(2 of 10)
The Villain: Congress. Banker Alexander agrees with the general view that part of money's tightness—and the highest interest rates (5% and up) in 28 years—is the result of demand for credit spawned by the strong upsurge of the new boom. But it is also the result of fumbled fiscal policy. Who is to blame for that? Says Alexander: "The Administration's policy is good, and the Treasury is doing all it can.'' The real villain, he says, is Congress. It has refused to raise the 47% ceiling rate on long-term Treasury bonds, thus forced the Treasury to do its financing at competitive rates in the short-term market, to which private borrowers are turning in increasing numbers to get their money. The Treasury has thus sopped up billions—and within a year forced up the rates on short-term loans to nearly double their previous level (see chart). "The Secretary of the Treasury doesn't want a printing press [for money] in his office," says Alexander, "but the practical effect of the rate ceiling may be to put one there."
Alexander believes there may be more jiggling of rates when holiday financing steps up and the steel strike ends. But, he says hopefully, "there is a good likelihood that the worst pressure on rates is past. A sustained strong upward force is unlikely." He does not think that tight money will harm the boom: "The supply of money and credit is not exhausted. The banking system is heavily loaned, but not loaned up." He is not concerned about high money rates, points out that for long periods short-term rates wrere actually above long-term yields. Says he: "If we are to preserve our free economy, that has to be expected, and it is exactly the right medicine to forestall inflation. After 20 years of abnormally low rates, present rates are in the area of normal rates."
10-ft. Yacht. Despite the squeeze, hardly any banker is going to be beastly to a borrower. Reason: a great change has swept over U.S. banking. The banker whose thin lips seemed to be permanently fixed in a no has been succeeded by the banker with a neighborly twinkle in his eye. The soft sell has replaced the hard eye.
Nothing better symbolizes the change in bankers than the differences between Morgan Guaranty's Alexander and John Pierpont Morgan, the founder of the House of Morgan. Where Morgan was gruff and autocratic, with a fierce glare that could wither a man at 30 paces. Alexander is relaxed, cordial, full of a dry wit. He speaks with a Tennessee drawi. talks about mules as easily as about the national debt. While J. P. Morgan roamed the world in his 302-ft. yacht Corsair, Alexander's yacht is a loft. dinghy moored at his Cape Cod summer home. While Morgan traveled in private railway cars, Alexander gets about in a 1957 Chevrolet station wagon or a Corvette. While Morgan's hobby was spending millions for old masters. Alexander's chief delight is to get out in the country, climb onto a tractor to harrow or mow a field. He likes to polish his own shoes, buys his suits off the rack at Tripler's.