The Path to Power (59 page)

At Roosevelt’s direction, legislation had been drafted giving the federal government authority to regulate the issuance of securities for the protection of those who bought them. Rayburn, who had seen so many financially unsophisticated farmers invest the little spare cash they had been able to scrape together in worthless stocks or bonds, had fought for similar legislation more than twenty years before—not only in Austin but in Washington; it was, of course, over his attempt to give the federal government authority over the issuance of railroad securities that the freshman Congressman had defied Woodrow Wilson. That attempt had been unsuccessful, as had decades of Populist outcry for meaningful federal legislation; in the face of Wall Street opposition, the most Populists could get was state “Blue Sky” laws (the Texas law had, of course, been authored by the Gentleman from Blanco County). But when he had made that attempt, Rayburn had been a junior member of the Interstate Commerce Committee. Now he was its chairman. There was uncertainty over which committee had jurisdiction over Roosevelt’s proposed “Truth-in-Securities” Act, but Speaker Henry Rainey was a friend of Rayburn’s. “I want it,” Rayburn told him. Rainey gave it to him.

His first difficulty was with the legislation itself, a poorly drafted bill as confusing as the problems it was trying to solve, and almost completely lacking in any effective enforcement measures. Attempts to patch it up had been hamstrung by Roosevelt’s reluctance to offend the man he had asked to draft it, an old Wilsonian Democrat, Huston Thompson, and since no one knew what to do, the measure seemed likely to die. Then Rayburn paid a visit to Raymond S. Moley, one of Roosevelt’s advisors.

Rayburn knew what to do, Moley was to recall. The bill “was a hopeless mess,” Rayburn said, and the patching-up should stop. A new bill should be written from scratch, he said, and it should be written “under [his] direction” by new draftsmen, experts in the complicated securities field.

Moley agreed with Rayburn’s analysis, but felt he could not bring in new draftsmen unless he could find a way around Roosevelt’s reluctance to ease out Thompson. Moley was unwilling to spell out the problem—but he found that he didn’t have to. Before he “went ahead on the draftsmen business,” he said, “it would have to be understood that I was acting directly on
his, Rayburn’s, authorization, not the President’s. For all his seeming slowness, there isn’t much Sam misses. He laughed appreciatively. ‘All right,’ he said, ‘you’ve got it.’” On a Friday in early April, three young men began working on a new bill: a Harvard Law School professor, James M. Landis, and two lawyers expert in the securities field, Thomas G. Corcoran and Benjamin V. Cohen. On Monday, they presented their work to the Interstate Commerce Committee.

Questions from the puzzled committee members about the immensely technical draft lasted all day. All day, the committee’s chairman sat silent. Trying to read his face for clues, the young men found none. They were discouraged. Moley had learned what lay behind the seeming slowness, but they hadn’t, and to them Rayburn seemed, in Cohen’s word, a “countryman”—incapable of understanding so complex a subject. At the end of the day, the chairman asked the young men to wait outside; after a while, he came out, and told them that the committee had approved their work and wanted them to turn it into a finished bill. He said no more; only later did Landis learn that “it was Sam Rayburn who decided that this was a bill worth working on.”

Rayburn said he wanted them to work with a House legislative draftsman, Middleton Beaman. Beaman was a Rayburn man. “I had thought I knew something of legislative draftsmanship until I met him,” Landis was to say. “For days,” in his office, “deep in the bowels of the old House Office Building,” Beaman, a “rough, tough guy, would not allow us to draft a line. He insisted instead on exploring the implications of the bill to find exactly what we had or did not have in mind. He probed. …” This was, Landis recalls, “exasperating.” The young men began to suspect “that this delay bore symptoms of sinister Wall Street plotting.” Rayburn’s demeanor did not alleviate their suspicions. Dropping by Beaman’s office, he would pick up a draft paragraph and stand there studying it. He didn’t, Landis could see, “know anything about securities,” and they felt he didn’t understand what he was reading; if he did, he certainly gave no sign of it. Sometimes he gave them a word or two of advice, but it was advice so simple, so unsophisticated, that they could hardly keep from laughing at it. He said that “He wanted a strong bill, but he wanted to make sure it was right, that it was fair, that it was just,” Cohen says. He gave no sign of approval, either. The grim face beneath the gleaming bald skull was as immobile as a mask. They didn’t know what to make of him, this man of whom Beaman, and Beaman’s assistants—and everyone else they talked to—seemed so unaccountably afraid, but he certainly didn’t seem to be on their side.

Their suspicions were seemingly confirmed when Rayburn agreed to Wall Street demands that its representatives be given a hearing to present their views on the draft bill. Suspicion turned to apprehension when they heard that the Street’s views would be presented by three of its most prominent
attorneys, led by the feared John Foster Dulles himself. They would have to rely for their defense on this slow, stolid farmer.

And then came the hearing. “I confess that when I went in that morning to the hearing, I was scared,” Landis was to recall. “After all, I was something of a youngster.” The hearing was closed, and no records of it exist, but those who were there agree. Two men, John Foster Dulles of Sullivan & Cromwell and Sam Rayburn of Bonham, were the principal antagonists—and the Dulles who stalked into that hearing room slunk out of it. And after the hearing, there came the moment that, Landis was to say, “I’ll never forget,” the moment when he found out what was behind the mask.

“I went back to my little cubbyhole down in the sub-basement. … About twenty minutes later, I got a call from Sam Rayburn, to come up to his office. Well, naturally, I was worried. I thought maybe all our work was down the drain.” But Rayburn said that the work was just fine, and that they should get right on with it. For the first time, there was an expression on Rayburn’s usually expressionless face. It was a snarl. He began talking about Dulles and about Wall Street lawyers, and he cursed them, “in very obscene language.”

“Now Sam didn’t know anything about securities,” Landis was to say, recalling that meeting, “but Sam was an expert on the integrity of people. … He knew when a man … was telling the truth. … He had no patience for men who were not sincere and honest. And this is what he expressed to me, at that time. …” He had not, Landis was to say, known Rayburn “too well up to that time. I got to know him quite well later on. He was an expert in … procedure—oh, absolutely an expert in matters of procedure! He was an expert in procedure, and sizing up the motives of what made human beings tick.”

An expert on human beings
. With the full twenty-four-member committee susceptible to Wall Street pressure, he delegated the Truth-in-Securities Bill to a subcommittee—the right subcommittee; as its chairman, he named himself; as its other four members, he named four Congressmen he knew he could dominate, four who would bow to his personality rather than to Wall Street. When, in the showdown, they did, and reported the young men’s bill favorably to the full committee, he told the young men which committee members to approach, and how to approach them. Says Thomas Corcoran, whose expertise in handling men was to become legendary in Washington: “Sam was a genius in handling men. He would send you to see a guy, and he would tell you exactly what the guy was going to say, and in what order, and he’d tell you how to answer each point. And the guy would say exactly what Sam had told you he was going to say, and if you just answered exactly what Sam told you to answer, you could just see these conservative sons-of-bitches coming around right before your
eyes.” He told them which committee members not to bother approaching—because they would never come around. And these he handled in a different manner; his weapon was the gavel, and, almost half a century later, the young men can still remember its harsh crash as their champion swung it in their defense. During the Hundred Days, his chairmanship was a “temporary dictatorship,” writes Michael E. Parrish in his
Securities Regulation and the New Deal
. “Even under normal circumstances a powerful chairman, [he] dominated the … committee as never before.” Still other committee members didn’t understand the incredibly complex bill, with its pages of detailed technical regulations governing securities issuance—but they felt it was not necessary that they understand. Rayburn told them it was a good bill, and they trusted Sam. The hearings the committee held on the bill—before reporting it favorably to the full House—were so brief that Moley years later was to write incorrectly that none had been held.

An expert in procedure—oh, absolutely an expert in matters of procedure
. The young men had anticipated problems in the full House because of the legislation’s complexities; “If you amended Section 7, it might have an effect on Section 2 and 13, and so on,” Landis was to say. But, thanks to Rayburn, the complexities made passage easier, not harder. As Landis recalls: “Because of its complexities, and the danger that an unstudied amendment, apparently fair on its face, might unbalance the articulation of its various sections,” the bill was introduced under a special rule that “permitted the consideration of amendments only if they had the approval of the committee chairman.” No such approval was forthcoming. Landis, watching with apprehension from the gallery, saw that “Rayburn had complete control of the situation.” To his astonishment, the bill passed “with scarcely a murmur of dissent.”

The young men had anticipated more problems—all but insoluble problems—in the conference committee, in which five-member delegations from the House and the Senate met to try to reconcile their conflicting versions of the same bill, for the Senate bill was, in effect, Huston Thompson’s original, “hopeless” bill, which was thoroughly approved by the distinguished chairman of the Senate delegation, Duncan U. Fletcher, of Florida. But there were procedures for a conference committee also.

Few men knew them. “If they exist, and documentary evidence to that effect is to be found in
Hine’s Precedents
, they are observed as much in breach as in conformance,” Landis was to write years later, after he had become a veteran of conference committees. But one of the men who knew them was Sam Rayburn.

Taking advantage of them was made easier because Fletcher, a courtly Southern gentleman, suggested that Rayburn be chairman for the first meeting. Rayburn said that the first question to be decided was, as Landis puts it, “what document”—House version or Senate version—“you would work from, which was a very important issue, really a basic issue.” Rayburn
“quietly asked Senator Fletcher if he did not desire to make a motion on this matter.” Apparently unaware of the trap into which he was walking, the seventy-five-year-old Fletcher replied that he certainly did so desire: he moved that the Senate bill be made the working draft.

“Motion moved,” Rayburn said quickly. “Motion seconded?” It was seconded. “Vote on the motion.” The vote was, of course, a tie; all five Senate members voted in favor of the motion; all five House members voted against it. Since it was a tie, Rayburn said, the motion was lost; consequently, the House bill would become the basic draft. Had a House member made the motion, and a tie vote resulted—as, of course, it would have—the Senate bill would have become the basis for negotiations; by luring a Senator into making the motion, Rayburn had won a crucial point before the conferees had more than settled into their seats. “Except for an occasional reference to its provisions,” Landis was to reminisce, “that was the last we heard of the … Senate bill.”

The Senate delegation included not only Fletcher but such big names as Carter Glass of Virginia, James Couzens of Michigan and Hiram Johnson of California. “The House had no such distinguished personalities except for Sam Rayburn,” Landis was to say. But that one was enough. While Fletcher had apparently intended that, at succeeding meetings, he and Rayburn would alternate in the chair, he was too much of a gentleman to put himself forward; and, as Landis puts it: “Absent any request from him, Rayburn continued to guide the proceedings.”

Aides were guided with an iron hand. Once, desperate because their handiwork was being ignored, two Senate staffers who had worked on the Thompson bill attempted to put their draft in front of the committee members. Rayburn spoke to them, in Landis’ phrase, “rudely but firmly”; the attempt was not repeated. Senators were guided with deference: deference in tone, in solicitation of their opinions—in all matters except matters of substance. The atmosphere of most conference committees is tense, Landis was to write: in this committee, “thanks to Rayburn’s guidance,” and the respect he showed for everyone’s opinions, “friendships developed,” and the tension dissolved. And so did the opposition. On every crucial point, the final bill was the House bill. On May 27, 1933, Roosevelt signed it into law—and after decades of fruitless discussion, government regulation of the issuance of securities was a reality. In the public mind, Rayburn was associated hardly at all with the dramatic months immediately after Roosevelt’s inauguration, during which so much legislation that was to change the shape of American life was rushed through Congress. But to the young men who had seen what he did, he was one of the heroes of the Hundred Days.

The next year brought the introduction of legislation for governmental regulation of the exchanges on which securities were traded. Tough as the fight had been in 1933, the fight in 1934—for the creation of a Securities and Exchange Commission, and an end to the operation of the Stock Exchange
as a private club, run by and for the benefit of its members, often at the expense of the public—was tougher. The business community moved against Ray burn in his own committee, and almost beat him there. He had to use every ounce of persuasiveness he possessed—and every lever of power—to break the revolt in the committee. Then, in angry scenes on the House floor, he compromised and compromised and compromised again—and never compromised on the crucial point. He maneuvered like a master in another conference committee. And the Securities Exchange Act of 1934 joined the Securities Act of 1933 on the nation’s statute books.