The Great A&P and the Struggle for Small Business in America (31 page)

The advertisement resounded through the business world, where the Hartfords’ reluctance to engage in political matters was well-known. In years past, when various retailer groups had defended chain stores before Congress, the Roosevelt administration, and state legislatures, A&P had remained aloof. Nor had it allied itself with lobbying groups like the American Retail Federation and the National Association of Chain Stores. The fact that the huge retailer was prepared to devote its vast resources to the opposition cause immediately reshaped the political landscape. “I think the A&P advertisement is one of the most constructive things that has been done for business generally in a long while,” a department-store executive told
The New York Times
. “If I had any criticism to make, it would be that the ad and the educational campaign should have appeared five years ago.”

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DEFYING DEATH

For the first time since winning his congressional seat in 1928, Patman faced serious opposition in the July 1938 Democratic primary. He blamed the opposition on chain-store interests, but there was more to the story. Democrats in Texas, and in other parts of the country, had finally split over the New Deal, and conservative Democrats took on Roosevelt supporters in many of that year’s primary races. In Texarkana, though, Roosevelt remained highly popular. Patman portrayed himself as Roosevelt’s man, and his opponents made hay when the president failed to stop in the district on his train trip to California in early July. “This has reached the point I earnestly urge you to send me telegram of some sort as primary only few days off,” Patman telegraphed to Roosevelt in San Francisco on July 15. A frantic telegram to Marvin McIntyre, Roosevelt’s secretary, followed the next morning. Roosevelt, about to embark on a Pacific cruise, evidently had no desire to become entangled with the volatile congressman. Patman heard back from McIntyre, not Roosevelt: “The president asked me to wire you and express his regret that he could not come to Texarkana on his trip across Texas.” Patman used McIntyre’s tepid telegram as best he could, issuing a press release: “President Roosevelt Wires Personal Regards to Congressman Patman.”
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Patman won his primary, and immediately made known his desire to replace a defeated Texas congressman on the House Ways and Means Committee. The position was much coveted, for the committee had jurisdiction over all tax matters, including the chain-store tax bill. Patman’s Texas colleague Sam Rayburn, the House majority leader, controlled the appointment. Another Texas congressman also wanted the job, and Rayburn advised Patman to seek support from other members of the state’s delegation. Patman did so aggressively, writing to his colleagues, their supporters, and their local newspaper publishers. “It is very probable I will be a member of the Ways and Means Committee,” Patman wrote to a supporter in September. But there were problems. Several Texas congressmen strongly opposed the chain-store tax and refused their support. “It looks like the chains are trying to block my selection,” Patman wrote to the head of the Texas Wholesale Grocers’ Association in late October. Rayburn urged him to seek out Vice President John Nance Garner, another Texan and former Speaker of the House, who by this point had broken with Roosevelt and favored more conservative policies. “Dear Sam: I am not going to see Mr. Garner,” Patman rejoined. At the start of 1939, Rayburn and William Bankhead, the Speaker of the House, sent Patman a blunt rejection letter expressing “our desire that you not further consider becoming a member of the Committee on Ways and Means but remain a member of the Committee on Banking and Currency.”
2

Someone more skilled in reading signals might have drawn certain conclusions from Roosevelt’s studied avoidance, Rayburn’s hesitation, and Bankhead’s remoteness. These men, occupying high positions in the national government, faced serious worries in 1938. In Europe, an aggressively expansionist Germany was swallowing Austria, threatening Czechoslovakia, and resorting to increasingly violent repression at home. In China, Japan was waging full-scale war. In the United States, labor unrest was rife, and overcoming isolationist sentiment to rebuild U.S. military strength was becoming the administration’s highest priority. Confronted with such weighty issues, Roosevelt and the congressional leadership must have viewed Patman’s high-profile chain-store crusade as a nuisance. The chain-store debate even influenced a congressional investigation of Nazi influence peddling when the Texas congressman Martin Dies, head of the Committee on Un-American Activities as well as an ardent foe of food chains, went after Carl Byoir for associating with a purported Nazi propagandist.
3

Patman refused to desist. He had pushed the veterans’ bonus bill through Congress against the wishes of the leadership in 1935, and he planned to repeat the trick with the chain-store tax. In late July, he asked the clerk of the House to assign his bill the number H.R. 1 in the Congress that was to convene in January 1939, the better to promote it. And he laid new plans to go after George and John Hartford. In late September 1938, a few days after A&P’s loud newspaper blast against the chain-store tax, he asked the Department of Justice to investigate the truth of A&P’s advertisement and to gather information about the Hartfords’ tax payments. In November, after voters in Colorado overwhelmingly refused to repeal their state’s tax on chain stores, Patman wrote to Roosevelt suggesting a compromise: “Let A&P keep their fifteen thousand stores and the others the number of retail outlets they now own, but make the prohibitive tax apply to additional outlets. This will not be as drastic as my proposal and I believe will satisfy ninety-eight per cent of the small business men of the country.” Roosevelt responded with a cold thank-you.
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*   *   *

The November 1938 elections brought sweeping change to Congress. The economy had slumped back into recession in 1937, seriously denting Roosevelt’s popularity, and the president’s controversial plan to add administration-friendly justices to the U.S. Supreme Court turned many old allies against him. Roosevelt’s decision to back liberal insurgents against some Democrats who had opposed parts of the New Deal program exacerbated the split in his party. Although the Democrats retained majorities in both houses of Congress, eighty-one seats in the House of Representatives shifted into the Republican column. Of the seventy-five legislators who had co-sponsored the chain-store tax bill in February 1938, twenty-five did not return to Congress in 1939.
5

Patman’s tax bill was reintroduced in January as H.R. 1, but it faced opposition as never before. At year’s end, Ralph Sharbrough, head of A&P’s research department, told the American Statistical Association’s annual meeting that “proponents of chain store taxes have resorted to the use of half-truths and distorted reports and figures.” Two days later, John A. Hartford granted an interview in which he criticized “punitive” taxation. These public statements were part of Byoir’s master plan. So were new endorsements. Business Organization Inc. had sent out feelers to farm interests, reminding them that A&P had often staged large-scale promotions to help dispose of surplus produce. They responded promptly: two farm groups that often disagreed on political matters, the American Farm Bureau Federation and the National Grange, passed resolutions in November 1938 opposing “discriminatory and punitive taxes.” The National Drainage, Levee, and Irrigation Association, an existing organization, was transformed into a secret A&P front, receiving money in return for opposing the chain-store tax.
6

Real-estate groups joined the anti-tax campaign as well. Along with its monthly rent checks, A&P enclosed letters urging landlords to consider the effects of the chain-store tax on their businesses. Patman spoke before the National Association of Real Estate Boards in October 1938, arguing that the chain tax would benefit property owners, but—thanks to spadework by Byoir—the group adopted a resolution declaring that Patman’s bill would dislocate the real-estate market. Byoir also created a front group, Business Property Owners Inc., to oppose the bill. “So secret was the sponsorship by A&P of this group that bankers and employees in A&P field offices found it necessary to write to Headquarters to ascertain the views of the Company as to this organization,” government lawyers later claimed.
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Byoir left no stone unturned. After A&P published its “Statement of Public Policy,” he collected the ensuing press commentary and mailed it off to newspaper publishers to drum up yet more commentary. His agency sent a weekly packet of news articles, including a financial column and photographs suitable for publication, to newspapers around the country. In January 1939, he put out a press release asserting that anti-chain agitation actually helped chain stores by reminding the public of chains’ low prices. In February, his contacts encouraged the West Virginia Horticultural Society to speak out against the bill. Byoir invited Roosevelt’s press secretary, Stephen Early, to join him for golf in Florida and asked him to bring along Pat Harrison, the Mississippi Democrat who chaired the Senate Finance Committee, whom Byoir did not know. Early could not come, but Harrison, whose committee would have jurisdiction over the chain-store tax bill should it pass the House, golfed with A&P’s political strategist in Palm Beach. And quite separate from Byoir’s efforts, 135 chain-store operators, not including A&P, financed a national advertising campaign against the Patman bill. Meanwhile, Postmaster General James A. Farley, long Roosevelt’s key adviser on matters of politics and patronage, was rumored to be considering a lucrative offer to become a lobbyist for a large chain-store operator; the firm in question is unknown.
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*   *   *

On March 29, 1939, in the midst of this intense maneuvering, Caruthers Ewing, A&P’s general counsel, received an unexpected telephone call. The caller was William Sirovich, a New York physician, playwright, and banker who was serving his sixth term as a U.S. representative from New York City. Sirovich, a longtime friend of Ewing’s and also of Franklin Roosevelt’s, told him of a recent conversation with Roosevelt. The president said his son Elliott wanted to borrow $200,000 in order to purchase a radio station. Roosevelt thought that Sirovich’s friend Ewing could probably approach the Hartford brothers about such a loan. “Why doesn’t he go to a bank?” Ewing asked. Elliott’s securities were not suitable collateral for a bank loan, Sirovich responded, but they were worth $750,000. Ewing immediately transmitted the request to the Hartfords.
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George Hartford was unwilling to lend money to anyone. John, however, was attuned to the political implications, and he told Ewing it was unfair for Elliott to be handicapped by being the president’s son. With the intermediation of G. Hall Roosevelt, the brother of Elliott’s mother, Eleanor, Elliott Roosevelt was invited to John Hartford’s apartment at the Plaza Hotel. Hartford asked whether his father knew of the loan and said he would not make it without the president’s approval. “Let’s get dad on the telephone,” Elliott responded, and placed a call to Franklin Roosevelt in Warm Springs, Georgia. After some preliminary conversation Elliott handed the receiver to Hartford, who had never met Franklin Roosevelt. “I said, ‘Hello, Mr. President,’ and I heard a familiar voice, a voice I had heard over the radio many times, said, ‘Hello, John,’” Hartford recalled later. “I then told him that Elliott was in my apartment and asked him what did he think about this $200,000 loan Elliott wanted to make in connection with the radio business and the President said that he was entirely familiar with it, that it looked good and gave assurance to me that it was a sound business proposition and a fine thing.” No one said anything about A&P, John continued, but “after the President was so enthusiastic about it I felt that I was on the spot and I had to make a decision right then and there and I did not want to do anything to incur the enmity of the President.” He agreed to the loan, which was secured by two thousand shares of stock in the radio venture, Texas State Network Inc.
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The entire episode would have remained a closely guarded secret had Elliott been reliable about paying his debts. He was not. At the end of 1941, with Elliott serving as a brigadier general in the Army and the radio stations struggling, Franklin Roosevelt asked Jesse Jones, head of the Reconstruction Finance Corporation, a huge government financing agency, to meet with Elliott’s creditors. Jones called Ewing to say “the Roosevelt family” wished to settle Elliott’s debt. He discussed the matter with John Hartford on December 31, 1941. Hartford, according to Jones, said the money was insignificant to him, as 90 percent of his income went for taxes, and added that he did not want Elliott’s notes in his estate. They met again in March, when Hartford agreed to Jones’s offer to settle the debt for two cents on the dollar. A few days later, Jones handed Caruthers Ewing a $4,000 check; Ewing thereupon took a scissors and cut up the notes to excise John Hartford’s name. Hartford claimed a $196,000 income tax deduction for his loss on Elliott Roosevelt’s debt. The deduction was upheld by a federal tax examiner.
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Elliott Roosevelt’s loan from John A. Hartford came to light only in June 1945, after Franklin Roosevelt’s death. The House Ways and Means Committee looked into the matter that summer, collecting affidavits and testimony from Hartford and other creditors as well as Ewing and Elliott Roosevelt. It turned up no evidence supporting gossip that Elliott had used his station to support chain retailing, nor to back up Wright Patman’s claim that Hartford wanted to use Elliott’s twenty-five-station radio network to push for repeal of the chain-store tax in Texas. The Democratic majority found that Hartford was probably entitled to his $196,000 tax deduction. The Republican minority objected, futilely, that if the loan represented a loss to John Hartford, then it must represent a gain to Elliott Roosevelt and should be taxed. The question of whether the loan was, in the words of
The Washington Post
, “a highly satisfactory investment in White House good will” has never been clarified.
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