In 1932 several politicians from Texas assumed important positions of power in Washington. John Nance Garner became Speaker of the House of Representatives. Texans also became the chairmen of very important committees. This included Samuel Rayburn (Interstate and Foreign Commerce), Joseph J. Mansfield (Rivers and Harbors Committee), Hatton W. Sumners (Judiciary Committee), Marvin Jones (Agriculture Committee) and Fritz Lanham (Public Buildings and Grounds Committee).
As the historian, Robert A. Caro has pointed out in Lyndon Johnson: The Path to Power: "Texans were elected on December 7, 1931, not only to the Speakership of the House but to the chairmanship of five of its most influential committees, Lyndon Johnson's first day in the Capitol was the day Texas came to power in it - a power that the state was to hold, with only the briefest interruptions, for more than thirty years."
In 1932 Franklin D. Roosevelt selected John Nance Garner as his running mate and on 8th November was elected as Vice President of the United States. Garner was able to use this position to promote the political careers of other Texans. He recommended that Jesse H. Jones should become chairman of the Reconstruction Finance Corporation (RFC). This became a crucial post in Roosevelt's New Deal policies and Jones had the responsibility of directing billions of dollars to help support American industry. Jones also took control of the Federal Loan Agency, the Federal Housing Authority and the Home Owners Loan Corporation. Such was his power that Jones was described as a "fourth branch of government".
Samuel Rayburn as chairman of the Interstate and Foreign Commerce Committee, played an important role in the establishing the and the Federal Communications Commission. In 1937 Rayburn became majority leader and held the post for the next three years.
Several of these Texas politicians became involved in the Suite 8F Group, a collection of right-wing businessmen. The name comes from the room in the Lamar Hotel in Houston where they held their meetings. Members of the group included George Brown and Herman Brown (Brown & Root), Jesse H. Jones (multi-millionaire investor in a large number of organizations and chairman of the Reconstruction Finance Corporation), Gus Wortham (American General Insurance Company), James Abercrombie (Cameron Iron Works), Hugh R. Cullen (Quintana Petroleum), William Hobby (Governor of Texas and owner of the Houston Post), William Vinson (Great Southern Life Insurance), James Elkins (American General Insurance and Pure Oil Pipe Line), Morgan J. Davis (Humble Oil), Albert Thomas (chairman of the House Appropriations Committee), Lyndon B. Johnson (Majority Leader of the Senate) and John Connally (Texas politician). Alvin Wirtz, Thomas Corcoran, Homer Thornberry and Edward Clark, were four lawyers who also worked closely with the Suite 8F Group.
Suite 8F helped to coordinate the political activities of other right-wing politicians and businessmen based in the South. This included Robert Anderson (president of the Texas Mid-Continent Oil and Gas Association, Secretary of the Navy and Secretary of the Treasury), Robert Kerr (Kerr-McGee Oil Industries), Billie Sol Estes (entrepreneur in the cotton industry), Glenn McCarthy (McCarthy Oil and Gas Company), Earl E. T. Smith (U.S. Sugar Corporation), Fred Korth (Continental National Bank and Navy Secretary), Ross Sterling (Humble Oil), Sid Richardson (Texas oil millionaire), Clint Murchison (Delhi Oil), Haroldson L. Hunt (Placid Oil), Eugene B. Germany (Mustang Oil Company), David Harold Byrd (Byrd Oil Corporation), Lawrence D. Bell (Bell Helicopters), William Pawley (business interests in Cuba), Gordon McLendon (KLIF), George Smathers (Finance Committee and businessman), Richard Russell (chairman of the Committee of Manufactures, Committee on Armed Forces and Committee of Appropriations), James Eastland (chairman Judiciary Committee), Benjamin Everett Jordan (chairman of the Senate Rules Committee), Fred Black (political lobbyist and Serve-U Corporation) and Bobby Baker (political lobbyist and Serve-U Corporation).
One of the major concerns of this group was to protect the interests of the Texas oil industry. The most prolific oil reserves in the United States was not discovered until October, 1930. The East Texas Oilfield included Rusk, Upshur, Gregg and Smith counties. The first small company to find oil in East Texas was Deep Rock Oil Company. The first investor to take advantage of the discovery was Haroldson L. Hunt. He bought 5,000 acres of leases and an eighty-acre tract for $1,335,000. Hunt soon owned 500 wells in East Texas.
The discovery of oil in Texas made a small group of men a great deal of money. They decided to join together in order to maintain their profits. This included strategies for keeping the price of oil as high as possible. The rich East Texas field caused problems as it initially caused the price of oil to fall.
Ross Sterling, the former owner of Humble Oil, was elected governor of Texas and took office on 20th January, 1931. The Texas Railroad Commission, under the control of the large oil producers, attempted to limit the production of oil (prorationing) in the new fields of East Texas. On 31st July, 1931, the federal court in Houston sided with a group of independent oil producers and ruled that the Texas Railroad Commission had no right to impose prorationing.
Large oil companies in Texas such as Humble Oil were in favour of prorationing and Sterling came under great pressure to intervene. On 16th August, 1931, Sterling declared martial law in Rusk, Upshur, Gregg and Smith counties. In his proclamation Sterling declared that the independent oil producers in these counties were "in a state of insurrection" and that the "reckless and illegal exploitation of (oil) must be stopped until such time as the said resources may be properly conserved and developed under the protection of the civil authorities".
Sterling now ordered the commander of the Texas National Guard, Jacob F. Wolters, to "without delay shut down each and every producing crude oil well and/or producing well of natural gas". Wolters who was the chief lobbyist of several major oil companies in Texas, readily agreed to this action. Wolters used more than a thousand troops to make sure that the oil wells in East Texas ceased production. The Texas Railroad Commission was now in firm control of the world's most prolific oil fields. It now controlled the supply of the oil in the United States. As a result, the price of oil began to increase.
When Franklin D. Roosevelt gained power he attempted to push a bill through Congress that would give his Secretary of the Interior, Harold Ickes, the authority to regulate domestic oil production. However, Sam Rayburn, a politician from Texas, as chairman of the House Committee on Interstate and Foreign Commerce, was able to kill the bill. It was left to another powerful Texan, Tom Connally, to sponsor the Connally Hot Oil Act. This gave the Texas Railroad Commission the authority to proration oil.
Texas oil millionaires also fought hard to maintain its tax concessions. The most important of these was the oil depletion allowance. It was first introduced in 1913 and allowed producers to use the depletion allowed to deduct just 5 per cent of their income and the deduction was limited to the original cost of their property. However, in 1926 the depletion allowance was increased to 27.5 per cent.
In the 1930s this group were very hostile to Franklin D. Roosevelt and the New Deal. Edward A. Clark arranged for a meeting to take place between Herman Brown and Lyndon B. Johnson. During the meeting Brown complained about the cost of New Deal projects. According to Robert Caro, Johnson said to Brown: What are you worried about? Its not coming out of your pocket. Any money thats spent down here on New Deal projects, the East is paying for.
Brown and Root now grew rapidly as a result of obtaining a large number of municipal and federal government projects. This included the Marshall Ford Dam on the Colorado River. This was worth $27,000,000. In a letter written to Lyndon B. Johnson, George Brown, admitted the company was set to make a $2,000,000 profit out of the deal. In 1940 the company won a $90 million contract to build the Naval Air Station at Corpus Christi.
Jesse H. Jones was another important figure in this group. He was chairman of Roosevelt's Reconstruction Finance Corporation (RFC). This became a crucial post in Roosevelt's New Deal policies and Jones had the responsibility of directing billions of dollars to help support American industry. Such was his power that Jones was described as a "fourth branch of government".
Jones worked closely with John Nance Garner. The men were both right-wing conservatives and did not always approve of Roosevelt's more progressive policies. However, Jones helped to finance many public works programs. Jones also took control of the Federal Loan Agency, the Federal Housing Authority and the Home Owners Loan Corporation.
In 1940 Jones became Secretary of Commerce. However, he retained his post as Federal Loan Administrator. Congress granted Jones and the Reconstruction Finance Corporation the power to distribute funds in order to prepare for war. This included the creation of the Defense Plant Corporation and the Defense Supplies Corporation. During the Second World War Jones was responsible for the spending of 20 billion dollars.
In 1942 George Brown and Herman Brown established the Brown Shipbuilding Company on the Houston Ship Channel. Over the next three years the company built 359 ships and employed 25,000 people. This was worth $27,000,000. This contract was eventually worth $357,000,000. Yet until they got the contract, Brown & Root had never built a single ship of any type.
Another businessman who did very well out of the war was Lawrence D. Bell, the head of the Bell Aircraft Corporation. This included the production of the Bell P-39 Airacobra, the P-39D and the P-59 Airacomet, America's first jet-powered airplane.
After the war the company concentrated on helicopters and in Bell had the great idea of making a 47-B available for Lyndon B. Johnson during his 1948 election campaign. As Robert Bryce the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate has pointed out: "With a helicopter, Johnson could land right in the center of town and give a speech right on the landing spot, eliminating the need for time-wasting car trips and from the airstrip." Bell decided to move his company from New York State to Fort Worth, Texas. Johnson, who became a member of the Naval affairs Committee, was able to help his friend sell helicopters to the United States Military.
In 1954 Paul Douglas began making speeches in the Senate about the need for tax reforms in order to eliminate special privileges such as the oil depletion allowance. Douglas attempted to join the important Finance Committee. He held seniority priority and should have been given one of the two available seats on the committee. Johnson had to apply considerable pressure on Harry Byrd, the chairman of the Finance Committee, to stop this happening.
In 1955 Lyndon B. Johnson became majority leader of the Senate. Johnson and Richard Russell now had complete control over all the important Senate committees. This was proving to be an expensive business. The money used to bribe these politicians came from Russells network of businessmen. These were men usually involved in the oil and armaments industries.
According to John Connally, large sums of money was given to Johnson throughout the 1950s for distribution to his political friends. I handled inordinate amounts of cash. A great deal of this came from oilmen. Cornel Wilde worked for the Gulf Oil Corporation. In 1959 he took over from David Searls as chief paymaster to Johnson. He testified that he made regular payments of $10,000 to Walter Jenkins.
In 1956 there was another attempt to end all federal price control over natural gas. Sam Rayburn played an important role in getting it through the House of Representatives. This is not surprising as according to Connally, he alone had been responsible for a million and a half dollars of lobbying.
Paul Douglas and William Langer led the fight against the bill. Their campaigned was helped by an amazing speech by Francis Case of South Dakota. Up until this time Case had been a supporter of the bill. However, he announced that he had been offered a $25,000 bribe by the Superior Oil Company to guarantee his vote. As a man of principal, he thought he should announce this fact to the Senate.
Lyndon B. Johnson responded by claiming that Case had himself come under pressure to make this statement by people who wanted to retain federal price controls. Johnson argued: In all my twenty-five years in Washington I have never seen a campaign of intimidation equal to the campaign put on by the opponents of this bill.
Johnson pushed on with the bill and it was eventually passed by 53 votes to 38. However, three days later, Dwight D. Eisenhower, vetoed the bill on grounds of immoral lobbying. Eisenhower confided in his diary that this had been the most flagrant kind of lobbying that has been brought to my attention. He added that there was a great stench around the passing of this bill and the people involved were so arrogant and so much in defiance of acceptable standards of propriety as to risk creating doubt among the American people concerning the integrity of governmental processes.
Senators called for an investigation into the lobbying of the oil industry by Thomas Hennings, the chairman of the subcommittee on Privileges and Elections. Johnson was unwilling to allow a senator not under his control to look into the matter. Instead he set up a select committee chaired by Walter F. George of Georgia, a member of the Southern Caucus. Johnson had again exposed himself as being in the pay of the oil industry.
Drew Pearson of The Washington Post picked up on this story and wrote a series of articles about Lyndon B. Johnson and the oil industry. Pearson claimed that Johnson was the real godfather of the bill. Pearson explored Johnsons relationship with George Brown and Herman Brown. He reported on the large sums of money that had been flowing from Brown & Root, the big gas pipeline company to Johnson. He also referred to the large government contracts that the company had obtained during the Second World War. Pearson also quoted a Senate report that pointed out there was no room for a general contractor like Brown & Root on Federal projects. Nevertheless, Johnson had helped them win several contracts including one to build air-naval bases in Spain.
Johnson was now in serious trouble and sought a private meeting with Pearson. He offered the journalist a deal, if Pearson dropped the investigation, he would support Estes Kefauver, in the forthcoming primaries. Pearson surprisingly accepted this deal. He wrote in his diary: I figured I might do that much for Estes (Kefauver). This is the first time Ive ever made a deal like this, and I feel unhappy about it. With the Presidency of the United States at stake, maybe its justified, maybe not I dont know.
The decision by Dwight D. Eisenhower to veto this bill angered the oil industry. Once again Sid Richardson and Clint Murchison began negotiations with Eisenhower. In June, 1957, Eisenhower agreed to appoint their man, Robert Anderson, as his Secretary of the Treasury. According to Robert Sherrill in his book, The Accidental President: "A few weeks later Anderson was appointed to a cabinet committee to "study" the oil import situation; out of this study came the present-day program which benefits the major oil companies, the international oil giants primarily, by about one billion dollars a year."
During the 1960 presidential election John F. Kennedy gave his support for the oil depletion allowance. In October, 1960, he said that he appreciated "the value and importance of the oil-depletion allowance. I realize its purpose and value... The oil-depletion allowance has served us well."
On the advice of Lyndon B. Johnson, Kennedy appointed John Connally as Secretary of the Navy. This was an important post as it controlled a great deal of federal spending, including the contract to provide oil to the US Navy. When Connally became Governor of Texas, Johnson arranged for fellow Texan, Fred Korth, to become the new Navy Secretary.
However, two years later, Kennedy decided to take on the oil industry. On 16th October, 1962, Kennedy was able to persuade Congress to pass an act that removed the distinction between repatriated profits and profits reinvested abroad. While this law applied to industry as a whole, it especially affected the oil companies. It was estimated that as a result of this legislation, wealthy oilmen saw a fall in their earnings on foreign investment from 30 per cent to 15 per cent.
On 17th January, 1963, President Kennedy presented his proposals for tax reform. This included relieving the tax burdens of low-income and elderly citizens. Kennedy also claimed he wanted to remove special privileges and loopholes. He even said he wanted to do away with the oil depletion allowance. It is estimated that the proposed removal of the oil depletion allowance would result in a loss of around $300 million a year to Texas oilmen.
In November, 1963, Fred Korth was forced to resign as a result of accusations of corruption following the award of a $7 billion contract for a fighter plane, the TFX, to General Dynamics, a company based in Texas. Johnson could not afford to appoint another Texan in this post. Instead he selected Paul Nitze, the husband of Phyllis Pratt, a Standard Oil heiress.
The assassination of John F. Kennedy brought an end to this proposal to bring an end to the oil depletion allowance. The Suite 8F Group also did very well out of the escalation of the Vietnam War. They formed a new company called RMK-BRJ to obtain these contracts. This included Halliburton who took over Brown & Root in 1962. These contracts included building jet runways, dredging channels for ships, hospitals, prisons, communications facilities, and building American bases from Da Nang to Saigon. RMK-BRJ did 97% of the construction work in Vietnam. The other 3% went to local Vietnamese contractors. Between 1965 and 1972 Brown & Root (Halliburton) alone obtained revenues of $380 million from its work in Vietnam.
Senator Abraham Ribicoff of Connecticut attempted to expose this scandal. He claimed that millions was being paid in kickbacks. An investigation by the General Accounting Office discovered that by 1967 RMK-BRJ had lost $120 million. However, GAO never managed to identify the people obtaining these kickbacks.
Another company associated with the Suite 8F Group also did well out of the Vietnam War. Bell Helicopter Corporation began producing the UH-1. It could climb 2,000 feet per minute and could fly at 125 miles per hour for about three hours. It could carry nine fully equipped soldiers and a crew of four. By 1969 Bell Helicopter Corporation was selling nearly $600 million worth of helicopters to the United States Military. According to Robert Bryce: "Vietnam made Bell Helicopters".
Anti-war protesters decided that George Brown was the mastermind behind this corruption. Demonstrations against him took place everywhere Brown went. It got so bad that Brown advised Lyndon B. Johnson to withdraw from Vietnam. Brown told Johnson that if he did not do this, the war would destroy both men. It did destroy Johnson but Brown survived the protests.
Johnsons resignation as president was a body blow to the Suite 8F group. However, they had made preparations and John Connally had already got Richard Nixon involved with the group. He arranged for Nixon to meet fellow members at his ranch in Texas. This resulted in Connally becoming Secretary of the Treasury. However, they were not able to obtain the success that Johnson achieved in the 1950s and 1960s. The main reason for this was that they were no longer able to control the chairmanship of the important Senate committees.