Master of the Senate: The Years of Lyndon Johnson

by Robert A. Caro

  That “situation” made clear the chasm between America’s dominant belief in Big Business and liberals’ conviction that the business ethos had degraded the nation they cared about. Most of America’s power was hydroelectric, generated by the water of its rivers; in the opinion of liberals, such a natural resource does not belong to any private interest. As the author John Gunther was to ask: “Who and what should own a river, if not the people as a whole?” In the America of the 1920s, however, not only did the people not own this power, they had to pay dearly for the use of it—and to much of America’s people, it was not available at any price.

  Most of the nation’s hydroelectric power was controlled by a very few private companies, for the local operating electric companies had been absorbed into holding companies, and then the holding companies had been absorbed into other, larger holding companies, and then absorbed again—until by 1929, when Leland Olds sat reading in the Crerar Library, holding companies had been piled atop operating companies in layer after layer. Since holding companies were interstate, they were largely beyond the reach of state utility commissions, and in the pro-business atmosphere of the Twenties, the agency that had been created to provide federal regulation of interstate hydroelectric development—the Federal Power Commission—was notably unenthusiastic about doing so.

  Effectively free of governmental restraint, the holding companies milked the operating companies, selling them materials and management and engineering services at grossly inflated prices, and watered their stocks until stock prices soared far beyond their real worth. These extra costs were passed back to the operating companies—and the operating companies passed them back to the consumers, in the form of rates so high that they deprived low-income urban and small-town families of money for other purposes. And for rural customers the consequences were far worse. Because holding companies saw little profit in rural electrification, which required the building of long power lines into sparsely populated areas, in 1929 more than 6 million of America’s 6.8 million farms did not have electricity. Decades after electric power had become part of urban life, farmers had to perform every farm chore by hand; their wives had to haul up endless buckets of water from wells, and, without the vacuum cleaners, dishwashers, washing machines, and electric irons that had freed city women from much of the drudgery of housework, worked from dawn to dark as if they were peasant women in the Middle Ages.

  Insulating private utility companies from government regulation was an impenetrable financial structure. Owen D. Young of General Electric, a brilliant financial innovator in his own right, was to say that when “I begin to examine” the utilities’ complicated structure, “I confess to a feeling of helplessness.”

  But Olds’ natural gift for mathematics had been honed by years of analyzing masses of statistical material for the AFL and the Federated Press; at the end of his month’s “vacation” in the Crerar Library, he possessed a rare—in the opinion of men who worked with him later, a unique—understanding of holding companies’ financial complexities and manipulations. This understanding enabled him to determine the true cost to consumers—the rate they should, under state regulation, actually be charged—which meant he was finding formulas under which electric rates could be drastically lowered. Moreover, the refusal of utility companies to provide electrification in rural areas was based on their contention that farmers could not afford to buy electrical appliances; that farmers’ usage of electricity would therefore be low, and rural electric rates that would therefore have to be too high for farmers to afford.

  Making detailed analyses of rural areas that had been electrified, Olds proved that this vicious circle could be broken—by lowering rates. In the rare instances in which they had been lowered, he demonstrated, farmers had invariably found that they could afford to use more electricity; they bought more appliances, used still more electricity, and rates could be reduced still further. The principle was not new, of course. Henry Ford had demonstrated it: the cheaper a company prices a needed product, the greater will be the company’s profit. All that was necessary, Leland Olds said, was to apply the principle to rural electrification. And if it was applied, he said, electricity would transform the lives of farm families: a farm wife would no longer have to do her wash by hand, stooping over washtubs, but could simply push a button on an electric washing machine.

  Olds’ studies, in other words, had the potential to accomplish what he had decided so long ago he wanted to accomplish with his life: to be “of service”; to “mitigate the evil of poverty”; to “help human beings.” As one of his associates was to explain: “All his life Lee Olds was concerned with the means for decreasing poverty and injustice.” Now, at last, he had found the means. “His preoccupation with obtaining low-cost electricity was only an expression of his belief that low-cost energy would open the door to a more decent world.” And at the end of that month’s vacation, just as he was about to enter private employment, Leland Olds received a telephone call. Looking back at that call years later, he would tell a friend, “I haven’t selected what I would do; things have selected me.”

  The telephone call was from Frank P. Walsh, an old Progressive who was now Chairman of the New York State Power Authority, and an admirer of Olds’ articles. Walsh said that New York’s new Governor, Franklin D. Roosevelt, was planning to use the State Power Authority to break the hold of the state’s private utilities and to develop public power for the people. Governor Roosevelt, Walsh said, wanted stricter regulation of utilities, and lower rates, rates based on new formulas. A commission was being established to make recommendations to accomplish these aims, and there was an opening for a staff expert on it. Would Lee be interested in the job?

  Lee said he would, and sometime in 1929, he was invited to visit Roosevelt in the Executive Mansion in Albany, and after dinner Roosevelt talked about a farm family in Dutchess County that couldn’t obtain electricity because, as the Governor’s counsel, Samuel Rosenman, was to recall him saying, “the damned old electric corporation says they can’t afford the expense of the line.”

  “That farmer’s wife still has to pump her water by hand, and sew by oil lamp, and cook by wood. The farm chores and household chores take so much time that they have no chance for rest and leisure. I want to get cheap electricity out to that farm…. Now, tell me what you think….”

  Olds told him. Although he was thirty-nine years old, he was still strikingly thin, and with his hollow cheeks and his eager, intense eyes behind wire-rimmed spectacles, still very much the young radical. And he still, when he became excited, talked too much and too fast. But now—at last—he had found someone who would listen, and who, in fact, spurred him on with more questions (“question and answer, until after midnight,” Rosenman would recall), until the final question: “Tell me, what would you recommend if you were Governor?” As Olds replied, Rosenman, after listening for a minute or two, quietly pulled out a pad and pencil, and began taking notes—as fast as he could write. “Many of the ideas expressed that night found their way into a series of messages which the Governor sent to the Legislature in 1929 and 1930,” Rosenman was to recall. And when, in 1931, Olds’ ideas were codified in legislation expanding the powers of the New York State Power Authority, Roosevelt appointed Olds its executive secretary.

  DURING THE TEN YEARS he held that job, Olds proved to be an unusual bureaucrat. To determine the cost, best location, and engineering feasibility of a proposed hydroelectric dam across the St. Lawrence River, he not only commissioned surveys but did some of the surveying himself—living in a tent, camping out on the banks of the broad river, sometimes taking his family along. Back in his office, he worked his big slide rule making pioneering analyses of electric rates. He drafted bills that, over last-ditch Republican resistance in the New York State Legislature, gave the State Public Service Commission new authority over utility rates—and that, in a new tactic to force rates down, authorized municipalities to construct their own plants and distribute power themselves.
When New York City Mayor Fiorello La Guardia, angered by rates he considered onerous for the city’s low-income families, proposed building a municipal power plant to establish a yardstick by which the utilities’ rates could be measured, Olds worked with La Guardia’s office on it—and exulted when, as he was to recall, “just one day before the Mayor went before the Board of Estimate for authorization,” a power company official sullenly announced substantial rate reductions. And he exulted a year later, when the same official admitted that after the reduction electric usage had increased so greatly that the company’s profits had risen instead of fallen.

  During these ten years, Roosevelt became President (his successor as Governor, Herbert H. Lehman, continued his policies) and the New Deal changed Leland Olds’ views in areas other than electricity. He had believed that there was no alternative to the corporate domination that was destroying the dream of “economic democracy” and social justice in America except the “complete passing of the old order of capitalism,” that in the Industrial Age it had become impossible to reconcile economic and political freedom. Roosevelt taught him that he was wrong: that there were other alternatives—within the existing order. Olds had believed that there was no way of curbing the power of giant corporations and monopolies except by having them taken over, either by the government, by labor unions or by some form of consumer cooperatives. Roosevelt taught him that there was a way: government regulation. Olds had been led to believe by the bitterness of his own experiences that there was no hope that unions would prevail against corporate power; the New Deal taught him that there was hope—that government could enact laws that protected workers’ rights to organize, and to bargain collectively. Olds had believed that under the old order of capitalism, wage earners and their families could never have security against unemployment and old age. Now at least a measure of that security had been given them—and Olds was confident that more would come. He no longer felt it was necessary for the capitalist system to be eliminated; he now felt it could be improved, restored, and preserved. Thanks to Roosevelt, real progress had been made toward the “new age” of which Olds had dreamed; the evolution of democracy which he had long thought impossible was in fact occurring—in the measures of the Hundred Days, and of the hundreds of days which followed during the New Deal. “The great reforms of the 1930s,” Olds was to say, “completely changed the old laissez-faire capitalism into a new model.” And those reforms changed Olds, too. His radicalism was transformed. Like many another passionate radical of the 1920s, Leland Olds became, in the 1930s, a passionate New Dealer—a liberal of the new, vibrant liberal faith.

  Olds idolized FDR. Seeing no basic difference between the two parties, he had never been active in Democratic politics, but he became active now—to support the President who was, he said, “the greatest leader democracy has ever produced.” When, in 1937, conservative Democrats in New York’s Rock-land County, where Olds now lived, sought to mobilize opposition to the “dictatorship” of Roosevelt’s Supreme Court-packing proposal, Olds went to a meeting called to support the President, and jumped up in the audience, without preparation but with all his usual eloquence, to deliver an impassioned attack on “the real dictatorship” of “corporate interests” and “reactionaries” which was greeted, the New York Times reported, with “thunderous applause”; “people crowded forward, tipping over benches, to clasp his hand.”

  With conservative New York Democrats, including the powerful Tammany Hall organization, rebelling against the New Deal, labor leaders founded the American Labor Party. Olds joined it—because it had been founded to support Roosevelt. Delivering the keynote speech at its 1938 convention, he said the ALP would be the President’s own party; it “invites all who would support the leadership of President Roosevelt, all who recognize the need for party realignment, all who believe that the re-establishment of economic democracy is essential to the preservation of political democracy in our age, to join its ranks …”—and remained active in it for a year, resigning when it became infiltrated by Communists. And in June, 1939, the President brought him to Washington as a member of the Federal Power Commission, of which in January, 1940, he became chairman.

  BEFORE OLDS ARRIVED at the FPC, the agency had not been making the progress Roosevelt had hoped toward reducing private control over natural resources—in part because young staff members trying to ascertain utilities’ true financial condition found themselves unable to unravel the tangled web of the giant holding companies’ finances, in part because the commissioners seemed intimidated by the vast new powers they had been given and uncertain how to utilize them. The staff was disorganized; in striking contrast to the situation at most of the New Deal agencies, morale was low.

  Olds’ arrival changed that. The staffers who had been daunted by holding companies’ finances found that, as one of them, Melwood W. Van Scoyoc, assistant chief of the FPC’s Bureau of Finances, recalls, “Mr. Olds understood it all so well that he could make it very simple for you.”

  Olds provided these young men with not only technical skills but inspiration. The long columns of figures, he made them see, weren’t just figures—they were the key to a better life for tens of thousands—hundreds of thousands, millions—of farmers and their wives and children. He made his assistants understand that if they could get electric rates down, farmers would be able to alleviate the terrible drudgery of their lives. And he made the young men understand that if they could understand the figures, the rates would come down. “He saw (public) power as a means to an end, as an important means of lightening the burden of man,” says Alexander Radin, a young FPC staff member who would later become general manager of the American Public Power Association.

  He not only made the young staffers feel they were part of a great cause, he made them feel he was fighting beside them. FPC staff counsel Reuben Goldberg recalls spending “an entire winter” in Butte, Montana, with a handful of FPC attorneys and accountants fighting a big team of high-priced attorneys for the Montana Power Company in a proceeding designed to force down the company’s rates. One day, without any advance notice, there in that Butte courtroom was their boss. He had made the trip from Washington “just to see how we were doing,” Goldberg recalls. “He just stayed a day or two, and had lunch and dinner with us, and was friendly and approachable like always—and let us know it was a very important job we were doing.”

  And he inspired them also with his own example. Leland Olds was in his fifties now; the shock of hair had turned gray on the sides. He was a little stooped, and arthritis in his right hand was making it difficult to play tennis or the cello. But while the young men would work late with him in his office, he would eventually send them home; glancing back as they left, they would see him still bent over the masses of figures. Returning to the office the next morning, sometimes they would, Radin recalls, “find him asleep at his desk—he had worked all night.” Some of these young New Dealers were very bright men—bright enough to know how bright Lee Olds was. So broad was Olds’ knowledge of economics, James M. Kiley says, that “His concentration on electric systems was a conscious narrowing of his sweeping, broad interest—like Einstein teaching elementary math to freshmen in college.” They also admired Olds’ sense of justice. “He was very fair-minded,” Goldberg says. “While he was very much consumer oriented, he was also very much aware that you had to be fair to the utilities—that they were entitled to a reasonable return on their investment. Because their financial integrity was necessary to enable them to provide the service to the customers that should be provided. He was constantly reminding us that you don’t help the consumer by destroying the utility. When you hurt the utility, you’re really jeopardizing the consumer.” Under his leadership, the FPC pressured electric utility companies to extend power lines into neglected rural areas, to encourage the increased use of electricity through low rates, and to reduce inflated capitalizations. But the pressure was never draconian. And although he sometimes threatened recalcitrant companies w
ith government takeover—or with the creation of competing consumer cooperatives—behind the threats was a belief that unless the utilities instituted these reforms themselves, the public would demand that government take over their functions. The FPC program, he felt, was actually protecting private enterprise. As Olds told electric power company executives during a 1944 convention, “Many of you have probably heard the work of the Federal Power Commission … attacked as aimed at the destruction of private enterprise and furthering of public ownership. Actually we believe the effect of [federal] enforcement is just the reverse.”

  IN THE OTHER PRINCIPAL FIELD of FPC activity—natural gas—Olds insisted on enforcing the Natural Gas Act of 1938, in which Congress had given the FPC broad powers to regulate the price of gas brought by pipeline from Texas and other southwestern states to consumers in the big cities of the North. And he disallowed several accounting devices employed by natural gas companies to hide illegal profits. But his fairness and his belief that only through effective regulation could the private enterprise system be preserved were equally obvious, and he would almost invariably carry the other FPC commissioners with him.

  When, in 1944, Roosevelt nominated him for a second five-year term, the articles he had written for the Federated Press during the 1920s were brought up by Senator Edward Moore, a rabidly right-wing Oklahoma oilman, who quoted from them to show that Olds was “Communistic,” as well as a “reformer” and a “zealot” (those last two terms being given equal weight) who was “opposed fundamentally to private enterprise.” Roosevelt had sent up the renomination on May 25, less than a month before Olds’ term expired on June 22, and Moore, a member of the Commerce Committee subcommittee to which the renomination had been referred, delayed hearings until July 6, so that Olds was without a job. But when the hearings were held, the subcommittee’s other members gave Olds an opportunity to explain (“I think my ideas have been going through a constant process of change…. I think it has been my continuous philosophy … that this country has got to work out its solutions in terms of its own traditions; that one of the great things in democracy is that it has the possibility of assimilating change, so that instead of … break-ups you have a constant evolution of the system”) and found his explanations so convincing that they quickly reported his nomination favorably to the full committee, which, after the usual Senate delays, sent it to the Senate floor. When, on September 12, 1944, it was taken up there and Moore repeated his attack, subcommittee chairman James M. Tunnell of Delaware said, “I do not think anyone [in the subcommittee] believed Mr. Olds was a Communist. I do not think the Senator from Oklahoma believed Mr. Olds was a Communist. I do not think anyone believes that.” Declaring that “any statements he [Olds] had made some years before would be rather immaterial, incompetent and irrelevant,” Lister Hill said, “he has a record now of six years of service, and that record” is what he should be judged on, and Tunnell noted that that record “has been reviewed and re-reviewed”—and always approved—by Congress. “The Senator [Moore] must go back approximately twenty years in order to find some ground on which to attack Mr. Olds.” Senators who had been governors—George Aiken and William Langer—and who had worked with Olds in their states rose to praise him, and when Moore demanded a roll-call vote on the renomination, not a single senator was willing to second even that request, and Olds was confirmed for a second term by an overwhelming voice vote of “ayes.” Although the confirmation occurred almost three months after Olds’ term had expired on June 22, the new term for which he was being confirmed had begun on June 22, so his back pay was restored to him.