Couzens wanted to know if this system of “splitting” earnings did not cause “a lack of care in the handling and sale of securities to the public.”

“I do not recall seeing it operate that way,” said Mitchell.

“You wouldn’t,” retorted Couzens scornfully.³³

8

It was no wonder that Couzens was even more contemptuous than ever of the big financiers. He now regularly raised questions about RFC help to big banks, such as the Dawes bank in Chicago. To him, the RFC operations smacked of bailing out “banksters” and preserving their undeserved gains, at the expense, he feared, of the general taxpayers. In July 1932 he proposed a full-dress Senate investigation of the RFC, but was appeased by the establishment of a select committee with the authority to confer with RFC officials.³⁴

The bankers, he felt, were the very men who, while aided by the RFC, opposed, with cries of “no dole,” every proposal to help the little people of the land who were out of jobs through no fault of their own. The conviction grew upon him that millions were out of jobs actually, in large part, through the fault of these same financial giants. No wonder, too, that their talk of the need for a “dictator” irritated him.

He was naive in taking up temporarily with an economic fad called “Technocracy,” and for this he was held up to ridicule.³⁵ But at least he did not make common cause with those who welcomed a dictatorship for America. Back in 1917, in a discussion with a Detroit lawyer, he had conceded that democracies were often inefficient, but said: “Democracy will never be efficient. . . . As long as we believe in democracy, we will have to pay the price, and I for one am willing to do it.”³⁶ He had never changed. Not dictatorship, but more democracy was the answer, he felt, meaning not simply political democracy, but economic democracy, through more equal distribution of security and income. As he wrote a little later to the editor of the United States News, when asked to comment on an article by David Lawrence, that said the great need was a greater dissemination of knowledge among the people, “This dissemination of knowledge, I believe, has brought our people to the conclusion that there has to be something besides the dissemination of knowledge, and that is the wider dissemination of this world’s goods, so that the masses may have some economic security.”³⁷

9

In the summer of 1931, he began to work in that direction himself. Recalling the recommendations in his 1928 “Report on Unemployment,” he announced that he hoped to introduce legislation for a national unemployment-insurance law, one that also would provide for old-age pensions, despite frequently expressed opposition by President Hoover to any such government program. The Detroit Times commented editorially: “He means to work most of the summer with a view to urging immediate legislation in the next Congress. . . . With Couzens working for unemployment insurance and old age pensions, these two reforms appear less remote of realization than they once did.”³⁸

About this same time, Ray Tucker, the Scripps-Howard writer, dropped into his office. They fell to discussing Hoover’s objections to spending large enough sums of government money to diminish unemployment. Couzens told Tucker that even if it meant tripling the federal debt, the government ought to “make work by building libraries, museums, highways, bridges, schools, and so forth, even if they returned no income.”

Tucker was astonished by the boldness of the idea, and asked him if he, a businessman and millionaire, would stand for quotation.³⁹

“Sure!” replied Couzens.

“So fantastic was the suggestion at that time,” recalled Tucker, “that I got an eight-column banner in the New York World-Telegram.” He thought that Franklin D. Roosevelt, then Governor of New York, might have obtained from that story inspiration for his public-works program after he became President.⁴⁰

Of course, Couzens got nowhere with his “fantastic notions.” Such reforms, he knew, would have to wait for a new administration.

He had lost all vestige of hope in Hoover, though events were pushing Hoover also in the direction of federal action.