article

10.10.08

What Obama and McCain Can Learn From FDR

When Roosevelt took office in 1931, he faced a banking crisis much like the one our next commander in chief will face. His strategy may have been radical, but it worked.

When Roosevelt took office in 1933, he faced a banking crisis much like the one our next commander in chief will face. His strategy may have been radical, but it worked. An excerpt from Harold Evans’ book, The American Century.

On the morning of Monday, March 6, 1933, at the beginning of FDR’s first week as president, his valet, Irvin McDuffie, wheeled him from the White House to the executive wing and the office Herbert Hoover had vacated just 36 hours before. McDuffie retreated and the thirty-second president found himself hopelessly alone at a bare desk bereft of pen or paper, immobilized in a large, bleak chamber. He could find no buzzer to summon his staff who had thought he would like some prayerful solitude and he sat in blank-minded fear, as paralyzed in mind as in body. It was a parable of the national predicament. And then he yelled and his beloved secretary, Missy Le Hand, came running from one side, his appointments secretary, Marvin McIntyre, from the other.

And that, too, was a parable. “This nation asks for action and action now” he said in his inaugural address on the slate grey day of March 4, 1933. “The only thing we have to fear is fear itself.” Of all the many achievements of FDR in those early days the most sensational was the change he wrought in the national mood. Fear, cynicism and despair yielded to hope, trust and courage. But the nation’s nervous breakdown was too advanced for example or exhortation alone to suffice. Action! The day after he took the oath, FDR called Congress into emergency session of March 9.

The day before the reorganized banks were to reopen, FDR spoke to the American people in the first of his “fireside chats”. An estimated sixty million people hung on his every word as he explained the banking system in warm and friendly tones and with a candor and thoroughness no recent American politician would dare to attempt.

His priority was to save the banking system. Throughout the bitter four-month interregnum, President Herbert Hoover had tried to get FDR to endorse joint policy statements. There was no love lost between the two men. When FDR had begun to heel himself out of the room at the end of the briefing in November, Hoover curtly told him: “Nobody leaves before the president.” The banking crisis had become acute by February 14, when Michigan closed all state banks. Hoover was frantic. He wrote in his own hand to FDR, urging him to make a joint statement to stem the panic. Hoover’s mistake was to think he could achieve this once again by promising, yet again, to balance the budget and expect FDR to abandon ninety percent of the New Deal to that aim. FDR evaded commitment. Hoover was enraged. Roosevelt, he told Stimson, was “a madman…perhaps they want a breakdown. That is always the technique of revolution.”

By March 2, banking had been suspended in 33 states. FDR and Eleanor paid a courtesy call on Hoover that day, two days before the inauguration, and Hoover angrily asked him, “Will you join me tonight in a joint proclamation closing all banks?” According to Eleanor, FDR replied, “Like hell, I will. If you haven’t got the guts to do it yourself, I’ll wait until I’m president to do it.”

In the early morning hours of Tuesday, March 7, FDR proclaimed a four day bank holiday. American citizens awoke that Tuesday to find themselves without any money other than what they had in their pockets. They cheerfully managed with barter and IOUs. The emergency session of Congress, opening on March 9 passed the Emergency Banking Act within hours.

On Sunday night, March 12, the day before the reorganized banks were to reopen, FDR spoke to the American people in the first of his “fireside chats”. An estimated sixty million people hung on his every word as he explained the banking system in warm and friendly tones and with a candor and thoroughness no recent American politician would dare to attempt. The next day everything went well when the banks reopened; there were no more frantic lines of depositors.

In the famous hundred days that followed the emergency session of Congress on March 9, to its adjournment on June 15, FDR signed 15 historic bills.

The changes were breathtaking. With the eager help of a Congress dominated by Democrats and progressive Republicans, FDR completed the rescue of the banking system with deposit insurance. He regulated the stock exchanges; coordinated the faltering rail system; went off the gold standard to raise prices: sent $500 million to the states for direct relief; saved a fifth of all home owners from foreclosure and refinanced farm mortgages. All the ideas had been talked about for years, but improvisation, not ideology, was the engine of the First New Deal.

Try it and see, was FDR’s rule. And if it does not work, try something else.

Abridged from The American Century (Knopf) by Harold Evans.