The following is an excellent excerpt from the book “THE UNTOLD HISTORY OF THE UNITED STATES” by Oliver Stone and Peter Kuznick from Chapter 2 “The New Deal: “I Welcome Their Hatred”” on page 45 and I quote: “The world Franklin Delano Roosevelt confronted when he was inaugurated president on March 4, 1933, bore strikingly little resemblance to the one in which he ran for vice president thirteen years earlier. In 1920, the world was on the mend following the Great War. In 1933, the problems seemed insurmountable. The United States was mired in the fourth year of the worst depression in its history. Unemployment stood at 25 percent. GNP had fallen by 50 percent. Farm income plummeted by 60 percent. Industrial production was down by more than 50 percent. The banking system had collapsed. Breadlines formed in every town and city. Homeless walked the streets. Misery was ubiquitous, despair pervasive.
Most of the world was in even worse shape than the United States. Unlike the United States, which had experienced a period of relative prosperity in the 1920s, most belligerents had never fully recovered from the devastation of the world war. Their citizens had less of a cushion to buffer them from the impact of the global economic meltdown. Trouble loomed everywhere.
Benito Mussolini was firmly ensconced in power in Italy after eleven years of dictatorial rule. Adolf Hitler and his National Socialists had come to power in Germany by exploiting both postwar grievances and economic hardship. Only a week before Roosevelt took office, Hitler had used the Reichstag fire to consolidate his dictatorial stranglehold over the country, unleashing vicious attacks on German Communists, Social Democrats, trade unionists, and left-wing intellectuals.
Trouble was also brewing in Asia. In September 1931, Japanese forces has seized Manchuria, a resource-rich and contested region situated between the Soviet Union, China, and Korea, and renamed it Manchukuo in 1932. In response to international protests, Japan left the League of Nations in 1933.
Despite the devastation wrought by the Depression, the mood was decidedly more upbeat in the United States. On the day of Roosevelt’s inauguration, a “New York Times” editorial captured the excitement that surrounded the change of administrations:
“Americans are a people of invincible hope. . . . But seldom can their eagerness to see a new president inaugurated have equaled that of this year. . . . they have exhibited an extraordinary patience in enduring hardships which millions of them have somehow come to believe will be mitigated or removed by the mire fact of Mr. ROOSEVELT’S entering the White House. . . . Mr. ROOSEVELT has . . .given an impression of buoyant optimism in the face of a great complex of knotty problems awaiting him. . . . Even citizens sunk in gloom. . . will preserve a remnant of admiration for a President who begins his turn by acting on the belief that “nothing is impossible for the United States.”. . . no President of the United States ever came to greater opportunities amid so great an outpouring of popular trust and hope.”
Roosevelt decided to act boldly. The country was behind him. The Democrats controlled both houses of Congress and people wanted action. Will Rogers commented on the president’s early days: “If he burned down the capitol, we would cheer and say, ‘Well, we at least got a fire started anyhow.’”
Roosevelt’s much-anticipated inaugural address rallied the nation to the fight. His declaration that “the only thing we have to fear is fear itself” seems, in retrospect, to have been out of touch with reality, given the magnitude of the problems. But Roosevelt connected with a deeper reality: Americans’ desperate need for renewed hope and confidence. And that he set out to restore.
He identified those responsible for the current dismal state of affairs: “The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.” He called for “strict supervision of all banking and credits and investment” and “an end to speculation with other people’s money.”
Roosevelt had given little indication of the kind of policies he would adopt once in office. At times, during the campaign, he attacked President Herbert Hoover from the right for spending too aggressively and unbalancing the budget. At other times, he acknowledged the suffering of the people and called for a “new deal.” Now he had to solve some very real and very practical problems. Hoover accused him of deliberately making a bad situation worse by ignoring Hoover’s pleas for joint action during the four-month interregnum between the election and Roosevelt’s taking office in March. Now the waiting was over. First up was the banking system.
Between 1930 and 1932, one-fifth of U.S. banks had failed. Many others were tottering. On October 31, 1932, with the Nevada governor off in Washington seeking a federal loan, Lieutenant Governor Morley Griswold declared a twelve-day bank holiday, preventing depositors from withdrawing their funds and thereby safeguards against a run on the banks. Mayors and governors across the nation anxiously eyed the situation, hesitating to follow suit. Things began to unravel when Michigan declared an eight-day bank holiday on February 14, closing 550 state and national banks. The “New York Times” assured nervous readers that “there is no reason why [Michigan] should be taken as a precedent.” Maryland and Tennessee saw sufficient reason to act, as Kentucky, Oklahoma, and Alabama, as panicky depositors lined up to get their money out while they still could. By the time Roosevelt was inaugurated, banking had been halted completely or sharply limited everywhere.
Conditions were ripe for dramatic changes in the banking system. Public anger against bankers had been building since the stock market crash. The year before, in February 1932, “New York Times” reporter Anne O’Hara McCormick had described the widespread antipathy toward Wall Street bankers afoot throughout the land: “In a country which suffered more then 2,200 bank failures last year. . . the tendency is to blame the bankers for almost everything that has happened at home and abroad. . . . Not in a generation at least has the feeling against money barons been so bitter . . . . The average citizen always suspected the morals of the financial hierarchy, but now his distrust goes further: he doubts its intelligence.”
A year later, mistrust of Wall Street financiers was at an all-time high, fueled by Senate inquiries into the banks’ role in precipitating the economic collapse. Peter Norbeck, the chair on the Senate Committee on Banking and Currency, appointed former New York County Assistant District Attorney Ferdinand Pecora to run the hearings. Pecora blistered the nation’s leading bankers. When announcing, in early February, that Charles E. Mitchell, the powerful chairman of the board of National City Bank, the world’s largest bank, was being called to testify, Norbeck, a Republican from South Dakota, issued a statement: “The investigation so far shows that some of the large banks were highly responsible for the wild stock market boom. . . some banks were in on the promotion scheme. . . . It was just a polite way of robbing the public.” Norbeck added that when the Federal Reserve Board in Washington tried to slow down the stock market boom, Mitchell, chair of the New York Federal Reserve Bank, had “defied the board and speeded up the boom. He took a ‘go-to-hell’ attitude toward the Board and got away with it.”
News of the hearing was splashed across the front pages of newspapers. Pecora exposed fraud and wrongdoing on the part of the nation’s top bankers, including obscene salaries, unpaid taxes, hidden bonuses, unethical loans, and more. Mitchell, one of the most powerful men in the country, was forced to resign. He managed, however, to win acquittal on charges of defrauding the government of $850,000 in income taxes, narrowly escaping a possible ten-year prison sentence.
Magazines began calling bankers “banksters.” “The Nation” observed, “If you steal $25, you’re a thief. If you steal $250,000, you’re an embezzler. If you steal $2,500,000, you’re a financier.” In this climate, Roosevelt had pretty much a free hand to do what he wanted. Brain Truster Raymond Moley noted, ”If ever there was a moment when things hung in the balance, it was on March 5, 1933—when unorthodoxy would have drained the last remaining strength of this capitalist system.” Senator Bronson Cutting concluded that Roosevelt could have nationalized the banks “without a word of protest.” Rexford Guy Tugwell, director of the Agricultural Adjustment Administration, and other advisors urged Roosevelt to do just that.
But Roosevelt chose a much more conservative course of action. He declared a four-day national bank holiday, conferred with the nation’s top bankers on his first full day in office, called a special session of Congress to pass emergency legislation, and calmed citizens’ fears with the first of his famous fireside chats. Congress passed and Roosevelt signed the Emergency Banking Act, written largely by the bankers themselves. The banking system had been restored without radical change. Congressman William Lemke remarked, “The President drove the money-changers out of the Capitol on March 4th—and they were all back on the 9th.” Roosevelt’s solution to the banking crisis would serve as a template for how he would handle most issues. His instincts were fundamentally conservative. He would save capitalism for the capitalists. As Secretary of Labor Frances Perkins, the first female cabinet officer in the nation’s history, explained, Roosevelt, “took the status quo in our economic system as much for granted as his family. . . he was content with it.” But the means he would use to save capitalism would be bold, visionary, and humane. They would transform American life for decades. Perhaps longer.
Though clearly not a radical, Roosevelt laid out an ambitious recovery program during his first hundred days in office. It included the Agricultural Adjustment Administration, to save farming; the Civilian Conservation Corps (CCC), to put young men to work in the forests and parks; the Federal Emergency Relief Administration (FERA) under Harry Hopkins, to provide federal assistance to the states; the Public Works Administration (PWA) under Harold Ickes, to coordinate large-scale public works projects; the Glass-Steagall Banking Act, which separated investment and commercial banking and instituted federal insurance of bank deposits; and the National Recovery Administration (NRA) to promote industrial recovery.
Established by the National Industrial Recovery Act (NIRA), which Roosevelt considered “the most important and far reaching legislation ever enacted by the American Congress,” the NRA was modeled, in part, on the War Industries Board (WIB), which Bernard Baruch had directed during World War I. The NRA suspended antitrust laws, effectively sounding the death knell for laissez-faire capitalism. Centralized planning would instead revitalize the shattered economy. Under the NRA, each industry drew up its own code covering wages, prices, production, and working conditions. The largest corporations dominated the code-setting process in their respective industries, with labor and consumer groups playing at best, a minor role.”
(AFTER READING THE FIRST PART OF THIS CHAPTER, YOU CAN EASY SEE WHY SENATOR ELIZABETH WARREN AND OTHERS WANT TO REINSTATE THE GLASS-STEAGALL ACT. PRES FRANKLIN ROOSEVELT DID THE PROPER THINGS TO GET THE BANKS OPERATING PROPERLY BEFORE THEY STARTED TO NOT FOLLOW REGULATIONS AND STARTED OPERATING SOLELY FOR THE BENEFIT OF THE BIG INVESTMENT BANKS AND THEIR CEOs, LIKE THEY DID IN THE 1930s. THIS IS WHY THE WHOLE WORLD MUST PUT REGULATIONS ON THE BIG INVESTMENT BANKS, PRIVATE EQUITY AND HEDGE FUNDS, THAT ARE PROMOTING THOSE WORTHLESS, GROWING, TOXIC DERIVATIVES THAT DON’T HAVE ANY VALUE AS AN ASSET, LIKE GOLD, SILVER AND LAND.AND THEIR COMMODITIES, WHICH ARE SUPPOSED TO BE REPRESENTED ON THE CHICAGO MERCANTILE EXCHANGE BEFORE THEY GOT ENCHANTED WITH THE WORTHLESS DERIVATIVES THEMSELVES. PRESIDENT FRANKLIN ROOSEVELT WAS THE ONLY ELECTED FOUR-TERM PRESIDENT WE EVER HAD AND HE PASSED THE GLASS-STEAGALL ACT SEPARATING THE COMMERCIAL BANKS FROM THE INVESTMENT BANKS AND THE STOCK MARKET AND IT WORKED VERY SUCCESSFULLY FOR OVER 60 YEARS UNTIL IT WAS ELIMINATED UNDER PRESIDENT BILL CLINTON IN 1999.
LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen and AARP Members