Business: Dead Flower

The Tennessee Valley Authority is a number of things to a number of people, but to Socialist Norman Thomas it is “the only genuinely socialistic project in the New Deal—a beautiful flower in a garden of weeds.” Tenderly cultivated by TVA Director David Eli Lilienthal, the flower budded prettily last summer when Electric Bond & Share agreed, at pistol point, to sell its Knoxville, Tenn. power & light properties to TVA. The pistol was the threat that Knoxville would build its own distributing system with a PWA loan-grant (TIME, July 30).

By this deal Mr. Lilienthal secured a big-city outlet for some of his surplus power, and Bond & Share got $6,200,000 which was enough to pay off the bonds of the local company and leave a little something for preferred stockholders. With bondholders’ approval practically assured, Mr. Lilienthal departed for a happy holiday in Britain.

Meantime his budding flower was set upon by cutworms, slugs and aphids. Two preferred stockholders marched into court to block the Knoxville deal. A group of coal and ice companies, which mortally hate & fear TVA’s hydro-electric schemes, hastily obtained judicial permission to join the fight. Since the agreement was already signed & sealed, Bond & Share was placed in the anomalous position of fighting shoulder to shoulder with Mr. Lilienthal.

In due course the TVA deal came before the Tennessee Railroad & Public Utilities Commission. Back from Britain, Director Lilienthal was called as a witness. Just before he took the stand, he boasted to newshawks: “In spite of hell & high water, the TVA is going great guns. We find ourselves with ample funds and with a splendid personnel.” Mr. Lilienthal won his case before the Tennessee Commission on the ground of “public interest.”

Last week, however, 13 embattled coal and ice companies went before a Tennessee circuit judge, convinced him of their interest in the matter, got him to issue a writ forbidding the sale of the Knoxville properties until the whole deal could be reviewed from the legal and constitutional angle.

Simultaneously the TVA-Bond & Share agreement expired. Mr. Lilienthal declared the sale dead, bitterly pointing out that “failure of the transaction was not due to any difference between the parties as to price or fairness to investors.” Promptly the Knoxville city fathers dusted off their PWA-financed plans for a municipal system.

Terms of the Knoxville deal could be readily extended. Certainly Bond & Share had no desire to have the value of its Knoxville properties extinguished by lopsided municipal competition. But the 13 coal and ice companies, with the moral support of many a thoughtful Tennessee Valley businessman, were determined to drag Mr. Lilienthal, dead flower in hand, before a high court.