The Path to Power (111 page)

But Lyndon Johnson knew how to solve the problem. He himself could provide the party with substantial funds, and he could provide them fast. And he appears to have been able to generalize from his experience with Brown & Root. Leaving the gloomy caucus with Edouard Izac, another young Congressman, Johnson said, according to Izac, “‘Sam Rayburn’s all wet. That isn’t the way you raise money for the Democratic Party.’ Lyndon’s idea was to go to the contractors and get the money.”

He knew more. He knew, in fact, of a source of money that was available only to Sam Rayburn—and that even Sam Rayburn didn’t know about.

Oil money had long been a factor in politics in the United States. In Texas, oil had come in not long after the century; the Spindletop field on the Gulf Coast, which would eventually prove out at a hundred million barrels, one-tenth as much oil as had been produced previously in America, blew in on January 10, 1901. The robber barons who had tapped the oil fields of the Northeast had been using the sale of black gold to purchase politicians for decades before that; the Standard Oil Company, one historian said, did everything possible to the Pennsylvania Legislature except refine it. But the new oil fields of the Southwest had, through the first three decades of the twentieth century, been controlled by the same companies that controlled the old oil fields of the Northeast; with their control of pipelines, markets and refineries—and the capital needed to explore and drill—they bought out or forced out the discoverers of the Texas fields so thoroughly that in 1930 75 percent of the oil in Texas was owned by Standard Oil and its offshoots and rivals such as Humble, Magnolia, Gulf and Sun, and the owners of the other 25 percent had to sell their oil to these companies, who owned the refineries and pipelines, at prices so low that they were effectively prevented from accumulating capital of their own. The companies, and the families back of them, that poured money into politics in Texas—Gulf Oil (the Mellons), Sun Oil (the Pews), Standard Oil (the Rockefellers)—were the same companies and families who had been financing the Republican Party—and selected Democrats—for decades in Washington and in various states of the Northeast. Their political alliances on the national level had long been made and cemented.

But after 1930, there were new sources of oil money, for 1930 was the year of the great East Texas pool.

The first success among the test wells being “poor-boyed” (drilled on credit, with frequent halts to raise money to go a few hundred feet deeper) by long-broke wildcatters in a poverty-stricken area of East Texas was eight miles east of Henderson. The oil that gushed out of it on October 6, 1930, splashing down on the rusty drill and on the derrick floor set among the pine trees, was believed to come from an isolated pocket, because the major oil companies had been advised by their geologists that there was little oil in the area. The second well that blew in, two months later, was near Kilgore, thirteen miles to the north. That must come from an isolated pocket, too, geologists said. At any rate, being so far from the first well, it certainly couldn’t come from the same field. A month later, another well came in, near Longview, twelve miles farther north. Three separate fields, the geologists said: certainly no one field could be that big. But with the major companies uninterested, hundreds of small oil prospectors, men who had been wildcatting for years, most without success, rushed into the area. They found that East Texas was a “poor man’s pool,” not only because, with the majors not aggressively buying up land, oil leases could be obtained at reasonable prices, but because, at 3,500 feet, the oil was relatively close to the surface and the drilling was relatively inexpensive; since the East Texas oil was a high-grade, light-gravity oil with little sulphur contamination, it could even be refined cheaply; some—very few, but some—of the wildcatters could refine their own oil and sell it to gasoline companies. By the end of 1931, in some weeks, wells were being sunk at the rate of one per hour. And no matter where they drilled, it seemed, not only between Henderson and Longview but to the north and south (and the east and west), when they reached a depth of about 3,500 feet and took a sampling of the sand, it came up resembling brown sugar—sugar that had been dipped in oil. By 1934, it was apparent that underneath those barren, dried-out cotton fields and miles of stunted pine trees was an ocean of oil more than forty-five miles long. By 1935, the East Texas pool was producing more oil than any state had ever produced—more than any nation had ever produced. Spindletop, with its hundred million barrels, had been huge. The East Texas pool had five billion barrels—fifty times as much as Spindletop.

And it was owned not by the majors, but by the independents.

The majors moved in and bought the independents out, of course; Humble alone wound up with 16 percent of the East Texas pool; by 1938, the majors controlled 80 percent of the field. But there was a difference. The East Texas field was unprecedentedly huge, and, to an extent true of no previous field, it had originally been owned by the wildcatters—so that this time, when they sold out, they came away rich. The owner of the first well to hit sold out for a relative pittance, but the owners of the second came away with $2 million, the owners of the third with $2.5 million. Some, like Sid Richardson, took their money and put it into other oil fields—in the Panhandle and in West Texas and down near Houston—and some of these
fields came in, too, and this time they didn’t have to sell out at all; they could keep the profits themselves. There was by this time so much money that even if they had to share it with the majors, what was left over was millions of dollars. Hugh Roy Cullen, for example, brought in the Tom O’Connor Hill in 1934. He had to share it with Humble—but what he was sharing was half a billion barrels. And, more independent because they now had financial resources of their own, the new owners no longer had to share on the former disadvantageous terms. More and more often, in fact, they didn’t have to share at all. “More independent oil fortunes came out of the East Texas field than from any other place in the world,” an historian of the industry has written. “This was primarily because of the size of the field. Out of the thousands of tracts and town lots, there was something for almost everyone.” And because of this, the East Texas field “became a point of departure from the old pattern of Texans going, hat in hand, out of the state to solicit funds for expansion and development.” H. L. Hunt, for example, built his own pipelines, and was soon filling up the tank cars of the Sinclair Oil Company with his own oil.

Little awareness of this development existed among even the shrewdest of politicians in Washington. The names of many of the new rich were not even known, and the wealth of others was drastically underestimated. In August, 1935, Harold Ickes forwarded to President Roosevelt an “interesting document” which Ickes said had been “handed to me by a man in the oil game who thought it ought to reach you.” It was a list of oilmen who had contributed that year to the Democratic National Committee—most of the contributions were for $1,000 or less—together with a brief description of the contributors. Of one of them, Herman Brown (Brown had begun buying oil leases), the writer says only: “Do not know of him.” One “S. W. Richardson” is described as “in debt and borrows money to develop leases from Charles Marsh. …” Of only two names on the list—Clint Murchison and his partner, Dudley Golding—is there an awareness of the size of their fortune (“Golding & Murchison came into the East Texas Field several months after it started with no money and [after] a little over three years … sold out … for about five million dollars”). Neither the author of the document—nor, apparently, Ickes—had any idea of the true financial circumstances of the men on the list. And this was still the situation in 1940. In part this was due to the rapidity with which their circumstances had changed: Sid Richardson had indeed long been in debt, but at the time the memo was sent, that description of him was out of date by several years—and several millions of dollars. And in 1937, he hit the Keystone Sands in West Texas. By 1940, his income was close to $2 million a year.

But while the politicians had no knowledge of these oilmen, the oilmen had a deep interest in national politics. They enjoyed many federal favors. The most widely known, of course, was the 27.5 percent oil-depletion allowance,
the loophole that, as Theodore H. White was to put it, “gives oil millionaires magic exemption from tax burdens that all other citizens must bear” by making 27.5 percent of their income free from tax. But there were many others, also important in oilmen’s bookkeeping, if less known—for example, the law that allowed the immediate writing-off of intangible drilling and development costs on successful wells. And the owners were vitally interested in keeping those favors, which were under almost constant attack. Hardly had the Roosevelt administration entered office when Secretary of the Treasury Henry Morgenthau, Jr., called the depletion allowance “a pure subsidy to a special class of taxpayers” that should be eliminated. In 1937, Morgenthau renewed his plea, calling the allowance “perhaps the most glaring loophole,” and Morgenthau’s boss joined in, calling depletion and other loopholes attempts “to dodge the payment of taxes.”

And the wildcatters were concerned with national policy not only because of favor but because of fear. As oil from the East Texas pool glutted the market and the price of oil plummeted, the industry was in turmoil and the positions of majors and independents swirled back and forth in confusion, but in general the wildcatters feared federal regulation. The occasion of the memo to Roosevelt—and of the donations which it reported—was a bill, introduced by the Oklahoma Populist, Senator Elmer Thomas, in 1935, that would have directly regulated the industry. That bill was blocked (in favor of Texas Senator Tom Connally’s “Hot Oil Act,” which left the setting of production quotas with the Texas Railroad Commission, a body which would be controlled by the wildcatters). Protected by the Railroad Commission from the price-cutting practices of the “majors,” the “independents” were soon flourishing, but the threat of federal regulation was a constant cloud on an otherwise limitless horizon. They had plenty of money; they needed a way to make it felt in Washington—they needed a path through which the power of their collective purse could be brought to bear on the federal government.

Of the members of the federal government, the only one they knew well enough to be comfortable with was Sam Rayburn. Richardson was from Fort Worth, and many other wildcatters lived in nearby Dallas. Ray-burn’s district adjoined Dallas, of course, and he had many close friends among the politicians there. On his frequent visits to the city, he had come to know Richardson and some of the other wildcatters while they were still poor-boying wells, searching for wealth on a shoestring. Becoming rich, other wildcatters moved to Dallas—the nearest large city and also the city whose banks first revealed a willingness to finance the wildcatters’ new ventures—and made their headquarters there. Rayburn met these men, too, usually through a pair of old friends who were intimately connected with the wildcatters, former State Attorney General William McCraw and William Kittrell, the veteran Texas lobbyist. Rayburn actively disliked the “old” oilmen, the wealthy shareholders in major companies like the Magnolia, whose
6,000-pound flying red horse atop the Magnolia Building dominated downtown Dallas and, at night, when it was outlined in 1,162 feet of ruby neon tubing, the plains for thirty miles around; and he disliked the oil-company corporate executives and lawyers, the lobbyists. And the feeling was mutual; traditional oil interests disliked Sam Rayburn as much as the utilities; attempting to remove him from Congress, they would fruitlessly pour money into his district year after year. But Rayburn liked Sid Richardson, whom he had known for years as a broke young man, and he liked many of Richardson’s friends. And when they had asked him for help, he had helped them. They had told him that the Thomas bill was a device of the big companies to kill off the little fellows—little fellows like themselves. If they had very recently—thanks to the East Texas pool—graduated out of the “little fellow” class forever, he did not grasp that fact. (He was never to grasp it fully—a fact that was to have grave consequences for the United States in decades to come.) The bill was, they said, a device of Wall Street to keep Texans—them—from ever getting a share of their own state’s wealth. They should be allowed to handle their own problems until it was proved they couldn’t, and since all this oil was in Texas, this seemed like one problem that Texas should definitely be allowed to handle. Roosevelt at the time was working closely with Rayburn on the SEC Bill; the President told Ickes (who would, under the proposed legislation, be given the federal regulatory power), “I do not want to cross wires with Sam Rayburn about this matter.” And the Thomas bill was tabled.

Rayburn was no stranger to the use of money in politics. As Garner’s campaign manager not only in 1940 but in 1932, he had asked for contributions to his friend’s campaign, and had gotten them. But, perhaps because he was uninterested in money himself, when he thought about campaign contributions, he had a tendency to think small. When he thought large, he thought in terms of Texas, and of the kind of Texans who gave large contributions to politicians, and this old money—cotton money and cattle money—was, almost entirely, Garner money. He knew how much Garner’s backers hated Roosevelt, and he knew that in 1940 they were contributing to Wendell Willkie, and that their money would not be available to him.

If there was new money in Texas on the same scale as the old—oil money, the wildcatters’ money—he had not yet come to understand that fact. Not having even the vaguest notion in 1940 of the extent of the wildcatters’ recently acquired wealth, he could not see its potential for politics. The scale of contributions they had made in 1935—a scale calculated largely in the hundreds; a thousand dollars was a generous contribution—was the scale on which he still thought. And as for using their money on a national scale—the obtaining and distribution of funds to scores of Congressmen across the country—what relationship did a task of such a magnitude have
with, say, squat, silent, unassuming Sid Richardson, still wandering around Fort Worth in a rumpled suit and living in the same small, shabby bachelor quarters at the Fort Worth Club where he had always lived? Says Richard Boiling: “He thought that his people were little people. He missed the fact that the independents had become giants. … He knew they had money, but he had no idea of the extent of the money.”