CHAPTER 10
COSTLY VICTORY
SILVER HAD LOST ITS GUARDIAN ANGEL WHEN KEY PITTMAN DIED on November 10, 1940, but Pat McCarran, the junior senator from Nevada, continued the battle with no less fanaticism, like Stalin picking up where Lenin left off. McCarran was born in Reno in 1876 and spent his entire life in Nevada practicing law and running for political office.1 He made William Jennings Bryan his personal hero and put the white metal on a pedestal: “The greatest value in the world is human energy—and brains, brawn, and muscle are represented in every ounce of silver we produce.”2 The beefy and broadshouldered McCarran was first elected to the U.S. Senate in 1932, when there were about 90,000 people in Nevada and he may have known everyone by name. McCarran told his daughter after the election: “I visited every water hole, town, hamlet, valley and place within the State. There was scarcely a man, woman, or child … that I did not see personally.”3
McCarran was an admirer of Spain’s fascist dictator Francisco Franco and joined Wisconsin’s disgraced Senator Joseph McCarthy on a communist witch hunt after World War II, but like Pittman he knew how to please his constituents.4 He spent much of the war battling Senator Ted Green of Rhode Island over America’s silver policy. The seven big western states in the silver bloc made the odds 14 to 1 against Green in the upper chamber of Congress, but the senator from the tiniest state made some headway. McCarran would have the last word, of course.
Theodore Green was born in 1867 in Rhode Island and could trace his lineage back to its founder, Roger Williams.5 Educated at Brown University and Harvard Law School, Green was governor of Rhode Island before being elected to the U.S. Senate in 1936 as an FDR liberal. Like Roger Williams, tolerance ran deep in Green’s blood, and he was a strong supporter of civil rights and religious freedom, but he also favored cheap silver to please his constituents. A thriving silverware and jewelry industry populated Rhode Island and surrounding states. The New England Manufacturing Jewelers and Silversmiths Association was founded in Providence and included about 30,000 workers before the war.6 The restrictions on scarce raw materials imposed by the War Production Board beginning in 1942 threatened those firms in the jewelry industry that could not convert to war production. The abundance of silver at West Point was a tempting target to sustain employment.
On Wednesday, October 14, 1942, a subcommittee of the Senate Banking and Currency Committee approved a bill introduced by Green to “permit the Treasury to sell non-monetary silver to private industry for consumptive use and to lend monetary silver for nonconsumptive purposes.”7 This meant that the Treasury could, for example, sell free silver to the Progressive Ring Company on Sabin Street in Providence, which employed about ninety workers, to make wedding bands and engagement rings, and could lend the silver that backed silver certificates to the Niagara Hudson Power Company to substitute for copper busbars in their generating plants servicing upstate New York. Henry Morgenthau had already begun lending free silver for the Manhattan Project, but the expansive Green bill permitted outright sales as well as lending monetary silver to anyone if it remained under Treasury control. Morgenthau supported the new legislation but specified that the average sale price of silver under the act “shall not be less than 50¢ per fine troy ounce.”8
Morgenthau’s 50¢ sale price covered the 48.5¢ average cost of free silver to the Treasury, but that did not satisfy Pat McCarran, who said that senators from the silver states would oppose the Green bill “most heartily.”9 Failure to pass it would mean the Treasury could sell only at $1.29 per ounce or higher as specified in the Silver Purchase Act.10 McCarran met with Morgenthau at his home with a counterproposal that would have permitted sales of free silver for war purposes at 71¢ an ounce if going forward the Treasury paid $1.29 for domestically mined silver. Morgenthau said, “I don’t think you can get away with it.”11
He almost did. McCarran led a one-man filibuster against the Green bill on Tuesday, December 8, 1942, by reading in a hoarse voice a report on the activities of the Reconstruction Finance Company for 1932 to an empty Senate chamber.12 McCarran’s stocky frame became a human roadblock on the Senate floor and succeeded in preventing the bill, which had the support of the Treasury, the Navy, and the War Production Board, from being considered before the Christmas recess.13 The New York Times editorialized: “This is strictly a war measure which goes no further than a minimum of common sense requires. It would break the ridiculous impasse now existing in which industry is being denied badly needed silver while the Government sits on a huge hoard buried in the ground. It would be better to repeal the whole discredited mess of selfish silver legislation which now requires the Government to continue endlessly to purchase silver at inflated prices and forbids it to sell the metal outright even for urgent war needs, except at prohibitive prices.”14 The editorial probably brought a smile to McCarran’s lips.
Six months later the Senate voted for the Green bill after it was amended to make the selling price of silver 71¢ an ounce, the same price the Treasury paid for newly mined domestic silver, perhaps because the symmetry appealed to four silver bloc senators on the Banking Committee who switched sides to break the deadlock.15 Senators Abe Murdock of Utah, Worth Clark and John Thomas of Idaho, and James Scrugham of Nevada joined forces with Senator Green, who said this would “prevent the closing of silversmiths throughout New England.”16 McCarran did not like the bill (or the four turncoats) but failed to rally enough support to withhold scarce resources during the war. He viewed it as a temporary setback, like a strategic military retreat that would turn into victory after hostilities ended and the permissive regulations expired.
McCarran prepared for a counterattack.
When the Green bill expired on December 31, 1945, four months after Japan surrendered to end World War II, the white metal had become a scarce commodity. Much of the Treasury’s stock was still leased to industry, and silver bullion stored in the West Point depository had dwindled to about 200 million ounces compared with 1.5 billion ounces four years earlier.17 Use of the white metal in electrical equipment, photographic film, silverware, and jewelry exceeded domestic mine output by almost 100 million ounces in each of the previous four years, and the U.S. Treasury had supplied much of the difference with outright sales.18 And as America shifted production from war to peace the shortfall promised to get worse, further shrinking the coverage of the Treasury’s readily available supply of bullion.19
Soldiers returning from war wanted to get married and raise families, which meant greater demand for sterling place settings as wedding presents and more silver baby spoons nine months later (the natural order of things back then). The demand for apartment furnishings like stoves, refrigerators, chandeliers, and wall mirrors exploded, but R.H. Turner, president of the Mirror Manufacturers Association, warned that without any silver “some in that industry also are facing [a] shutdown.”20 The Wall Street Journal focused on the shortage of the white metal in business: “Film for medical and industrial photography is being shut off.”21 In April 1946 William Thurber, spokesman for the Silver Users Association, said, “Unless Congress grants new authority to dispose of some of the Government’s excess of 225 million ounces underground at West Point, a lot of silversmiths are going out of business.”22
Senator McCarran rode to the rescue with silver bullets in his gun belt. He proposed an amendment that would fix the value of the white metal at 90¢ an ounce, allowing the Treasury to sell silver to industry at that price and also pay the same for newly mined domestic silver.23 This jump from the prevailing 71¢ subsidized price would last for two years, according to McCarran’s bill, when it would increase to the distinguished $1.29 of Alexander Hamilton and William Jennings Bryan. McCarran urged the return of silver to its full monetary value with an appeal to history: “This does not end the long fight which began with the ‘Crime of 1873,’ when silver was demonetized, but it brings the end of that fight in sight.”24
McCarran got much but not all of what he wanted. The battle between western miners and eastern silversmiths, a legacy of the class warfare between Bryan’s Democrats and McKinley’s Republicans, had brought congressional appropriations to a standstill, preventing postal workers from receiving their paychecks, but on July 19, 1946, each side compromised to allow the mail to be delivered.25 The legislation raised the price for domestically mined silver to 90.5¢ an ounce, extending the tradition of subsidy established by FDR in December 1933, but avoiding any mention of further increases.26 Congressman Herman Kopplemann, representing silverware companies in central Connecticut, and a member of the House-Senate conference committee negotiating different versions of the bill, considered the omission a victory: “At least we stopped them from putting over the $1.29 an ounce price.”27 Moreover, unlike FDR’s original Christmas present to the silver bloc, which simply paid 64.5¢ per ounce to American mines, the new bill made 90.5¢ a two-way street as long as the Treasury held enough bullion to cover its silver certificate obligations. The Treasury would buy domestically produced silver at 90.5¢ an ounce and could also sell the white metal to industry at that price.28 Few realized at the time that this provision would destroy silver’s monetary crown.
McCarran died in 1954 and did not live to see President Kennedy lead the coup.