Business & Finance: Leon's Worst Week

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Last week was bad for Price Administrator Leon Henderson. It was a week in which a six-month-old price rise (led by agricultural commodities) gathered speed.

Cotton crossed 15¢ a Ib. for the first time since 1930. It was a week in which Leon needed to have all his wits about him. Instead, he got into a tiff with Chrysler Corp., infuriated cotton Congressmen, got a very bad press, and wound up with a draft of a price-fixing law, which Congress promptly tore to pieces.

The faster prices have risen, the faster has Leon brandished his only effective weapon over them—his jawbone. By last week he reminded even his friends of Hugh Johnson at the climax of NRA. Chrysler, Ford, Hudson, Nash, Studebaker had all announced price increases ranging from $10 to $53 a car. Henderson wired them a request to rescind the increase; Chrysler refused. So Leon let Chrysler have it. If everybody were as uncooperative as Chrysler, he said, the whole country's price stability would be undermined.

In this tiff, Henderson chose to occupy an unpopular salient. He picked on Chrysler's profits, which he said were about $20,000,000 (after taxes) during the first six months of this year. Nash and Studebaker, whose price increases were allowed after the Chrysler refusal, have not been making much money, and this—as well as their willingness to cooperate—was cited by OPACS men as a reason for not bearing down on them. "If a company is in a position to absorb cost increases, we're asking them to do it," said OPACS Price Director John Kenneth Galbraith; "the majors can do it, the minors cannot. " He formulated OPACS's rule of thumb: "Any company making reasonable profits, in the light of the past, should not increase prices."

The press was quick to detect the new menace in such a rule. Said the New York Times: "In effect OPACS has been attempting to control prices by asking for voluntary reductions in profits." Said the Wall Street Journal: "Profits ... are not the business of Mr. Henderson." Leon remained philosophical. "The honeymoon is over," he told a Congressional committee. He prepared to set price ceilings for the whole auto industry when the new model year begins. His present powers (which, apart from his jawbone, depend on the vague and drastic commandeering powers of the President) may by then be supplemented by specific legislative teeth.

Cotton. Politically, Henderson meanwhile had aroused a far more dangerous foe than Detroit. This was King Cotton, whose price, thanks to the Fulmer Cotton Loan (85 %-of-parity) Act, has led the whole commodity list skywards in recent weeks. OPACS is formally in favor of parity prices for cotton (16.12¢ a Ib.). But after the price crossed 15¢ last week, the sympathetic rise in cotton textile and cottonseed oil prices drew OPACS's fire.

Gray goods prices in New York have risen from 5.4¢ to 9.3¢ per yard since last December. Last week cotton textiles got a ceiling—around 15% below recent levels.

A ceiling for cottonseed oil, also well below the market, was expected.