1933. It was the middle of an era that our current moment is sometimes compared to: the Great Depression. When Franklin Delano Roosevelt took his oath of office in March of that year, over 10,000 banks had collapsed, following the stock market crash of 1929. One-quarter of American workers were unemployed, and people were fighting over scraps of food. This is an excerpt of FDR’s inaugural speech on March 4, 1933.
PRESIDENT FRANKLIN DELANO ROOSEVELT: First of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror, which paralyzes needed efforts to convert retreat into advance. […]
We face our common difficulties. They concern, thank God, only material things. […] The withered leaves of industrial enterprise lie on every side. Farmers find no markets for their produce. And the savings of many years in thousands of families are gone. More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment. […]
Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. […]
Yes, 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. […]
This nation is asking for action, and action now. […]
There must be a strict supervision of all banking and credits and investments. There must be an end to speculation with other people’s money. And there must be provision for an adequate but sound currency.
These, my friends, are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the forty-eight states.
The parallels between then and now are very strong. The contrast, I’d have to say, between that speech and the speech we heard from President Bush this morning was also quite stark. That speech, the inaugural address, was one of the great speeches in American history, but one of its great themes was “nothing to fear” and an explanation of the problems and a commitment to change the fundamental underlying principles of American government.
From President Bush today, we got a lot of fear—you know, unless you act quickly, everything’s going to fall apart—no explanation about exactly what’s going wrong—and I think the American people still don’t really understand that—and no commitment to change fundamentals. It’s all about, let’s pump more money into the system; don’t ask any questions.
ADAM COHEN: That’s right. But there was an understanding on the part of FDR and the people who supported him that there was something fundamentally wrong with capitalism. Capitalism was not working. And in the 1932 election, that was really the big issue. Herbert Hoover believed in the old system, believed that capitalism had to just work its way through, and everything would be fine. FDR was saying, no, there’s something wrong, and we need to fix the system.
And in that Hundred Days that followed that address that we just saw, there were major changes made to the system, things that we’re actually still talking about now and fighting over, like the Glass-Steagall Act, which separated out investment banking from savings banks; the Truth and Securities Act, the first real regulation of the sale of securities; and Home Owners’ Loan Corporation, the Farm Credit Administration, which actually took care of people who were having problems with their mortgages. It was a very different approach to government.
Things were actually so bad during Great Depression that corporations didn’t really feel they could fight back on a lot of these things. The election had been a landslide, and people pretty much all agreed that there had to be fundamental changes. And that’s why, for a very brief period, we were able to do things, change the laws, change our government, in a way that’s been very hard to do since.
Now, there’s a lot of pushback on these same issues. If you look at the bailout bill that we’re talking about today, there’s very little fundamental reform. There are provisions in it to say, OK, we need to look at reform, next year; we need to think about reform. But, one question a lot of people have is, why, if we’re right now making $700 billion in taxpayer money available, are we not also saying, here are the reforms we’re demanding? And some of those reforms, remember, would just be reinstalling protections that were built in during the New Deal, like the Glass-Steagall Act, and they’re not really part of this bill, which is disappointing.
Think of the power of that rhetoric that FDR used. It really put Wall Street on the defensive. It said, you know, these people have been speculating with other people’s money, as FDR said; they have created this problem; they’ve created, in large part, the market crash of 1929; we need to do something to stop them from doing it again. It put Wall Street on the defensive. It said there had to be fundamental changes. We’re not hearing that from any of our leaders now. Where are we hearing people say that the people at the large Wall Street firms stand indicted in the court of public opinion for doing really crazy levels of risk, which turns out to have been with other people’s money, because those risks have not paid off, and now we’re bailing them out?
In the 1932 race, you have Hoover who was saying the market will correct itself, and you have FDR saying, no, we have to take a hold of this, and he initiates this revolution. In the debate on Friday night, the candidates agreed on the bailout, fundamentally.
In the FDR administration, there was a battle within the administration. It wasn’t all a group of liberals. Now when we look back on the time, we think, oh, a group of liberals took over and changed everything. But there actually were battles within FDR’s inner circle. He had some liberal advisers like Frances Perkins, his Labor secretary; Harry Hopkins, who came a little later in the Hundred Days, who had been a social worker; Henry Wallace, who was the Agriculture secretary; and then advisers, like Felix Frankfurter at Harvard, who were pushing for more regulation, a more active role of government. But he also had a budget director, Louis Douglas, who was really an ally of Wall Street and very similar to the sort of, conservatives of today saying we don’t need regulation, we can’t afford to spend a lot of money, let’s keep things conservative. And that was a battle that actually really fought itself out during the Hundred Days, with the liberals prevailing.
There were many more banks failing, obviously, at that time then there are now, although the bank failures maybe were not as big as the ones that we’re seeing now—but Roosevelt didn’t actually fear that. In fact, he declared a bank holiday on his second day in office, a national bank holiday. Did that actually force lawmakers and others in the society to agree to these substantive changes, by the fact that he was saying, OK, we’re going to shut the banks down until we get a handle on what’s going on?
He didn’t have so much of a choice, because the banks were really failing, but yes, the national bank holiday that he declared really changed the momentum, and then the question was, what things do we need to do before we can end the holiday and reopen the banks? And one thing that he did with the first bill that was passed, the Emergency Banking Act, was to have the Treasury Department actually look through the finances of every bank and decide which ones were healthy enough to reopen and which ones weren’t—again, the start of a very active role of government. And the government didn’t let every bank reopen.
And it wasn’t about a bailout; it was about making sure that prudent regulation and making sure the banks had enough assets to do their banking. That was the new norm that was set up. And then, later, at the end of the Hundred Days, another banking act was passed that had even more protections, like Glass-Steagall, that really fundamentally changed the way our financial system works.
It definitely sent a signal that times were changing, that the old way of doing things under Hoover was not going to prevail. What was interesting, though, was, throughout that period and back then, the president got inaugurated in March, not in January, so it was a longer interregnum, as they called it. There was this four-month period in which Hoover actually kept on asking FDR to work with him on his solution to the banking problem.
But Hoover, rather egotistically, wanted it to be done all on Hoover’s terms, and he actually wrote to a congressman and said that he was trying to undo the New Deal before it began. FDR refused to go along with that. He said, he would deal with the crisis on March 4th, when he took office, and it would be him, the new Democratic Congress, doing it on their terms. And that worked out very well.
It’s interesting to see the Democrats working with Bush right now, going to the White House, and it’s the House Republicans who revolted. It’s an irony of the situation that we have an incredibly unpopular president who’s been repudiated, really, by the American public. We have, an unpopular party in charge that may be the one that designs this system that will perhaps last into the next four or eight years.
I would like to see many more regulations built in and true reform. The idea of “let’s write the check now and do the reforms later” doesn’t strike me as correct. The fact is that Paulson will now be authorized, if this passes, to begin spending about a billion-and-a-half dollars a day. And remember, his initial plan was he would have complete discretion over $700 billion in taxpayer money—no judicial review, no other agency could review it. And in the give-and-take, there have been some checks put on his discretion, but not really tremendous checks, and, an oversight board of people who themselves one would have questions about. So, you’d like to see more teeth in the law.
If the Democrats won Paulson will not be in charge. I think, this is sort of the last gasp, perhaps, of people like him being in charge for a little while.
Discussion: Adam Cohen, Amy Goodman, Juan Gonzalez
Adam Cohen, assistant editorial page editor of the New York Times and formerly a senior writer for Time magazine. His forthcoming book is called “Nothing to Fear: FDR’s Inner Circle and the Hundred Days that Created Modern America“.
– from DemocracyNow