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William K. Divers Oral History Interview, April 16, 1970

Oral History Interview with
William K. Divers

Member of the staff of the Federal Emergency Public Works Administration, 1933-37; member of the legal staff of the U.S. Housing Authority, 1938; regional director of fifteen midwest states, U.S. Housing Authority, 1939-40; assistant general counsel and special assistant to the director of the defense housing division, Federal Works Agency, 1941; regional representative of the National Housing Agency, 1942-43; special assistant to the National Housing Expeditor, 1946; assistant administrator of the National Housing Agency, 1947; chairman of the Federal Home Loan Bank Board, 1947-53, and member, 1953-54.

Washington, D.C.
April 16, 1970
By Jerry N. Hess

[Notices and Restrictions | Interview Transcript | Additional Divers Oral History Transcripts]


Notice
This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

RESTRICTIONS
This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened September 1971
Harry S. Truman Library
Independence, Missouri

[Top of the Page | Notices and Restrictions | Interview Transcript | Additional Divers Oral History Transcripts]

 



Oral History Interview with
William K. Divers

Washington, D.C.
April 16, 1970
By Jerry N. Hess

[259]

HESS: All right, to begin with this morning, sir, let's discuss the Long Beach case that you mentioned just after we turned the machine off the last time. What's the history of that case?

DIVERS: Well, I'll be glad to mention it because it was the most important piece of litigation during the seven years I was on the Federal Home Loan Bank Board, and it had a lot of ramifications. A man named Tom [Thomas A.] Gregory was manager of a savings and loan association in Long Beach, California, known as the Long Beach Federal. I believe at that time he may also have been a director of the Federal Home Loan Bank of Los Angeles. This would have been about 1945.

[260]

The president of the Los Angeles Home Loan Bank died. The Board of Directors at the Bank recommended a success or. The successor had to be approved by the Federal Home Loan Bank Board here in Washington, or by the Administrator of the Federal Home Loan Bank Board, since there was just a single administrator, John Fahey, and no three men or five men board at the time this happened. Mr. Fahey refused to approve the nominee of the directors, whose name I believe was Hurford.

A lot of political pressure was brought by the Californians on Mr. Fahey to approve Mr. Hurford. Mr. Fahey believed that Tom Gregory was using the Long Beach Federal Savings and Loan Association, and the funds of the Long Beach Federal, to conduct a lobbying campaign against Fahey here in Washington, and he took two steps. One of them was he put a conservator in charge of the Long Beach Federal Savings and

[261]

Loan Association, and he also consolidated the Federal Home Loan Bank of Los Angeles with the Federal Home Loan Bank of Portland into one large Federal Home Loan Bank in San Francisco.

Well, this action in turn disturbed some of the Senators and Congressmen in the Pacific Northwest, because they'd had their own Federal Home Loan Bank before that time and now they had one in San Francisco, but Mr. Fahey was able to withstand the pressures, and along about this time I was appointed to succeed Mr. Fahey as chairman of the Federal Home Loan Bank Board.

The Californians then began to bring their pressure on me and on the other members of on the other member of our Board. You'll remember that there were only two of us at that time in 1947 and early--the first half of 1948.

Mr. J. Alston Adams, who was the other

[262]

member of the Board at that time, leaned in the direction of the desires of the Californians to have the Federal Home Loan Bank of Los Angeles re established and to remove the conservator from the Long Beach Federal. I was influenced to some extent by Adams' opinion and also by the opinion of Oscar Kreutz who was the head of the National League of Insured Savings associations and was a good friend of mine.

Incidentally, the United States Savings and Loan League also at this time was strongly in favor of rescinding the actions that John Fahey had taken so that all the calls I received from Congressmen, trade associations, so on and so forth, were all in favor of taking this action of rescinding Fahey's action.

I looked into the merits of the case as thoroughly as I could. I spent a dozen nights

[263]

reading all of the transcript of testimony and all the hearings and the court cases up to that time. And finally decided that it would be best for everybody concerned if we would remove the conservator from the Long Beach Federal, but not re-establish the banks at this particular time.

So, Adams and I had a meeting with Gregory and his attorney and with one of the California Congressmen who was particularly interested in this case. He was Congressman either in the district that Gregory was from or from the adjoining district. He was from Southern California and he . . .

HESS: What was his name?

DIVERS: Oh, well, I'll find it.(Chet Holifield) He may be still over there, I'll get out a Congressional Directory and find it for you, but--my secretary

 

[264]

would probably know.

We told Gregory that we would remove the conservator if he would call a new election for the Board of Directors of the Long Beach Federal, which was a mutual institution, that he would send a notice out to all of the shareholders that they'd be entitled to put up their own candidates for Board--or their own nominees for Board of Directors, and that he, Tom Gregory, would not try to manipulate the election in any way so that he would be returned as manager of the association. We recognized that he might be returned as manager, but we wanted the shareholders to have an opportunity to select another man if they wanted to have a new Board of Directors.

We took our action, as we had promised Long Beach Federal, and within about forty eight hours they began to break their promises. And

[265]

about a week later we put another conservator in after having removed it. He was only out for a week or ten days. Well, of course, each time a conservator is appointed for a financial institution there's a lot of publicity in the paper about it and it may even start a run so that Fahey's action had started a run and there were pictures of hundreds of people standing in line waiting to get their money out. When we put our conservator in there was no run because we explained to people that their accounts were insured by the Federal Savings and Loan Insurance Corporation. (This was done for the protection of the shareholders.) So, that there was no run even though Tom Gregory tried to start a run on his own institution by getting all of his friends to withdraw their money.

HESS: Why did he do that?

[266]

DIVERS: He wanted to get some evidence to show us, to show the congressional committees, and to show the courts, that the Federal Home Loan Bank Board was ruining his institution.

i could spend a lot of days telling all about the details of this. At one time the--when one of when a new Board member. was appointed, the attorneys for the Long Beach Federal sued him, and the marshal for the Federal District Court when he served the papers on the new Board member had to get a hand truck to hold all of the documents that were being served on this one Board member.

The litigation was handled for the Board by the Attorney General of the United States. And, as I recall, most of my--well, many of my conversations were with Howard McGrath, and others were with Tom Clark.

[267]

HESS: Did they handle it in a skillful manner?

DIVERS: Yes, they handled it in a--with a high degree of legal expertise and they were understanding of the position of our Board. After all, I had only one thing in mind, and that was to do whatever was the best for the public and for the savings and loan business. I think their interests were both the same in this case, there was no conflict.

HESS: What was the final outcome?

DIVERS: But I was not--but, the action by the Congressmen who were interested in the congressional committees they were on--the name of the Congressman who was particularly interested was Chet Holifield from California. I still don't speak to him although my wife is a, good friend of his wife.

HESS: What was his particular interest in this?

[268]

DIVERS: Well, all I can do is to say that I was suspicious.

HESS: Do you think he had a financial interest?

DIVERS: No, I wouldn't go that far, but I think that there were some very heavy donations to his campaign funds.

HESS: I see.

DIVERS: He had a . . .

HESS: By one Mr. Gregory?

DIVERS: Yeah. He had an administrative assistant who later became a lobbyist here in Washington, and I think there may have been some connection between this administrative assistant and Gregory.

HESS: What was the final outcome of that case?

[269]

DIVERS: Well, let me tell you one more thing about it.

HESS: A11 right.

DIVERS: John Fahey, my predecessor, spent several days briefing me on the Gregory case after I was appointed, and he had had the FBI looking into the matter, and also some other investigators who had been hired, and he told me of all sorts of ramifications. About Gregory buying control of newspapers and gold mines in Mexico and things of this kind. You want to--actually when he put--when Fahey put a conservator into this association he sent in a conservator with several dozen examiners who had been deputized to go in and put Federal seals on the vaults and on all of the tellers cash drawers, and so