CHAPTER XXXIV
THE WHITE HOUSE CONFERENCE
Two days later, February 8, 1933, Edsel Ford conferred in Washington on the situation with Ogden L. Mills, who had succeeded Mellon as Secretary of the Treasury. He also talked with Charles A. Miller of Utica, New York, who had succeeded Dawes as president of the RFC. Miller left a record of his conference with Edsel. “I . . . urged on him strongly the duty of himself and his father to come to the rescue of the situation [recalled Miller]. I gathered from him that he was entirely willing to do this, but that his father had other views and that influences other than his would have to be used to get his father to change his mind.”1
There is no doubt that Edsel Ford was trying to be as helpful as possible, that he wished to avoid a disaster and wanted the Ford Company to help save the situation. But there also seems no doubt that he was meeting resistance from his father. As would be said by Roger Burlingame, Edsel’s “life had always been more or less frustrated”2—mainly by Henry Ford, common knowledge in Detroit that Charles E. Sorensen amply confirmed in his memoirs published in 1956.
Edsel’s remark about “influences other than his” suggested an idea to Miller. Why should not President Hoover personally request of Henry Ford himself that he save the situation? Miller’s thought was that if the President invited Ford to the White House, Ford would not, could not, refuse.3 Miller immediately called on Hoover and made that suggestion.
But Hoover, according to Miller, was reluctant to act on the proposal. “The President told me,” Miller wrote, “that he was absolutely without influence so far as Mr. Ford was concerned, and to show that, he stated he had endeavored to obtain a contribution from Mr. Ford to the Republican campaign expense account, and had either been turned down entirely or had been offered some trivial amount, I’ve forgotten what, but I think about $500. Under these circumstances, he said he was entirely unwilling to ask any assistance in this matter from Mr. Ford.”4
2
This was a strange attitude for Hoover to take, especially as Ford had spoken on the radio in behalf of his re-election, and in Ford Company plants all over America a pre-election notice had been posted, on October 17, which said:
The Ford Motor Company is not interested in partisan politics. We do not seek to control any man’s vote. [However] we are convinced that any break in [President Hoover’s] program would hurt industry and employment. To prevent things from getting worse, and to help them to get better, President Hoover must be elected.5
Yet, apparently Hoover still did not feel he could appeal to Ford personally at this crucial time.
Of course, Hoover did honestly wish to save the situation. So in lieu of adopting Miller’s suggestion, he decided to call a meeting at the White House for the evening of February 9th. To this conference he invited Secretary Mills, Miller, and Michigan’s two senators—Couzens and Vandenberg.
It was this meeting that first brought Couzens directly into the picture.
3
Couzens had no idea as to the full nature of the Detroit banking situation until just two days before this White House conference. This had been because the representatives of the Guardian Group specifically had asked RFC officials not to let Couzens know of their application. Their later explanation was that they feared he would have “lectured them” on banking ethics.6 Doubtless he would have. However, on February 7th, Jesse Jones and Harvey Couch, RFC directors, decided to tell Couzens. They did so, and also told him that there was no legal way for the RFC to accommodate the Guardian Group in the amount it had requested.7
Then, just before Senator Vandenberg advised Couzens that Hoover wanted both Michigan senators at the White House on the Detroit matter, Clifford Longley, a Ford attorney, and by then president of the Union Guardian Trust Company, and Colonel James Walsh, executive vice-president of the Guardian Group, called Couzens to the anteroom of the Senate chambers, and gave him the details. At this same time they also requested his “support.” (It was later testified that someone connected with the RFC had told them: “We want you to get Senator Couzens to recommend this loan to us.”)8
Just then Couzens was a great deal more interested in some legislation he was sponsoring on the floor of the Senate than he was in any RFC matter. In the last weeks of the Hoover administration, his pet interest was to solve the problem of jobless, homeless boys and girls who, by the thousands, were roaming the highways of the nation in search of food and shelter. His solution, forerunner of the Citizens Civilian Conservation Corps (CCC camps of the Roosevelt administration), was to open Army forts in various parts of the country to homeless youths, who would work there on various projects, such as reforestation and flood control, for their board and shelter.9
The Senate was debating his proposal when a page boy advised him that two gentlemen from Detroit, Longley and Walsh, were waiting for him in the Senate anteroom. He went out to see them at once.
4
He did not give Longley and Walsh much of his time. When they began on the details of their application, he stopped them short. He knew all about the matter already, he said.10 He commented acidly on the assets in the “Wolverine Corporation,” asking pointedly if they included notes of a certain Detroiter, who, he said, he happened to know had been loaned a large sum and was notoriously unable to pay. The bankers ruefully admitted that these notes were included.11
There was some talk about the general problem of making RFC loans to banks. Finally he commented that as a matter of basic philosophy he was not at all certain that the RFC ought to save the banks. After the Dawes bank episode in Chicago, he had begun to have doubts about the soundness of the whole idea of the RFC, he said. In this, incidentally, he was not alone. Financiers as distinguished as Secretary of the Treasury Mills, Winthrop Aldrich of the Chase National Bank, and Melvin A. Traylor, president of Chicago’s First National Bank, had voiced similar doubts as to whether unsound banks should be saved through government support.12 Testimony about this interview was given later by Longley, in direct examination by Couzens himself.
LONGLEY:You said you were in a quandary as to whether you should go one way in support of these institutions, or let things slide the other way and let them go. I have forgotten what your language was.
COUZENS: I guess it was printable, was it not?
LONGLEY: Oh yes, quite printable.
Longley and Walsh departed from the Senate feeling indignant.
5
Actually, this interview changed nothing. The decision was still up to the RFC, exclusively. No one as yet had devised any plan for meeting the objection that the Guardian collateral was not sufficient to permit a legal loan of more than $37,720,000, the McKee figure. This, as stated, was the nub.
That night Couzens went to the White House under a serious misapprehension as to the purpose Hoover had in mind. He believed that the conference was called to get approval of an illegal loan. If that were the case, he knew what he would do. He would voice opposition. He made this clear in a conversation with John Carson, his secretary, who drove him to the White House.
Going to the White House that night [Carson recalled] I urged Couzens to take one position which might have been a cowardly one. I argued that the RFC had authority to make the loan, that he, as a senator, had no authority whatsoever in the matter, that if the RFC made the loan the RFC would divulge its action or keep it secret, that it was obvious the bankers and Hoover did not want to consult him until they felt compelled to do so, that therefore he would be justified in listening to the story and then saying that they had authority and responsibility and the facts and they should exercise their responsibility. His answer was that there was a critical situation and “you cannot run out on such situations.”13
Actually, the White House conference was held, not for the purpose of putting through an RFC loan, certainly not in the case of the trust company, but to find a substitute for an RFC loan. As stated by Miller, later:
Unless the directors of the RFC desired to take a really criminal responsibility, we could not have made the loan; and after we knew the facts and figures, none of us, I think, were in favor of making it, especially when Edsel Ford and the Ford Motor Company represented the large block of stock and held deposits there of an even larger amount.
The conference at the White House, therefore, was not held to discuss the possibility of the RFC making the loan as asked for, but was rather to find some feasible plan for coming to the assistance of this banking situation without violating our legal duty.14
President Hoover also made this clear—in 1933—in a communication to the later grand jury investigation of the crisis, saying:
I was informed that the Guardian Trust Co. situation was such that, even with the utmost of government assistance possible under the law, it would be insufficient without outside help and reorganization internally. The request . . . was that I should endeavor to bring about cooperation from outside banks, private interests and leading depositors to reorganize the trust company and thus prevent a crisis. . . .15
6
The fateful conference was held in the Lincoln Room of the White House.
Unfortunately, it was opened by Miller in a way that contributed to Couzens’ continued confusion as to its objective, as the RFC president realized later. For, instead of making clear at the outset, in his review of the situation, that the RFC could not make the requested loan, and had no intention of making it, Miller began the meeting by reading the original application for the $65,000,000 loan.
This convinced Couzens that the conferees were to be asked to give their approval to that application. His emotions began working when he heard Miller give his personal reasons why he, as RFC president, had rejected the loan—that the loan would be illegal and also immoral.
“Possibly I even overemphasized these reasons,” Miller later recalled, “because my Washington experience had led me to expect that Senators and Representatives from a state where a loan was asked of the RFC were inclined to be very critical of any hesitation on our part to grant exactly the relief asked for, and were generally either ignorant or indifferent to the limitation of our powers under the act creating the RFC.”16
If the RFC president expected the Michigan senators to act in accord with his “Washington experience”—that is, to insist that the loan be made—he got a surprise. “Senator Vandenberg made almost no comment on this occasion,” wrote Miller.17 As for Couzens, Miller’s use of the word “immoral” produced a predictable explosion.
If any such loan were made, he would “shout against it from the rooftops and on the floor of the Senate!” he said, a remark which, when lifted out of full context, was to get him into much trouble and also lead to much misrepresentation, unintentional or otherwise.18
7
But nobody else at the conference expressed any different views. Certainly no one expressed any disagreement with Couzens on his assertion.
President Hoover did not. It would have been strange if he had, inasmuch as in a speech in St. Louis, on the preceding November 4, he had gone out of his way to emphasize (concerning RFC loans) that “the law requires that they should be made on adequate security.”19
In the words of Senator Vandenberg, all that Couzens had done was to be “particularly aggressive” in voicing his opinion.20 It turned out later, however, that it would have been much better for Couzens had he not been so emphatic, for his explosion would be remembered and used against him.
After everyone had agreed that the RFC was estopped from helping the trust company, Hoover directed the conversation toward the real purpose of the conference. This, it turned out, was to induce Couzens personally to put up funds to help save the trust company.
As Hoover sketched the situation, the status quo in Detroit could be preserved if about $6,000,000 were raised privately. Hoover began this approach by saying that he had discussed the crisis with Alfred P. Sloan of General Motors and with Walter Chrysler, and that they had agreed to help, presumably assenting to advance $2,000,000 each. It should be noted that he did not then mention Ford. Hoover then asked Couzens if he would contribute $2,000,000.21
Still in an excited frame of mind, Couzens obviously was in no mood to have such a proposal made to him, especially not by Hoover. Also he resented hearing Hoover suggest to him his “duty” as a Detroiter. His reaction was told by Hoover: “He stormed that it was Ford’s business.”22
I pointed out that Ford had previously put up $5,000,000 against assets of little value to help and was now proposing to take a further loss of $7,500,000.
The Senator showed great resentment to my pressing him, and I replied that if 5% of my fortune would save a panic in hundreds of banks with hundreds of thousands of small depositors and tens of thousands of people’s jobs in my home town, they could have it tomorrow. He left in great heat.23
8
After Vandenberg, as well as Couzens, had departed from the White House conference, the decision was reached that someone ask Ford to put up additional cash. It was taken for granted, apparently, that the Ford Company would subordinate its deposits. Inasmuch as Hoover still elected not to talk with Ford personally, the discussion then came down to who would go to Detroit to get further Ford help. In view of Ford’s personality, to select the right emissaries was all-important.
Here, if ever, was a case where the “personal equation” in a public matter needed to be reckoned with. If not Hoover, then Ogden L. Mills might have been a good choice. Ford might have been impressed by having the Secretary of the Treasury come to see him. But instead of Mills, Hoover suggested that Miller, hardly known outside of New York State, take the assignment. Miller begged off. He felt that he was needed in Washington to watch national developments. Besides, his wife was acutely ill.24 So the suggestion was made that Secretary of Commerce Chapin and Arthur A. Ballantine, a Wall Street lawyer then serving as Undersecretary of the Treasury, go to Detroit on the errand.
This was to be the climax—and a worse-selected cast of characters could not have been imagined, if the play were to end happily.
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