A Completely Favorable Report

The Reconstruction Finance Corporation approved a $100,000 loan for the Three Rivers Glass Company in principle, set two conditions the company had to meet before the money could close, and received an engineering report on the plant that satisfied the first. The second condition — that the mortgage holder in Tulsa, Oklahoma agree to let the RFC hold the first lien — was never put to the Tulsa company in good faith. The attorney entrusted with making the approach had a second client: the Ball Brothers Glass Company of Muncie, Indiana. The loan that was supposed to save the factory became the mechanism for delivering its financial condition to the people who would foreclose on it.

The agency

The Reconstruction Finance Corporation was a federal lending agency. Smith describes it as “a New Deal agency which was created to provide government-insured loans to ailing business” [@ev-0039, p. 25]. Franklin D. Roosevelt appointed Jesse Jones of Houston to administer it [@ev-0039, p. 25]. Jones was a Houston banker and commercial figure who already knew Charles Tips. The Washington meeting in which Jones endorsed the loan application to his staff, and the terms of that endorsement, are documented in art-0028.

The loan

Tips summarized the outcome in a single sentence in his 1971 letter to Thelma Lindholm: “I went to Washington and got the Reconstruction Finance Corporation to approve a loan for a $100,000.00 for us” [@ev-0041, p. 44]. His 1973 account is more detailed. He had gone to Washington “and got an appointment to see Mr. Jones to try to get a loan to save the Three Rivers Glass Company” [@ev-0041, p. 19]. Jones endorsed the application to his staff, and the staff set two conditions.

The first condition — engineering

The RFC required that an engineering firm they approved visit the factory and report on its condition. Tips: “an engineering firm approved by them must visit the factory and report to them. The engineers from Pennsylvania went to Three Rivers with me, surveyed the factory, and made a completely favorable report” [@ev-0041, p. 19]. Smith: the RFC required “a federally-sponsored team of engineers inspect the plant to determine that the facilities were functional and that it was capable of glass production to repay its debt” [@ev-0039, p. 25]. Both accounts agree the condition was met.

The report itself is not held. Tips’ phrase — “a completely favorable report” — is his characterization. What the engineers concluded about the plant’s equipment, productive capacity, or financial projections, and what criteria the RFC had instructed them to apply, are not stated in any held document. The first condition was satisfied.

The second condition — Tulsa

The RFC’s second requirement was a change in lien priority. Tips: “The only other condition the RFC had was that the loan company in Tulsa Oklahoma holding the first mortgage would have to give the RFC a first lien on the plant” [@ev-0041, p. 19]. Smith: the RFC required “that the savings and loan in Tulsa, Oklahoma, which held the mortgage on the glass plant allow the Reconstruction Finance Corporation to hold the first lien on the plant and all its facilities” [@ev-0039, p. 25].

The RFC would not advance $100,000 to a company whose real property was pledged to another lender ahead of it. The Tulsa holder had to step back from first-lien position and let the RFC hold priority. If it agreed, the RFC’s collateral was secured and the loan could close.

Smith records the board’s assessment at this point: “The board of directors felt certain that the loan company in Tulsa would agree to the second requirement” [@ev-0039, p. 26]. Tips’ own summary of where things stood when he returned home: he “returned to Three Rivers feeling that the Three Rivers Glass Factory was saved from the depression” [@ev-0041, p. 19].

The betrayal

The company engaged William Church, an attorney in San Antonio who had conducted prior business with the Tulsa loan company. He was given $500 to cover his fee and travel to Tulsa [@ev-0039, p. 26]. Church did not negotiate with Tulsa. He had another client — the Ball Brothers Glass Company of Muncie, Indiana — and used the information about Three Rivers Glass Company’s financial condition to arrange a mortgage purchase by Ball Brothers instead. The RFC’s second condition was never put to the Tulsa holder; the foreclosure followed. The full record of Church’s conduct and Tips’ account of it are in art-0017 and art-0018.

After the Tulsa condition failed, the RFC does not appear in any held document. Whether the agency was notified that the condition had not been met, whether it formally closed the application, and what its own record of the transaction shows are not in the held evidence base.

What this expert does not hold about this loan

The RFC’s institutional file on the Three Rivers Glass Company loan is not held. No application is held — not the form Tips submitted, not any supporting financial documents. No formal approval or commitment letter is held; whether Tips received a written commitment before returning to Three Rivers, or understood the endorsement as conditional until the Tulsa requirement was met, is not stated in any held document. The engineering report is not held: the engineers produced a written document and Tips says it was completely favorable, but what the report said about the plant’s equipment, its productive capacity, or the criteria the RFC had set is not in any held account. The conditions as the RFC formally wrote them are not held; both conditions are known only through Tips’ oral account and Smith’s secondary summary derived from it. No internal RFC correspondence is held — no memoranda between Jones and his staff, no record of the application’s progress, and no documentation of what the agency did when it learned the Tulsa condition had not been satisfied, if it ever learned this. Whether the $100,000 figure was firm in the conditional approval or subject to adjustment after the engineering inspection is not stated. The identity of the Tulsa entity is described differently in the two held accounts — Tips calls it “loan company,” Smith calls it “savings and loan” — and neither account names it.