"We Are in a Box"

Senator J. William Fulbright's investigation of the stock market, which had some suspiciously political overtones from the start, last week turned into an out-and-out dogfight between Democrats and Republicans. G.O.P. Chairman Leonard Hall charged that Committee Member Paul Douglas of Illinois was "one of the original instigators of the gloom-and-doom attack" during the last congressional campaign, and that one of the star witnesses, Harvard's Professor John K. Galbraith, was an "oldtime New Dealing, A.D.A.-type of anti-Jeffersonian radical [who] flirted around with the customary pink fronts," and "almost wrecked" World War II's Office of Price Administration.

There was no doubt that the hearings were generating so much more heat than light that Chairman Fulbright himself admitted that the whole affair appeared to be "futile." Then he helpfully translated just what he meant by "futile": "We are in a box. If any good comes out of these hearings, the credit redounds to the President rather than to us."

100% Wrong. The week's first witness was Chairman William McChesney Martin Jr. of the Federal Reserve Board, watchdog of the nation's credit and onetime president of the New York Stock Exchange. Previous witnesses, notably Harvard's Galbraith, had testified that margin requirements should be raised, perhaps as high as 100%. Did Martin agree? He did not, since credit denied to the market would just move into other fields.

Next witness was Treasury Secretary George Humphrey, who had been following the hearings closely. Humphrey decided that it was time to read former College President Fulbright (University of Arkansas) a little lesson in economics. Humphrey was frankly worried about the effects of the investigation, feared it would affect confidence in the economy as a whole as well as the market. The market, said he, is a meeting place of the ideas of millions of people. "Confidence is a subtle thing. It is built slowly and can be easily and quickly shaken . . . Confidence--or lack of it--has more to do with the conduct of investors . . . than any single thing."

Fulbright was stunned. "Do you think we should discontinue these hearings?" he asked. Said Humphrey: "I do not think I would care to advise this committee on what its functions are and what it should do." New York's Republican Senator Irving Ives wanted to know if Humphrey had heard "anything today about" a stockmarket crash. Said the Secretary: only "in the hearings of this committee."

Humphrey was joined by Indiana's Republican Homer Capehart, who had been needling Fulbright from the beginning. Said Capehart: "The series of questions that we have had in this committee have all tended to be on the negative side, [and have tended] to prove that stock prices are too high and that maybe we are just a few steps behind a crash such as we had in 1929." Said Fulbright: "It is very inappropriate to engage in bickering with you before this audience." Replied Capehart: "You started it ... You . . . stick to your knitting and ask [your] questions." Fulbright flushed, and answered sarcastically: "The Senator always adds a great deal to the dignity and intelligence of our hearings."

100% Convinced. Time and again during the investigation, Fulbright had asked witnesses, for reasons best known to him and his farm constituents in Arkansas, whether they thought the auto industry was competitive and whether prices of General Motors cars were too high. At week's end G.M. President Harlow H. ("Red") Curtice got a chance to answer the question himself. Armed with charts and statistics, Curtice testified that the auto industry is fiercely competitive, and that G.M.'s prices have increased less since 1941 than its competitors'. But why, asked Fulbright, did G.M. not cut its prices when the excess-profits tax expired? Said Curtice: "In effect, we lowered prices because we did not increase the prices with the greatly enhanced value that was built into the cars."

Did G.M. want to increase its share of the market to 60%, or was it afraid of becoming a monopoly? Answered Curtice: "We have to keep aggressively competitive in all areas in order to keep sure of maintaining even our position." To show what he meant, Curtice predicted that by 1962 auto registrations will rise 30%, with a gross national product of $500 billion. Then Capehart spoke up again. The line of questioning, it seemed to him, had nothing to do with the stock market. Snapped Fulbright: "You have no right continually to criticize my questions." But Capehart disagreed. "I am going to continue to do so because I am thoroughly--100%--convinced that the purpose of this investigation is not to investigate the stock market, but to harass the Eisenhower Administration and to harass business in the U.S."

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