The Open Door

The old man had one bad eye and one bad ear and a bad heart. He did not have any real friends in Washington; he was not much of a judge of people; and his memory was none too good. His name was Walter L. Dunham, and he was a director of the U.S. Government's $1 billion Reconstruction Finance Corp.

Before the Senate Banking subcommittee investigating influence in the RFC, Director Dunham, 69, leaked excuses like a wet paper bag. But his story was the most detailed report yet of the sordid state of influence peddling, political wangling and general stockjobbing into which the once-great RFC had fallen.

The New Member. Dunham, a Republican and onetime president of a Detroit bank, pleaded that his was "a sad history of a businessman so naive and uninformed." When he came to Washington in 1949, said Dunham, Presidential Aide Donald Dawson told him that "top personnel matters of the RFC should be cleared through the White House" and asked pointedly whether Republican Dunham "could work in harmony with the Democratic Party." Dunham said he replied that he could "work in harmony with anybody."

Soon, Dunham testified, he was caught up in a social whirl. Before he had been in his office four days, the ubiquitous Merl Young called on him. He soon found, said Dunham, that Dawson, RFC Director William E. Willett, Merl Young and Young's employer, Rex Jacobs, a Detroit manufacturer, were "all close friends, and that I was obviously regarded as a new member of their social group." He lunched with them and dined with them. Sometimes they were joined by Democratic National Chairman William Boyle.

"They Dropped Me." Dunham kept diaries, instructed his secretary to listen in and make notations of each call. There were 45 calls from or about Dawson, 151 from Boyle or his office. Mostly, Boyle or his men wanted him to see some "very dear friend" on an RFC matter. And in August 1950, the Democratic Committee called about a loan for Pacific Rubber Co., a tire company "wholly or partly owned" by President Truman's good friend Edwin W. Pauley. Mr. Dunham gave it--"I don't like to use the word special"--consideration because "we were anxious to have small businesses interested in rubber production."

But the social flies buzzed loudest around Dunham's head when he began taking an interest in the $37.5 million Lustron loan. Dunham suddenly decided that Social Buddy Rex Jacobs was just the man to make a production survey of Lustron. Jacobs reported back that all

Lustron needed was a change in management--just about the time that an engineering firm reported officially that Lustron was hopeless and should be foreclosed. Next, Dunham heard a report that a "grab" of Lustron had been plotted at a house party at Jacobs' Florida ranch. Among the guests: Mr. & Mrs. Dawson, Merl Young and his wife Lauretta, the mink-coated White House secretary. Said Dunham: "Out of this Lustron matter came my first feeling of doubt . . . Shortly thereafter, it became apparent that my old 'friends' had cooled. They dropped me." "They" included Donald Dawson.

Dunham couldn't understand how all this came about. "I think I am lacking entirely in political sagacity," he said sadly. It now seemed clear to him that "some of the gentlemen . . . sought to use me. Somebody took me in, I guess. They were kind to me."

The Goat. Dunham insisted that Dawson himself had never tried to influence him on a RFC loan. But, he conceded, "I think I have outlived my usefulness with the RFC." He had tentatively written out a resignation several weeks ago, he said, and gone to Florida for a vacation. There he got a call from RFC's Vice Chairman G. Edward Rowe. Rowe thought it "imperative" that he resign at once. "You just resign and say the committee crucified you," Rowe told him. "I think that will straighten out the whole matter." To be helpful, Rowe even dictated the letter for him, and left it on his desk for signature. Demanded Indiana's Senator Homer Capehart: "In other words, he wanted to make you the fall guy?" Said Dunham sadly: "I think that I was to be the goat."

By last week, the investigators had still to find any evidence of outright illegality in & around the RFC (though the Justice Department was busily reading the committee transcripts for evidence of perjury). But there was no doubt that the RFC had sunk a long way from the day when Jesse Jones could turn down a presidential suggestion on a loan with the remark: "Well, Boss, we are not running a charitable organization."

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