William K. Divers Oral History Interview, April 16, 1970

Notice
This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

RESTRICTIONS
This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened September 1971
Harry S. Truman Library
Independence, Missouri

[259]

HESS: All right, to begin with this morning, sir, let's discuss the Long Beach case that you mentioned just after we turned the machine off the last time. What's the history of that case?

DIVERS: Well, I'll be glad to mention it because it was the most important piece of litigation during the seven years I was on the Federal Home Loan Bank Board, and it had a lot of ramifications. A man named Tom [Thomas A.] Gregory was manager of a savings and loan association in Long Beach, California, known as the Long Beach Federal. I believe at that time he may also have been a director of the Federal Home Loan Bank of Los Angeles. This would have been about 1945.

[260]

The president of the Los Angeles Home Loan Bank died. The Board of Directors at the Bank recommended a success or. The successor had to be approved by the Federal Home Loan Bank Board here in Washington, or by the Administrator of the Federal Home Loan Bank Board, since there was just a single administrator, John Fahey, and no three men or five men board at the time this happened. Mr. Fahey refused to approve the nominee of the directors, whose name I believe was Hurford.

A lot of political pressure was brought by the Californians on Mr. Fahey to approve Mr. Hurford. Mr. Fahey believed that Tom Gregory was using the Long Beach Federal Savings and Loan Association, and the funds of the Long Beach Federal, to conduct a lobbying campaign against Fahey here in Washington, and he took two steps. One of them was he put a conservator in charge of the Long Beach Federal Savings and

[261]

Loan Association, and he also consolidated the Federal Home Loan Bank of Los Angeles with the Federal Home Loan Bank of Portland into one large Federal Home Loan Bank in San Francisco.

Well, this action in turn disturbed some of the Senators and Congressmen in the Pacific Northwest, because they'd had their own Federal Home Loan Bank before that time and now they had one in San Francisco, but Mr. Fahey was able to withstand the pressures, and along about this time I was appointed to succeed Mr. Fahey as chairman of the Federal Home Loan Bank Board.

The Californians then began to bring their pressure on me and on the other members of on the other member of our Board. You'll remember that there were only two of us at that time in 1947 and early--the first half of 1948.

Mr. J. Alston Adams, who was the other

[262]

member of the Board at that time, leaned in the direction of the desires of the Californians to have the Federal Home Loan Bank of Los Angeles re established and to remove the conservator from the Long Beach Federal. I was influenced to some extent by Adams' opinion and also by the opinion of Oscar Kreutz who was the head of the National League of Insured Savings associations and was a good friend of mine.

Incidentally, the United States Savings and Loan League also at this time was strongly in favor of rescinding the actions that John Fahey had taken so that all the calls I received from Congressmen, trade associations, so on and so forth, were all in favor of taking this action of rescinding Fahey's action.

I looked into the merits of the case as thoroughly as I could. I spent a dozen nights

[263]

reading all of the transcript of testimony and all the hearings and the court cases up to that time. And finally decided that it would be best for everybody concerned if we would remove the conservator from the Long Beach Federal, but not re-establish the banks at this particular time.

So, Adams and I had a meeting with Gregory and his attorney and with one of the California Congressmen who was particularly interested in this case. He was Congressman either in the district that Gregory was from or from the adjoining district. He was from Southern California and he . . .

HESS: What was his name?

DIVERS: Oh, well, I'll find it.(Chet Holifield) He may be still over there, I'll get out a Congressional Directory and find it for you, but--my secretary

[264]

would probably know.

We told Gregory that we would remove the conservator if he would call a new election for the Board of Directors of the Long Beach Federal, which was a mutual institution, that he would send a notice out to all of the shareholders that they'd be entitled to put up their own candidates for Board--or their own nominees for Board of Directors, and that he, Tom Gregory, would not try to manipulate the election in any way so that he would be returned as manager of the association. We recognized that he might be returned as manager, but we wanted the shareholders to have an opportunity to select another man if they wanted to have a new Board of Directors.

We took our action, as we had promised Long Beach Federal, and within about forty eight hours they began to break their promises. And

[265]

about a week later we put another conservator in after having removed it. He was only out for a week or ten days. Well, of course, each time a conservator is appointed for a financial institution there's a lot of publicity in the paper about it and it may even start a run so that Fahey's action had started a run and there were pictures of hundreds of people standing in line waiting to get their money out. When we put our conservator in there was no run because we explained to people that their accounts were insured by the Federal Savings and Loan Insurance Corporation. (This was done for the protection of the shareholders.) So, that there was no run even though Tom Gregory tried to start a run on his own institution by getting all of his friends to withdraw their money.

HESS: Why did he do that?

[266]

DIVERS: He wanted to get some evidence to show us, to show the congressional committees, and to show the courts, that the Federal Home Loan Bank Board was ruining his institution.

i could spend a lot of days telling all about the details of this. At one time the--when one of when a new Board member. was appointed, the attorneys for the Long Beach Federal sued him, and the marshal for the Federal District Court when he served the papers on the new Board member had to get a hand truck to hold all of the documents that were being served on this one Board member.

The litigation was handled for the Board by the Attorney General of the United States. And, as I recall, most of my--well, many of my conversations were with Howard McGrath, and others were with Tom Clark.

[267]

HESS: Did they handle it in a skillful manner?

DIVERS: Yes, they handled it in a--with a high degree of legal expertise and they were understanding of the position of our Board. After all, I had only one thing in mind, and that was to do whatever was the best for the public and for the savings and loan business. I think their interests were both the same in this case, there was no conflict.

HESS: What was the final outcome?

DIVERS: But I was not--but, the action by the Congressmen who were interested in the congressional committees they were on--the name of the Congressman who was particularly interested was Chet Holifield from California. I still don't speak to him although my wife is a, good friend of his wife.

HESS: What was his particular interest in this?

[268]

DIVERS: Well, all I can do is to say that I was suspicious.

HESS: Do you think he had a financial interest?

DIVERS: No, I wouldn't go that far, but I think that there were some very heavy donations to his campaign funds.

HESS: I see.

DIVERS: He had a . . .

HESS: By one Mr. Gregory?

DIVERS: Yeah. He had an administrative assistant who later became a lobbyist here in Washington, and I think there may have been some connection between this administrative assistant and Gregory.

HESS: What was the final outcome of that case?

[269]

DIVERS: Well, let me tell you one more thing about it.

HESS: A11 right.

DIVERS: John Fahey, my predecessor, spent several days briefing me on the Gregory case after I was appointed, and he had had the FBI looking into the matter, and also some other investigators who had been hired, and he told me of all sorts of ramifications. About Gregory buying control of newspapers and gold mines in Mexico and things of this kind. You want to--actually when he put--when Fahey put a conservator into this association he sent in a conservator with several dozen examiners who had been deputized to go in and put Federal seals on the vaults and on all of the tellers cash drawers, and so on and so forth. This was a real take over, so that there were a lot of hard feelings

[270]

between Fahey and Tom Gregory and also between Fahey and Congressman Holifield. I shared Fahey's views with reference to the Congressman, but I never had any personal animosity towards Tom Gregory. I mean I didn't like most of the things that he did, but it never aroused my emotions. I mean I was discouraged by the many impediments that he would put in the way of settling the case, but I was never emotionally involved about it.

HESS: In a book I looked at yesterday entitled The Federal Home Loan Bank Board, by Thomas B. Marvell, it states that Mr. Fahey thought that Gregory had hired private detectives to try to find out if there was anything unsavory about his past. Do you recall that?

DIVERS: Well, that's quite possible. That was not mentioned to me by Fahey, and I would say that it

[271]

was not the first time that members of the Board had been investigated by people who were doing business with the Board. After I left the Board I found out that I had been--that people who wanted things from the Board had investigated me on several occasions trying to find some shadow in my past that they might use to blackmail me to get a charter or to get a branch or something of this kind.

HESS: I trust they never found anything.

DIVERS: Well, no, not that I know of. I mean, at least I was never--nobody ever tried to blackmail me while I was on the Board.

You asked about what were--the outcome of the case was. I can't just summarize. I mean I'11 have to tell you one other--tell you a little bit more about it.

Negotiations to settle the Long Beach Federal case were carried on for over a period

[272]

of a year and a half or two years and several times we thought that we hAd a firm settlement with Gregory, but there were-- the conservator for the Long Beach Federal had borrowed a substantial amount of money from the Federal Home Loan Bank of San Francisco to pay withdrawals to people who were disturbed over the publicity about this financial institution. (This was before my time.) And as a result the Federal Home Loan Bank of San Francisco is holding a note of this Long Beach Federal for eight million dollars or something like this, and so they were parties to the litigation and were parties to any possible settlement.

Several times we thought that we had got the agreement of the San Francisco bank to settle on terms that we thought were just and equitable so far as the shareholders of the institution and the public were concerned.

[273]

And several times either Tom Gregory or the Federal Home Loan Bank of San Francisco would kick over the traces after we'd met.

I went out to the west coast--in the course of negotiation I suspect I went out at least once a month for a year and we usually met at Portland which was a neutral ground. The Attorney General's office would not let me go into California while this litigation was pending because they were afraid that I'd be served out there. They were not afraid of me being served in Washington, but they were afraid of me being served out there.

So, I stayed out of California, and with the exception of one secretive trip during the--I stayed out of California for three or four years as a result of this litigation.

HESS: Did that trip involve Tom Gregory?

[274]

DIVERS: Yeah. Yeah, I met with him and other Board members. It was during the negotiations. I mean we and his attorney agreed not to try to serve me while I was out there.

But, this thing dragged on and on and on and I was really of the opinion that we never would get it settled as long as Tom Gregory or his lawyer were alive. And one of the actions taken by the Long Beach Federal, they sued me personally for thirty-two million dollars.

HESS: They must have thought you had an awful lot of money.

DIVERS: Well, I thanked them for the compliment, but to somebody who is--whose future lies in the financial field, it was not a very happy thought to have a suit for thirty-two million dollars pending against you. When I--oh, one

[275]

other thing I must mention is this that when I went before--when my term, my first term as chairman of the Bank Board expired, President Truman was good enough to nominate me for another four-year term, and his appointment was my appointment was sent up to the Senate by him and a hearing was set before the Senate Banking and Currency Committee. And in the meantime, and prior to this, the--one of the House committees on oversight, or administration or something, of which Congressman [William L.] Dawson of Chicago was chairman, had been holding a series of hearings on the Long Beach Federal, during which time I was before the committee for a solid week testifying. Congressman Dawson usually was not there, but Congressman Holifield was there and acted as acting chairman of the committee and there was a lot of pulling and tugging because Holifield was--would go over the

[276]

conduct of the Bank Board with me, three or four times held go over the same grounds trying to find some discrepancy in my testimony, and so we finally made arrangements to get the Republicans to come to the hearings and it was really the Republican Congressmen who prevented Holifield and Dawson from making a mockery of justice with one of their congressional committees. I--there was a lot of pulling and tugging behind the scenes. The Congressman Holifield and the staff that he had hired, tried desperately to get out a report which would criticize the Bank Board and the chairman of the Bank Board for the actions that they had taken and the policies that they had adopted. We tried just as hard through our friends on the committee to avoid the issuance of such a report, and we were successful.

HESS: Who were your friends on the committee?

[277]

DIVERS: Well, two men, I don't remember their names. One of them was an elderly Congressman from Michigan who was a great fisherman. He was very well known, he was known as kind of a watchdog of the public morals and the congressional morals, and he was very influential in the Congress part of this time and then it changed again. I don't remember his name. It was, I--well . . .

HESS: We can add their names later to the transcript.

DIVERS: Well, I'll think. And the other one was [William] Miller who was the vice-presidential candidate at the last election. Was it the last election, the one before . . .

HESS: '64.

DIVERS: '64. He ran with Barry Goldwater I guess.

HESS: Goldwater and Miller.

[278]

DIVERS: Yeah.

Miller was a former prosecuting attorney from upstate New York and so that--those were the two men who helped us. Now . . .

HESS: What attitude did Congressman Dawson take?

DIVERS: Congressman Dawson turned the thing over completely to Holifield and he was disinterested. He, in my opinion, he did not exercise the supervision that the chairman of a committee should have exercised over the operations of this committee. I think that actually that Holifield ran that committee and Dawson was just kind of a figurehead in the committee anyway.

HESS: Do you think Congressman Dawson understood the financial ramifications and the financial maneuvering?

DIVERS: He was a Chicago politician, I'll let you decide. But, anyway, this--no report was

[279]

issued--was ever issued by this committee although they conducted hearings for six months, something like that, which is very unusual.

HESS: What happened?

DIVERS: My nomination was before the Senate Banking and Currency Committee and Holifield was successful in getting about six or eight Democratic Congressmen from California to join him in appearing before the Senate Banking and Currency Committee and objecting to my confirmation by the Senate, which is also an unusual thing. I was rather naive, I didn't start any backfire against the actions by Holifield. I mean they were really by Gregory, but Holifield was acting for Gregory. But some of my friends who were not quite so naive went to work and, notwithstanding the opposition and the appearance before the committee of these Congressmen, these

[280]

Democratic Congressmen, I was confirmed unanimously, including the votes of the Senators from California, so that Holifield was given a good slap in the face by the Banking and Currency Committee of the Senate.

HESS: What happened to that thirty-two million dollar suit? Did they drop that?

DIVERS: The suit was not settled, the litigation was not settled by the time I left office. It was pending all the time, the seven years I was at the Bank Board, and was still pending when I left.

Walter McAllister, St. succeeded me and the litigation was still pending when he left as chairman. Al [Albert J.] Robertson Succeeded Walter McAllister, and my recollection is that the litigation was still pending when he .left.

HESS: Was this a personal suit against you, or in

[281]

your position as chairman?

DIVERS: Both.

HESS: Both.

DIVERS: Both. So that it was still pending against me.

And Joe [Joseph] McMurray succeeded Robertson as chairman and he made a great effort to settle it, and thought he had it settled and I wouldn't call it a settlement, I'd call it a give away. But anyway, it was one of the conditions of the settlement was that this suit be withdrawn against me, and it was withdrawn, oh, ten, twelve years after it was started. So, that the even though the papers were put in the court and the judge approved the settlement and everything, it was only thirty days later after this settlement that the litigation popped up again and I understand that it is still going

[282]

on today. Still haven't finally settled the case although it was started in 1945, that's twenty-five years ago.

HESS: Is Gregory still in charge of the savings and loan out there?

DIVERS: Gregory has passed away and his--I'm not sure whether his lawyer was--is still alive or not, but as I--I couldn't tell whether the lawyer was acting for Gregory or Gregory was acting for the lawyer lots of times. You want to remember that I think this lawyer at one time received a three hundred and fifty thousand dollar fee as partial compensation for his services, and that was a lot more money in those days than it is now, so that it was not a small matter. As a matter of fact, when J. Alston Adams was a member of the Board with me he used to say that he would raise his teenage son to be a lawyer and

[283]

have him assigned to the Long Beach Federal case so that he would be assured of a good living throughout his lifetime and . . .

HESS: Make a career out of it.

DIVERS: The funny part about it is that the boy did go to law school, took the California bar exam, and went into the law office of the law firm in San Francisco that was representing the Federal Home Loan Bank of San Francisco all through this and actually did go to work on this case and may still be working on it for all I know.

So, I think that about winds up the Long Beach Federal case, but it's a classic in litigation, I would say.

HESS: Yes, it sounds like it.

Well, you mentioned your presence before the Congress at the time of the hearings. Outside

[284]

of this, just roughly what percent of your time was given over to matters of--pertaining to congressional hearings, both the preparation for the hearing and for the actual appearance on the Hill? Was this an important part of your job?

DIVERS: Do you mean aside from the Long Beach Federal case?

HESS: Yes, aside from the Long Beach case.

DIVERS: No, I didn't spend a lot of time up there. Now, I did appear every year before the Senate and the House Appropriations Committees which all Federal administrators do not do. I mean, sometimes they send people from the staff to do this, but I wanted to present things my way, and the only way that I could do that was by getting prepared and, going there. And this meant preparing yourself with all the details

[285]

so that you could answer any questions that the Senators had. But I liked to do it that way, and I always had very good relations with both the House and Senate Appropriations Committees.

HESS: Did you also deal closely with the Senate and House Banking and Currency Committees?

DIVERS: Yes, I did. Brent Spence was chairman of the

HESS: House.

DIVERS: . . . House Banking and Currency Committee and I used to meet with him. I was very fond of him I might add. I was a great admirer of his, and I thought he was a wonderful man and I used to take him a token gift at Christmas time. I'd go up, I'd call on him, and usually would take a bottle of Kentucky bourbon up to him, which was his favorite drink and was from

[286]

his native state. The . . .

HESS: Jesse P. Wolcott was the other man wasn't he?

DIVERS: Yeah, he was the ranking minority leader and was also the chairman of the committee.

HESS: In the 80th Congress.

DIVERS: In the 80th Congress.

HESS: What kind of a man was he?

DIVERS: He was a good politician. He was from a small town. He knew politics, he had been in Congress for a long time and--but I would say that his intentions were good and that he was--gave us fair treatment whenever we appeared. I don't know whether I told you of one incident. I may be repeating myself, but Brent Spence and Jesse Wolcott were sitting up on the dais at one of these hearings and I testified on a

[287]

piece of pending legislation, and at the end of it I stated, as was the custom, that the--I was authorized by the `Bureau of the Budget .to say that these views were in accordance with the views of the president of the United States and--because of the Budget :Bureau always cleared any proposed legislation or testimony before legislative committees--they cleared it for the President. So, I made this statement and Jesse Wolcott, who was the ranking minority member at this particular time, leaned over and said to me, "Young man," he said, "you have testified that these are the views of the President of the United States. Now, do you mean to tell me that so and so and so and so are the views of the President of the United States?"

And I said, "Yes sir." I said, "That's his view."

He said, "Would you elaborate a little bit

[288]

about it?"

I said, "Surely, I’11 be glad to." And I went on at great length to tell about how Mr. Truman was intensely interested in the economy, that he wanted to do everything that could be done through private enterprise without using public funds. Public funds were only to be used as a last resort, that he wanted all of the agencies of the Government to be cautious in their movements and to make their dollars stretch, to economize and so on and so forth. Of course, the newspapers were there taking all this down all the time, and finally Wolcott said, "Thank you." And shortly thereafter the committee adjourned their meeting and Wolcott leaned over and said, "Come up here." And so I went up and Brent Spence was standing there and Wolcott said to me, he said, "I just want you to know, Divers, that that's the damn

[289]

best Democratic political speech that I've heard in the last five years." He said, "I know .that you never talked to the President about :this." He said, "You were making it all up, but you've made it up so well that nobody'11 ever deny it." And we had a lot of laughs.

Brent Spence had trouble with his eyes. He was almost blind in the later years of his service, but I'd go up with my bottle of bourbon and we might even have a drink together and he'd say to me, "Well, what do you want in the way of legislation this year?"

And I'd say, "Congressman, I've only, got one request to make. I don't want any legislation for us, I don't want any legislation against us. If you'll just leave us alone and let us do what we are already authorized to do," I said, "I think we've, got all the authority, all the powers that we need."

[290]

And he'd say, "Gee, I wish that the rest of the Government agencies would take the same attitude."

HESS: Was that really a problem trying to get Congress to leave you alone?

DIVERS: Not Congress, but individual Congressmen. One of the great troubles we have at the present time is the voluminous legislation that's being passed by the present Congress, and immediate past Congresses. They complain about the increase in the cost of living and 1 suppose that Congress is probably more to blame for the increase in the cost of living than any other single factor. I'm not talking just about their increasing their own salary 40 percent or something or 60 percent or whatever it was which psychologically was the worst thing that could ever have been done in order

[291]

to--at a time when they were concerned about inflation. As a matter of fact, I'm not--I don't think they're--as a body they're not concerned about inflation. They're not concerned about balancing the budget, and I'm not so sure that they are concerned about the future of the country frankly, as a body. I know that this--I'm not speaking about individuals, but I think they're--I think that they're just . . .

HESS: What makes you say that?

DIVERS: Well, I think that they are just temporizing it. They are thinking more of their own good than they are of the future welfare of this country. I'm not accusing them of being unpatriotic, I'm just accusing them of being dumb and thoughtless.

HESS: Shortsighted.

DIVERS: Shortsighted. But every piece of legislation

[292]

that they pass--for example, if they pass, as they did last year, they passed a bill which increased the Social Security payments that have to be made, by employer and employee. Now, this increase--this reduced the take-home pay of all employees in the United States that are subject to the Social Security system, which was another factor in demanding wage increases. They were successful in getting some wage increases, and of course, the portion of these wage increases that was attributable to the Social Security part, the employer had to find some way to pay that, and the only way he has in the final analysis, he can either absorb the price or he can increase the cost of his product and whichever he does it's going to be reflected in the--eventually in the cost of the product. Then, in addition to that, the employer had to increase their contribution to the Social Security fund, which meant an increase in the cost of production,

[293]

which meant an increase in their cost to the consumer.

Now, if you would take this--take as an example a mine, we'll say a coal mine, or a copper mine. The person--the company that owns the copper mine has to increase their Social Security costs, so does the--all their employees have to pay more into the fund. The cost of copper goes up. That copper has to be transported to the smelter. The cost of the trucker has gone up when this was done, the cost to the employees of the truckers had gone up so that their cost is added on. It's an acceleration of this cost all the way from the mine to the people that transport it to the smelter, to the smelters, to the wholesaler, to the distributor, to the people who make the wire, and so on all through the channels. Every time Congress takes an action like that they automatically

[294]

increase the cost of living by several percent.

Now, I'm not saying that this may not have been justified, but what I am saying is that I doubt very much that they're aware of the results of the action that they take. At least I've never seen anybody testifying to that effect or any committee report which indicated that they appreciated it. So that--these are the reasons I say that Congress maybe unintentionally is doing more to increase the cost of living than anybody--than any other factor I know of.

HESS: If there were times when you were seeking legislation, what method would you use to place your views before Congress? Congressional liaison.

DIVERS: Well, I was part of a team. You want to remember that the Housing and Home Finance Agency was overall supervisor. We were part of their

[295]

organization, and annually I would meet with--I mean I met with Ray Foley who was the administrator of HHFA. I would meet with him frequently. I mean I would see him at least every month and would be on the telephone to him several times a week, but the legislation was sent up in a package usually by the HHFA, and it included legislation that was sought by the constituents, including the Federal Public Housing Authority, the Fanny May [Federal National Mortgage Association], the Federal Housing Administration, the FHA, and the Federal Home Loan Bank Board, and many other--and the office of the administrator.

HESS: At this time was there someone on the staff in charge of congressional liaison, congressional matters?

DIVERS: Not in our office.

[296]

HESS: No, but I meant on the . . .

DIVERS: I never had anybody, I did it myself. I took all the congressional calls myself.

HESS: Did you find that more successful?

DIVERS: Yes, I did. I mean I wanted to know what Congress thought about our operations; I wanted to know what their questions were, what their complaints were if they had any, and I not only took them, but I handled them myself.

HESS: Did you even take Mr. Holifield's calls?

DIVERS: Yes.

HESS: That was back when you two were speaking, is that right?

DIVERS: Yeah, that's right. I even remember going down to the office on Saturdays and having him come over with his constituents, spent several

[297]

hours at the office in an attempt to reach some settlement, some common ground.

HESS: Well, in the Senate the majority and minority leaders were Charles Tobey and Robert Wagner. Did you have any dealings with those gentlemen?

DIVERS: Not with Wagner. Tobey presided at the hearing when my nomination went before the Senate for my first term. I remember that, as was customary, Senator Tobey who was then about seventy-five, I guess, and I was forty, and the Senator looked over to me and said, "We're glad you're here Mr. Divers. The President sent your nomination up; we're holding this hearing to inquire into your qualifications. Tell us what you know about the Federal Home Loan Bank system, and the savings and loan business."

And I said, "Well, Senator," I said, "I

[298]

think I would be misrepresenting to this committee if I said I know anything about either one of these things." I said, "I would rather just say that I don't know anything about either one of them."

And he said, "This is very unusual."

And so then Senator Bricker, John Bricker, from my own state of Ohio, who was on the committee I believe, he came down and around behind my chair and put his arm over my shoulder and said, "Mr. Chairman," he said, "Senator Robert Taft and I want the committee to know that we endorse President Truman's nomination of Mr. Divers 100 percent and hope that the committee will confirm him." And that was that. There were no other questions. They did ask me--I guess they did ask me a little bit about my background, where I'd come from and where I'd--what I'd done.

[299]

HESS: Was your answer at that time factual?. I mean why did you give them that answer?

DIVERS: Well, I felt that my knowledge was so limited that I didn't want to pose as--I didn't want to pose as an expert in the field and if I had gone on at some length about what I knew for five minutes, then they would begin to ask me all sorts of detailed questions and I'd frankly had to say 1 didn't know the answers to them or try to bluff and . . .

HESS: That's a poor place to be bluffing, isn't it?

DIVERS: Oh boy, I would say that it is! So, I really felt that I was a novice, and under the circumstances, I thought the best thing to do was to admit it.

HESS: Senator Joseph McCarthy, who later came to

[300]

fame, was also on that committee. He was also on the Senate Banking and Currency Committee. Did you ever see him at any of the . . .

DIVERS: No, I don't remember his existence on the committee. It's quite possible that he was there. Really, after Tobey there was a gentleman from South Carolina who was chairman of the Senate Banking and Currency Committee. Do you remember his name?(Senator Burnett Maybank of South Carolina.)

HESS: No, I don't. I've just--I've written down . . .

DIVERS: Well, he was--of course, he was prominent, being the chairman of the Senate Banking and Currency Committee. And I remember one incident when our Federal Home Loan--our Bank Board proposed a change in the regulations and this change was contested vigorously by the American Bankers' Association. And the American Bankers' Association went to the chairman of the

[301]

Senate Banking and Currency Committee, Maybank, and he made a public statement to the effect that this regulation would never go into. effect and that he'd see that it didn't. So, we were in touch with him and with his staff, and O.K. LaRoque who was then a member of the Federal Home Loan Bank Board, was from North Carolina, he went over to see the Senator and the Senator told him that--told LaRoque, "Now I promised that this will not go into effect and I don't want it to go into effect. So," he said, "I've promised the American Bankers' Association that I won't let this go into effect and I don't want it to go into effect with any affirmative action from me." But he said that, "I know you people want it, you need it," and he said, ''what will we do?"

So, O.K. LaRoque suggested to him that I tell the other Board members I was going to vote for this, and then they'd say that they'd vote

[302]

for it. And then I would disappear and leave LaRoque in charge of the Board (he was the vice chairman), and I would be incommunicado, and the chairman could always blame it on my absence.

So, I went out to Colorado and went up in the mountains and spent ten days out there with my wife and my daughters, and every day I'd get the mail and the American Banker. American Banker is a newspaper, a daily newspaper, and the Washington papers and the New York Times and so on and so forth would be saying that the Board had acted contrary to the wishes of the Senate and Senator Maybank.

HESS: What was that provision? Do you know?

DIVERS: Oh, I remember now. It was a provision for a new charter for Federal savings and loan associations and it was the first time that they were authorized by the charter to use

[303]

certain terminology including "withdrawals." Prior to that the Federal charter the charter for Federal savings and loan associations calls the savings account a "purchase of shares" and when you went to withdraw any money, technically, you re purchase shares in this mutual Federal savings and loan association and this was very awkward terminology, but the bankers always insisted that we use it in all of our advertising, and as a result there was not as much advertising as there would have been.

HESS: And what there was wasn't clear.

DIVERS: And the savings and loan associations didn't grow, so that when this new charter was adopted a forward step was taken and they could use the terminology "savings account" which they couldn't use before, "withdrawal" which they couldn't use before, and I guess they still use "payment."

[304]

We didn't go so far as calling it a "deposit." Now, fifteen years later, the present Bank Board has authorized the use of the term "deposit."

HESS: Which of the men on the Hill did you think was the most financially knowledgeable? Brent Spence, and Wolcott, and Charles Tobey, anyone else that you dealt with up there, who seemed to know the most about housing, finance, home finance?

DIVERS: John Sparkman. I think John Sparkman--well, John Sparkman and Robert Taft. Taft was knowledgeable about anything that had to do with financing, money, finance. And the Federal agencies were primarily in the business of either making loans, for building houses, making loans for other people to build houses, or making loans to financial institutions that would re-lend the money, or guaranteeing

[305]

mortgages, or insuring mortgages, and I'd say that those two men--you see I didn't know Wagner, and Wagner's interest was primarily in the field of public housing which didn't take any knowledge really of finance. All you had to do was to know how to get an appropriation bill through. And so those two, they were both Senators. And in the House, Spence and Wolcott--I mean they were both knowledgeable, they both worked well together, they were the closest friends, and even though one was the top Democrat and the other was the top Republican on the committee, and they switched positions several times, they kept the same staff, and they were close friends, and I guess that's the way--that's a great way for government to work.

HESS: All right. Shall we move on to another subject: The events of 1948? And in your scrapbook I found a certificate for sustaining membership in the

[306]

Truman-Barkley Club. What do you recall about the political events in 1948?

DIVERS: Well, let me say that I--I'd been a member of the Duckworth Democratic Club down in Cincinnati from 1928 on. I mean from the time I graduated from the University of Cincinnati, and I had made contributions to A1 Smith's campaign. I had worked for A1 Smith in 1928. I'd worked for Charlie Sawyer, who was a Democratic candidate for congress in 1930. He was unsuccessful, I might add, but later on he was our ambassador to Belgium and the Secretary of Commerce. I looked on him as my political godfather.

HESS: Now, he's from Cincinnati, is that right?

DIVERS: Cincinnati.

HESS: And did you know him when he was . . .

[307]

DIVERS: Oh, yeah, I knew him down there and I worked--and I worked a campaign for him.

HESS: Tell me about your early association with Charles Sawyer.

DIVERS: Well, he was a lawyer there in town and he was a member of a very prominent law firm and the law firm represented Proctor and Gamble. Charles Sawyer married one of Gamble's daughters, and as a result, he had no financial worries. But, he was not the kind of fellow to sit back on his laurels. He was very ambitious, very energetic, a wonderful man really. And he decided he wanted to run for Congress in 1930 and I tried to help with his campaign. I made several speaking engagements for him and tried to help out, both at the university and in some of the small towns in the western part of the county.

[308]

Sawyer was not--Sawyer only lost by about twenty-five votes out of a couple hundred thousand and I think that all of us who had worked for him, felt personally responsible because we felt that if we had worked just a little harder, given up a few more nights during the week, during the campaign, that we could have overcome that margin and he would have been successful. If he'd been successful I probably would have come to Washington with him, but I was crushed when he lost by twenty-five votes and I expressed my sorrow to him and dropped out of touch with him.

And in 1932 the first Democratic prosecuting attorney for Hamilton County Ohio was elected, Bob [Robert Nestor] Gorman, who later was on the Supreme Court of Ohio, then--and this was the depth of the depression. It wasn't '32, it was '30, 1930. I guess it was the same time that

[309]

Sawyer ran and was defeated, that Gorman ran and was successful. If Sawyer had been elected I would have asked him for a job probably, but since he was defeated it didn't occur to me to go to him. But Gorman called me one day and asked me to come up and I went up and he said, "How would you like to be assistant prosecuting attorney?"

I said, "I'd be delighted." I said, "I can't--I can hardly pay my office expenses at the present time and any paycheck would be welcome."

So, he made me one of his assistants and several years later I found out that Charlie Sawyer was responsible, that he had called Gorman and asked him to give me a job. Gorman had agreed.

I mention this because it is typical of the kind of man that Sawyer was. In other words, a

[310]

lot of people would have called me up and said, "Look, I got you this job and I want you to..." that some day you may have to do something for me. But Sawyer never mentioned it to me and I found out through other people. As a matter of fact, I suspect he tried to keep it quiet.

But I was active in the Democrats. I was with the Federal Government, an employee of the Federal Government from '33 on, so that my activities were circumscribed to a certain extent, but I did--I was able to raise money, and I tried to raise it from the staff and from people who did business with us. I did it openly and used to ask them, and they knew they weren't getting any favors, but a lot of people it didn't occur to them and all they needed was a reminder. I expect there might be a lot of fuss now if you did that. It might even be illegal. But I think that if you go about it in the right way . . .

[311]

HESS: Was that before the passage of the Hatch Act?

DIVERS: I guess it was. The Hatch Act must have passed around 1940 yeah. But anyway, there are different ways of doing this and I think that if you're open and aboveboard, don't try to hide it or masquerade it, or try to get somebody to pay money to somebody else to give to you for political contributions or something of that kind, that you don't run into problems and nobody ever raised any question about the propriety of it. I didn't raise a lot of money; but I raised it every year.

I know that when--when they had the annual Democratic dinners, Jefferson Day dinners here in Washington when I was here, at the Federal Home Loan Bank Board we always had several tables, and we were considered then as a relatively small organization, and I think we had more tables than some of them. I know that

[312]

we had more than some of the Cabinet officers brought down to the meeting.

HESS: During the time that you were chairman of the Federal Home Loan Bank Board and Mr. Sawyer was Secretary of Commerce, did you have any working relationships during those years?

DIVERS: No. No, we used to see each other at some Government functions and at some Democratic functions, but that was about the extent of it.

When I was with the Federal Emergency Administration of Public Works, the PWA, Charlie Sawyer was Chairman of the Board of Education in Glendale, Ohio, a suburb of Cincinnati where he lived, and we did have several contacts and conversations about pending applications for grants for construction of school buildings in his school district and things of that kind. But then I didn't hear anything from him until

[313]

he came to Washington and I called on him several times when he was Secretary of Commerce, but we never had any business.

HESS: As you know, he has recently written a book, Concerns of a Conservative Democrat, would you classify him as a conservative as opposed to liberal?

DIVERS: I didn't even know he had written a book. If I knew he had written a book I would have bought a copy and read it.

HESS: It came out last year or something like that.

DIVERS: I'll have to get one.

HESS: Concerns of a Conservative Democrat.

Were you surprised when Mr. Truman won the election in 1948?

DIVERS: Not very. I traveled a lot and I went out,

[314]

particularly to the Midwest, and I covered the region from--pretty well from Washington west to Denver, which is--and south maybe to Tennessee and Missouri. And everywhere I went I found a lot of people who admired President Truman. They were not noisy people, they were the silent majority as it turned out.

HESS: Not Mr. [Spiro] Agnew's silent majority though.

DIVERS: I'm not sure. They may be the same people.

But I really thought that he would win. Of course, I was hoping he would win, but I really thought he might surprise them all and I so advised my father-in-law and my father-in law won quite a bit of money on the election, because he was able to get some fantastic odds from people who believed the newspapers and the radio.

HESS: Did you go to the convention that year in

[315]

Philadelphia?

DIVERS: No, I don't think I did. I think that I forget how many--I only went to a couple of them. I remember the one in '32 where Roosevelt was nominated out in Chicago, but from the years from '33 on when I was with the Federal Government and not in a top position, my bosses would be going to the convention, and I didn't go.

HESS: In the President's Mid-Year Economic Report of 1949, the following phrase appeared, "A moderate downward trend characterized most phases of economic activity in the first half of 1949." Now, I believe that is one of the first official indications of the minor recession that began to appear in 1949. Do you recall anything in particular about that recession of 1949?

[316]

DIVERS: No, I don't. The--it was minor. It was a readjustment. The savings and loan business was experiencing a very good year and there may have been a minor recession, but our business was booming so that we were not particularly concerned about it. It did not--my only recollection is that there was a very small rise in the percentage of delinquent loans and you ordinarily from year to year out of the entire portfolio you may have l percent delinquent and there may have been an increase to 1.3 percent or something of this kind, but it was a minor fraction, and that's the only recollection that I have and it was and most of the savings and loan associations extended the term of the mortgage and when these people got back to work, why, they paid up what they owed and the delinquencies were reduced.

HESS: And on June the 27th, 1950 the President

[317]

signed, and he used a pen that I--it's on the wall right behind me here. It's framed, hung on your office wall, he signed the Federal Home Loan Bank Act, "An act to amend the Federal Home Loan Bank Act, as amended, and title IV of the National Housing Act, as amended, and for other purposes." What do you recall about that particular piece of legislation, since you have a pen on your wall?

DIVERS: Well, that piece of legislation did several things. One of them was that it increased the insurance of accounts from $5,000 to $10,000. And as a matter of fact, we had $10,000 coverage for several months that the banks didn't have. And as a result we got quite a bit of savings out of their . . .

HESS: I don't suppose the bankers liked that, did they?

[318]

DIVERS: No.

The second thing that that bill did was that it authorized the Treasury to purchase up to one billion dollars of the notes of the Federal Home Loan Bank system. That was the first time that the savings and loan business had had direct access to the Treasury of the United States, and although we had no intention to use this authority and have never used it, we wanted it for standby in the event of an emergency. If our marketable obligations we couldn't market, or the Treasury didn't want us to go out on the market, why, they could buy these obligations.

And another thing it did was that it authorized an amount of money, I'm not sure what it was, but I think it was a billion two hundred and fifty million of support for the Federal Savings and Loan Insurance Corporation in the event of an emergency. It authorized the

[319]

Treasury to buy that many obligations, so that these provisions were known as Treasury Support. As far as the Bank system, the savings and we thought it was a very fine piece of legislation at that time and . . .

HESS: Did you have to work to get it through?

DIVERS: . . . true to our--true to our predictions, it never had to be used. But it's there.

HESS: Did you have to put out any special effort to get that passed? Do you recall?

DIVERS: No particular effort. The banks opposed it, the commercial banks. The American Banking Association opposed it, but . . .

HESS: Isn't that an awfully strong lobby to be opposing it?

DIVERS: No. No, I never found any trouble up there

[320]

on the Hill. We usually got what we wanted even though they opposed it. I frankly don't think that they're nearly as effective as they are supposed to be, but we never noticed them really.

I'm still trying to think of the name of that Senator from South Carolina, three syllables. It wasn't Satterfield or such, but it was . . .

HESS: I should have written it down.

DIVERS: He was quite a guy.

HESS: We can look it up.

DIVERS: Yeah.

HESS: We're about to end the reel of tape here.

DIVERS: A11 right, well, let's stop.

[321]

HESS: We'll stop.

DIVERS: Let's stop, it's 12:14 and I've got a date with somebody from New York at 12:30, so . .