Piles & Politics

It was the way in which President Kennedy brought up the subject of stockpiling that sent a shudder last week through metal centers from the aluminum mills of California to the copper mines of the Congo. In harsher language than he usually uses at his press conferences, the President implied that the nation's 23-year-old war-emergency stockpiling program was chockablock with "mismanagement" and "unconscionable profits" and demanded a congressional investigation. On Wall Street, copper, lead, zinc and aluminum stocks softened, and futures in metals and rubber nosed down.

What "astonished" the President was the fact that Government stockpiles of industrial materials that the nation might need in event of war had long since outstripped the scandalous farm hoard, are now valued at more than $7.7 billion.* Brusquely dismissing the plea of "military secrecy," which has long been used to conceal the exact extent of stockpiling operations. Kennedy said that stockpiles now contain almost twice as much material as the Pentagon assumes the U.S. would need for a three-year war. He estimated that the excess supply of nickel alone was worth $103 million, the excess supply of aluminum another $347 million.

Goosefeathers. Secreted in 213 dumos and warehouses around the country, the war-emergency stockpiles include materials ranging from castor oil (for industrial machinery) to goosefeathers (for Army sleeping bags). Conceived by Franklin Roosevelt's Administration in 1939 as a means of preparing the U.S. for World War II, the stockpiling program was expanded slightly by Congress in the 19405, and greatly during the Korean war. In latter years, apart from a modest military utility, the program became a device to prop certain domestic industries, bolster commodity prices and even to work off the farm glut. Major holdings:

sbSTRATEGIC STOCKPILE. This embraces 98 separate "strategic" materials, including many that have to be imported, going all the way down to ten troy ounces of precious ruthenium metal. Current value: $5.8 billion.

sbDEFENSE PRODUCTION STOCKPILE. Started by Congress in 1950, this was designed to encourage certain industries, e.g., aluminum, titanium, textiles, to maintain or create sufficient capacity to meet anticipated wartime requirements. Current value stockpiled material bought from these plants: $959 million.

sbSUPPLEMENTAL STOCKPILE. Launched by Congress in 1954, this houses imported materials that the U.S. gets by swapping off its farm surpluses. Value (together with a separate Commodity Credit Corporation pile of materials acquired by barter): $1 billion.

Making Markets. "This is subsidy, no getting around it," snaps one official of the General Services Administration, which buys and minds the materials after the Office of Emergency Planning has set the goals. Some businessmen complain that the Government grossly overestimated its stockpile needs, hence encouraged producers, notably the lead miners and refiners, to develop so much capacity that whenever Washington stopped buying, the private market was flooded and prices went tumbling.

In its search for nickel, the Government signed at least 28 production contracts: among other celebrated deals, it built the Nicaro plant in Cuba, paid Freeport Sulphur Co. up to twice the market price to supply a steady stream of ore to Nicaro (which now ships its production behind the Iron Curtain). In aluminum, the Government virtually created the nation's No. 4 producer, California's Harvey Aluminum, Inc., by guaranteeing the $44 million loan that got Harvey started and guaranteeing, too, to buy up to 54,000 tons of the company's 75,000-ton capacity every year from 1959 to 1964. Harvey, which is now pouring at 100% capacity v. an average 77% for the rest of the industry, sold about 20,000 tons to the Government last year and prospered despite sluggish markets.

Down in the Dumps. Stockpile spending has dwindled vastly since 1958, when the Government cut its goals on critical materials from a five-year to a three-year war supply. Last year, with purchases confined to three minor "strategic" imports and relatively small quantities of nickel, manganese, copper and aluminum contracted for in years past, stockpile purchases amounted to only $33 million (v. a 1953 high of $906 million).

Industry thus has little to fear from additional cutbacks in stockpiling. What worries businessmen more is the possibility that the Government might undercut the already depressed metals market by dumping from its hoard. But at his press conference, the President pledged that "we will take no action which will disrupt commodity prices." And Congress, which must approve any sale from the strategic and supplemental stockpiles, so far has turned down almost every executive-branch request to make such sales.

Explosive Whispers. Potentially more explosive were the whispers of profiteering and corruption running through the Capitol. At week's end two rival Senate committees were racing to investigate--one headed by Virginia's budget-whacking Democrat Harry Flood Byrd, 74, no friend of Kennedy's; the other, by Missouri's Stuart Symington, who himself bossed the stockpile program in 1950-51 and is Kennedy's choice to do the investigating. As yet, no one could be sure whether the great stockpile investigation would prove a wild-goosefeather chase or lead to a latter-day Teapot Dome. But a lot more was plainly going to be heard about it.

*Economy-minded G.O.P. Senator John Williams of Delaware was astonished at Kennedy's astonishment, pointed out that, as Senator, Kennedy had voted eight out of nine times to support stockpiles.

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