The following is an excellent excerpt from the book “F*D*R: A Biography” by Ted Morgan from Chapter XIV on page 396 and I quote: “In 1933, the expansionist threat did not come from Germany or Italy but from Japan, whose record in international relations was that of a highway robber. Japan had fought China in 1904 to grab Korea, and had tried to annex Siberia during the Russian Revolution. In 1931, it had invaded Manchuria, the first open violation of treaties since Versailles, and seemed bent on gobbling up China. American policy was restrained. There was a $50 million gift to China, so it could buy American cotton and wheat, and an announcement that the U.S. fleet would be kept in the Pacific, which the Japanese protested. In April, FDR saw the Japanese foreign minister, Yosuka Matsuoka, and commented afterward that “his suggestion to us in regard to where we should keep our own fleet has brought me thousands of protests. I am wondering if he said this in order to ingratiate himself against assassination by the Junker crowd when he gets home.”
FDR’s first venture into personal diplomacy was the recognition of Russia. Here in embryo form was a style of negotiation that would affect the course of World War II and the postwar world. It was based on the conviction that if he simply bypassed official channels and talked to his opposite number, everything could be worked out. As he put it on this occasion, “If I could only, myself, talk to some one man representing the Russians, I could straighten out this whole question.”
The desirability of the move seems to have originated with Ray Moley, who wrote FDR on May 19 that “the old shibboleths as to whether Russia is a democratic government or not, should not weigh in the discussion. In other words, we should apply to Russia at this time the policy of recognizing a de facto government should be.”
FDR saw the advantages of such a step. This was, after all, the established government of Russia, recognized by every other major power. It was a potential ally against Japan, and a potential buyer of American goods.
To Cordell Hull, it was an ironic reversal of the situation in 1781 when Congress had sent Francis Dana as envoy to Russia, with John Quincy Adams as his private secretary, and the autocratic Catherine the Great had refused to receive the representatives of a dangerous revolutionary government. They were unable to obtain recognition. Hull was against recognizing a regime where religious freedom was denied and where foreign nationals were thrown in jail on slight pretexts, a regime that did not pay its war debts and that spread hostile propaganda through the Communist International. Another foe of recognition was Jack Garner, who said: “If this outfit has kept its word to anyone or done anything in good faith I have not heard about it.”
FDR at first used back channels, going through Henry Morgenthau, Jr., governor of the Farm Credit Administration, who opened negotiations with the Soviet trade organization, Amtorg. In October, there was a greater urgency for recognition because Hitler withdrew from the League of Nations; the Soviet Union was seen as a valuable ally in case of German expansion. FDR brought in the State Department, using Assistant Secretary of State Bill Bullitt to conduct the negotiations.
On October 10 the president broke the logjam with a personal letter to Soviet President Mikhail Kalinin, telling him that he had “contemplated the desirability of an effort to end the present abnormal relations between the hundred and twenty-five million people of the United States and the hundred and sixty million people of Russia.”
The Soviets, fearing an attack from Japan, were eager for recognition, and sent over their portly foreign minister, Maxim Litvinov, in November. After a week of talks with Hull and Bullitt, Litvinov saw FDR on November 15 and gave him the assurances he was seeking: that the Soviet Union would not permit subversion or propaganda in the United States, and that Americans in the Soviet Union would be guaranteed freedom of worship.
With a bonhomie that ignored recent Russian history, FDR sought to convert Litvinov to Western notions of freedom of religion. “Now you know, Max,” he told the Bolshevik envoy, “your good old father and mother, pious Jewish people, always said their prayers. I know they must have taught you to say prayers. You must know all the good old Jewish psalms and prayers.”
by this time Litvinov was blushing with embarrassment. “Now you may think you’re an atheist,” FDR went on. “You may think you don’t have any religion, but I tell you, Max, when you come to die do you know what you’re going to think of ? You’re going to be thinking about what your father and mother taught you. That’s what you’ll think when you’re dying.” Litvinov blustered and puffed and laughed nervously, thinking perhaps that merely by listening to this Sunday school talk he was committing a crime against the state, but FDR went right ahead: “In America nobody can understand this idea that people shouldn’t have access to religion—any kind they want. That’s all I ask, Max—to have Russia recognize freedom of religion.”
Russia did, but only for Americans, not for their own people. As for the promise that the Soviet Union would not export Bolshevism, it was broken in July 1935 when the Third International, meeting in Moscow, targeted the United States in particular for agitation and propaganda. No agreement was reached on the war debt, a relatively minor (compared to the British and French debts) $300 million, which the Soviets refused to pay, saying they were not responsible for debts run up by the Kerensky government. On November 17, 1933, FDR announced the resumption of diplomatic relations with the Soviet Union, a decision he could make without going to Congress.
Bullitt was sent to Moscow as the first American ambassador, full of high hopes that he would be the architect of a lasting friendship. Stalin greeted him with a kiss when he arrived in December, telling him that FDR was one of the most popular men in the Soviet Union. Three years later, when he left, he was thoroughly disillusioned. The Russians had reneged on every promise. Once they were sure Japan would not attack they dropped all pretense of cooperation. Bullitt could not even get them to make good on the site that Stalin had personally pledged for the American embassy. He was shocked by the brutality of the regime, the purge trials and the murder of Stalin’s rivals, such as Sergey Kirov, head of the communist party in Lenningrad. In his letters to FDR, Bullitt reported the climate of paranoia—Stalin received his meals from the kitchen of the Kremlin hospital in sealed containers to protect him from poison, and there were six OGPU agents watching the cooks.
And yet you could not say on balance that resuming relations with the Soviets was a mistake. Although it produced aggravation instead of entente, it was instructive. Sometimes, even if a policy hurt in certain ways (as when the American Communists were made the stars of the Third International), it was worth trying. The strength of Roosevelt’s leadership was his willingness to venture down blind alleys.
He did so in his gold-buying policy, in the mistaken belief that by raising the price of gold and devaluing the dollar you could raise farm prices. Gold had been at $20.67 an ounce since 1900. FDR wanted to set up a government agency to buy it at a higher price. Secretary of the Treasury Wooding was seriously ill, and the acting secretary was a principled young man named Dean Acheson, son of the Episcopal bishop of Connecticut and onetime private secretary to Supreme Court Justice Louis D. Brandeis. To Acheson, the gold-buying plan was a shoddy trick. He was in the process of selling government securities to the public. How could he in good conscience do that when he knew that the securities would be worth less when the gold buying devalued the dollar.
FDR complained to Morgenthau that he had tried for six weeks to get the Treasury to buy gold but it was “like punching your fist into a pillow.” Finally, in October, Attorney General Cummings ruled that the secretary of the Treasury had the power to buy gold on the open market.
Each morning in the president’s bedroom, starting on October 25, there took place a strange rite called “setting the price of gold.” As FDR breakfasted on soft-boiled eggs in his solid mahogany bed, he and Morgenthau and Jesse Jones, the chairman of the Reconstruction Finance Corporation, set the price of gold slightly higher than the London and Paris prices. One day they decided on a rise of twenty-one cents and FDR said, “It’s a lucky number because it’s three timed seven.”
Acheson was a reluctant party to these transactions. When Morgenthau on one occasion asked him where his statement of the price of gold was, Acheson asked: “Why don’t you move into Mr. Woodin’s office” “Dean,” Morgenthau replied,”. . . I live each day for itself. . . . I am neither a schemer nor a plotter.”
Morgenthau did however move into Woodin’s office on November 13, when Woodin went on a leave of absence, and became acting secretary of the Treasury. FDR had asked Jim Warburg what he thought about giving Morgenthau the job, and Warburg said, “If you want a good guard on a football team, who’ll charge straight ahead on every play and get the signals mixed about every tenth play, he’ll be fine.” By that time, Acheson had resigned, leaving, as he put it, the alchemists to turn gold into rising prices.
Acheson was sure the gold buying was illegal, and furthermore he disapproved of what might be called the “Roosevelt style.” He thought there was something condescending in the way FDR called everyone by their first name—it was “not gratifying to receive the easy greeting which milord might give a promising stable boy and pull one’s forelock in return.”
The early bedside appointments reminded him of a seventeenth-century levee at Versailles, at the mercy of undignified interruptions, such as the entrance of FDR’s grandchildren, Sistie and Buzzy, who galloped across the room and climbed on the bed. “Then began a game not designed to improve communications between President and caller. The child, leaning innocently against her grandfather, would suddenly clap her hand over his mouth in the middle of a sentence, smothering the rest of it. The President’s counterattack, a vigorous tickling of her ribs, brought her hand down in defense and produced joint hilarity. Conversation became intermittent. . . . “
FDR kept raising the price of gold through 1933, but it did not produce the hoped-for rise in farm prices. Lord Keynes, the theorist of countercyclical spending, described his currency management as “a gold standard on the booze,” and the British ambassador to Washington, Sir Ronald Lindsay, sent hie gruff appraisal to Winston Churchill, who had in 1929 resigned as chancellor of the Exchequer: “For two moths Roosevelt has been giving us pure hocus pocus and a continent has watched him agape. Now he has got to produce something out of his hat and pretty quick too. Let’s hope it won’t be the mixture of murder and suicide which the rest of the world dreads so much”(murder and suicide was a favorite phrase of the London Times to describe FDR’s monetary policies). The tinkering with gold stopped in January 1934, when congress passed the Gold Reserve Act, setting the price at $35 an ounce and the gold content of the dollar at about 60 percent of its pre-1933 content.
It’s surprising how virulent the criticism of Roosevelt already was at this time, when he had been in office less than a year, not only on the part of the British, who could be forgiven their long habit of obtuseness when it came to American affairs, but also on the part of affluent Americans, who did not seem to grasp the simple fact that he was only trying to save the capitalist system. In Rome that November, Mrs. Camilla Lippincott, widow of a former Republican senator from Rhode Island, traveling with the Washington hostess Mrs. Truxton Beale, said at a dinner given for her by the counselor of the American embassy, Mr. Kirk: “I wonder how the members of the Roosevelt family will juggle their income tax reports to conceal all the money they have been making through their official position.” The counselor asked her to leave at once, and the ambassador, Breck Long, reporting the incident to FDR, commented that it was intolerable for Americans abroad to express such views.
Americans at home expressed them too, and FDR told his Groton classmate George Biddle said, “a drop will precipitate the contents of a jar and separate the liquid into its component parts.” “Yes, but the stupidity of it,” FDR said. “Not entirely,’”Biddle replied. “They know or fear that what they want in life—irresponsible power—is gone. They hate the symbol of those impersonal forces.” “Our friend X told me he was so disgusted by the language in the Rittenhouse Club last month that he swore he would never enter it again,” Roosevelt said.
FDR knew from his study of history that the more a president tried to do, the more people went on about his commissions and omissions. He liked to tell the story of Lincoln listening patiently to complaints and then saying: “Gentlemen, suppose all the property you were worth was in gold, and you had put it in the hands of Blondin [the French tightrope walker] to carry across the Niagara River on a rope. Would you shake the cable, or keep shouting out to him, ‘Blondin, stand up a little straighter—Blondin, stoop a little more—go a little faster—lean a little more to the north—lean a little more to the south’? No, you would hold your breath as well as your tongue and keep your hands off until he was safe over.”
As the year ended, FDR did not think things were going as badly as all that. His devaluation of the dollar had helped people pay their debts. In nine months, he had seen cotton go from four and a half to nine and a half cents. Cotton farmers would get $350 million more than they had gotten last year. Writing Colonel House from Warm Springs on November 21, he said: “Now let me tell you something cheerful. This Southland has a smile on its face. Ten cent cotton has stopped foreclosures, saved banks and started people definitely on the upgrade. That means all the way from Virginia to Texas. Sears-Roebuck sales in Georgia are 100 percent above 1932. Another angel: Hugh Johnson has just telephoned me to be sure to read the latest Dun & Bradstreet report. He says every section of the country is showing a definite gain.
And whom was the recovery helping? Not Mrs. Camilla Lippincott or Mrs. Truxton Beale, but the millions of working people and farmers who even in so-called prosperous times never got much of a break. They were the ones who since 1929 had been in deep trouble. Other Americans had their investments cropped and their salaries cut, but they never had to face the tragedy of hunger, unemployment, and the constant fear of being dispossessed.”
(THE IMPORTANCE OF UNDERSTANDING WHY WE GOT INTO THE WAR WITH JAPAN IS CRUCIAL BECAUSE IT WAS OVER FAIR TRADE AND THE FACT THAT JAPAN WAS INVADING THEIR NEIGHBORS TO GET MORE COMMODITIES AND LAND FOR THE BENEFIT OF THEIR OWN GOVERNMENT. THE FACT THAT THESE ISSUES WEREN’T TALKED OUT AHEAD OF TIME, LIKE A DEMOCRACY IS SUPPOSED TO DO, SHOWS WE HAVE A LOT OF WORK TO DO IF YOU ARE EVER GOING TO DEVELOP A FAIR TRADING BILL THAT IS EXPECTED TO TREAT ALL GROUPS OF PEOPLE INVOLVED FAIRLY. THERE ARE TWO ISSUES THAT MUST BE DECIDED—ALL COUNTRIES MUST HAVE UNIONS TREATING THEIR LABORING PEOPLE FAIRLY SO AT LEAST THEY CAN BUY THE PRODUCTS THAT THEIR COMPANY IS SELLING. THE OTHER ISSUE IS—SINCE MOST PEOPLE DEAL WITH COMMERCIAL BANKS, THERE MUST BE A FIREWALL BETWEEN THEM AND THE STOCK MARKET. THE PROBLEM IS, THE STOCK MARKET KEEPS ON INSISTING WE MUST HAVE DERIVATIVES INVOLVED TO KEEP THE BANKING SYSTEM WORKING AND THE STOCK MARKET IS NOT A BANKING SYSTEM AND THAT’S WHY WE MUST REINSTATE THE GLASS-STEAGALL ACT WHICH IS EXACTLY WHAT SENATOR ELIZABETH WARREN WANTS TO DO WITH A MODERN VERSION OF IT. EVERY LEGISLATOR RUNNING FOR THE SENATE OR HOUSE MUST BE ASKED THE QUESTION: “WHAT ROLE DO DERIVATIVES HAVE TO PLAY IN OUR BANKING SYSTEM?” IF THEY CAN’T ANSWER, VOTE THEM OUT OF OFFICE, JUST LIKE DEIVATIVES MUST NOT BE ALLOWED IN ANY BANKING SYSTEM AND LEAVE THAT TO THE STOCK MARKET, IF THEY THINK THEY CAN RISK THEIR OWN COMPANY, WITH NO GOVERNMENT BAILOUT.
LaVern Isely, Overtaxed Independent Middle Class Taxpayer & Public Citizen & AARP Members