by Sally Denton
For thirty-five minutes he charmed and flattered them and gave a thumbnail overview of his forthcoming system of currency:
We hope that when the banks reopen a great deal of the currency that was withdrawn for one purpose or another will find its way back. We have got to provide an adequate currency. Last Friday we would have had to provide it in the form of scrip, and probably some additional issues of Federal Bank notes. If things go along as we hope they will, the use of scrip can be very greatly curtailed, and the amounts of new Federal Bank issues, we hope, can be also limited to a very great extent. In other words, what you are coming to now really is a managed currency, the adequateness of which will depend on the conditions of the moment.
When reminded that he had promised “sound currency” in his inaugural address, he replied: “The real mark of delineation between sound and unsound is when the Government starts to pay its bills by starting printing presses,” reasoning that to rescue failing banks with freshly minted scrip would undermine the larger economic recovery program. He stressed that the banking legislation was for emergency purposes—“We cannot write a permanent banking act for the nation in three days”—and when he concluded his press conference, the newsmen gave him a standing ovation.
That night, Woodin polished the final draft of the Emergency Banking Act to be submitted to the special session of Congress when it convened the following day. From eight thirty in the evening until one A.M. the following morning, Roosevelt, Woodin, and Moley discussed the bill with key senators and representatives. The bill conferred on the president nearly total authority over gold and foreign exchange transactions, basically legitimizing the action Roosevelt had already taken under the Trading with the Enemy Act. The U.S. Treasury would gradually reopen banks in the country under rigorous supervision, beginning with the most sound of the depositories. Less-solvent banks would receive support from the Federal Reserve. The most insolvent of institutions—an entire third class of bankrupt institutions—would not be permitted to reopen. The sweeping legislation sanctioned the government guarantee of all deposits in the banks that were allowed to reopen. The bill also expanded the authority of the Federal Reserve, granting it the right to issue currency backed by bank assets rather than by gold. As the governor of the Federal Reserve of New York wrote in his diary, printed money was to be issued against “all kinds of junk, even the brass spittoons in old-fashioned country banks.” Far from the radical alteration of the American capitalist system that many feared, it was, as Moley put it, a desperate effort to keep alive “the last remaining strength of the capitalist system.”
At noon on Thursday, March 9—a hasty five days after the inauguration—Congress convened. Within moments it received a message from the president: “Our first task is to reopen all sound banks,” he said. “I cannot too strongly urge upon the Congress the clear necessity for immediate action.” The House of Representatives passed the bill unanimously on a voice vote without debate and without reading it, since it had not yet been printed and distributed. The Senate took longer, as Huey Long—who had taken to calling Roosevelt “Prince Franklin, Knight of the Nourmahal” and referring to Roosevelt’s supporters as “his goddamned banker friends”—debated Carter Glass for several hours. Long, the champion of the “little county seat banks,” advocated for the small depositors who would lose their life’s savings under the legislation, which favored the strong New York banks that Long thought bore responsibility for the crisis. Long found it outrageous that only five thousand of the nation’s banks—a mere 10 percent—would reopen, while the government would not protect another fifteen thousand. As ad hominem attacks flew between Long and Glass, who vehemently favored the legislation, the two almost came to fisticuffs, each calling the other a “sonofabitch.” At one point, Glass, a caustic Virginian who was chairman of the Senate Banking and Currency Committee, slammed his fist on the desk and yelled at Long to “be more civil!” Finally, Long’s nemesis, Majority Leader Joe Robinson, broke it up and called for a vote. The bill passed 73–7.
Never before had Congress acted with such alacrity and decisiveness. An hour after the bill’s passage, Roosevelt signed it and immediately announced a schedule for reopening the banks. By the following Wednesday, he said, all of the banks in the country would open their doors, except for those that could not survive the scrutiny of Treasury Department examiners.
“The President drove the money-changers out of the Capitol on March 4,” one congressman commented, “and they were all back on the 9th.”
Roosevelt had conceived an ingenious scheme to restore confidence in the banking industry, announcing that the unpatriotic gold hoarders’ names would be published. The press, he said, would identify anyone who had withdrawn gold coins or bullion in the previous four weeks. By Friday, March 10, more than four thousand people had redeposited three hundred million dollars in gold and gold certificates in New York banks alone to avoid public embarrassment.
The national mood during one of the most momentous weeks in American history “had running through it a broad streak of messianic authoritarianism,” wrote Roosevelt biographer Kenneth S. Davis, “… a longing for the Leader, the Messiah in whom a passionate communal faith could be invested and who would take responsibility for everything, obviating the necessity for individual thought and decision.”
The sense that such a yearning had been fulfilled was palpable, as the nation breathed a collective sigh of relief. Franklin Roosevelt’s administration had “superbly risen to the occasion,” gushed the Wall Street Journal. “It and the country still have incalculable tasks to perform before they can afford so much as to pause for breath. But together they have made a good beginning and there are times when a beginning is nearly everything.”
Chapter Twenty-three
Time for Beer
President Roosevelt had planned to rush through the banking legislation and send Congress home. But encouraged by the rapid congressional response, he decided to use the momentum to push his domestic agenda, setting off what would go down in history as the famous “Hundred Days”—the exact period of time between the opening and closing of the special session of the Seventy-third Congress. Roosevelt had borrowed the term, which had the intriguing ring of both victory and defeat, from the famous hundred-day Waterloo campaign in the Napoleonic Wars of more than a century earlier. Even Roosevelt had no idea how prescient the comparison would be, as Napoleon’s heroic escape from exile led him into the most severe trial of his life. Exhilarated by how fast, bipartisan, and enthusiastic the legislators were, and pressed by his cabinet, which was urging him to seize the opportunity this presidential honeymoon offered, he decided to keep them in session until his program was enacted. Considering that his program wasn’t fully formulated, it was an audacious move, and the challenge thrilled him.
Drawing on the ideas of dozens of academics, economists, sociologists, labor leaders, populists, and reformers, Roosevelt intended to initiate a series of emergency relief programs to stimulate the economy and get Americans back to work. On Friday, March 10, he quickly sent Congress “A Bill to Maintain the Credit of the United States Government,” which would become known as the Economy Bill. Drafted just one day earlier, it proposed cutting all government salaries by 15 percent—including those of the president and members of Congress—and reducing veterans’ pensions, which, in 1933, accounted for nearly a quarter of the federal budget being paid out to 1 percent of the population. The legislation would become the centerpiece of Roosevelt’s economic recovery policy, which was based on the commitment to federal solvency.
“If the Congress chooses to vest me with this responsibility it will be exercised in a spirit of justice to all, of sympathy to those who are in need and of maintaining inviolate the basic welfare of the United States,” Roosevelt promised. The United States had “been on the road toward bankruptcy” for the past three years, Roosevelt said in his message to Congress, and “immediate action” was necessary to avoid economic collapse.
/> Roundly embraced by fiscal conservatives, the bill provoked outrage among veterans and their powerful American Legion and Veterans of Foreign Wars lobby. Mississippi Democrat “Lightnin’ ” John Rankin avowed that World War I veterans shouldn’t be penalized for the mistakes of bankers. Huey Long, by now predictably antagonistic to the Roosevelt agenda, rushed to oppose it as well. “Talk of balancing the budget! Let them balance the budget by scraping a little off the profiteers’ profits from the war.” When it became clear that the Democratic caucus was going to abandon him, Roosevelt resorted to the brilliant political instincts that had elevated him to the presidency. Working masterfully with conservative Democrats and fiscally minded Republicans, Roosevelt maneuvered passage of the bill on Saturday—a mere week after his inauguration—by a vote of 266–138.
Meanwhile, Roosevelt’s Brain Trust hastily focused on recovery programs for public works, the unemployed, and the agricultural and manufacturing industries. On Sunday evening, March 12, he would take his ideas to the airwaves to rally support from the American public for his amorphous and nascent agenda and to reassure them that the country was back on track. He announced his plan for a national radio address “to explain clearly and in simple language to all of you just what has been achieved and the sound reasons which underlie this declaration.”
An estimated sixty million citizens, clustered around seventeen million radios, heard the first “fireside chat.” As lore has it, the new president had seen a laborer working outside a White House window and the idea had come to him to write some remarks directed at this man. “I decided I’d try to make a speech that this workman could understand,” he told Louis Howe. “I really made the speech to him.” He had selected Robert Trout of the Columbia Broadcasting System’s Washington station to be the announcer, given his euphonious voice and friendly demeanor. Welcoming the listeners with his mellifluous delivery, Trout told them that “the President wants to come into your home and sit at your fireside for a little fireside chat.” Speaking into the microphones installed in front of a roaring fire in the Diplomatic Reception Room, the president entered the living rooms of millions.
With his rich tenor voice—which Hollywood actress Miriam Howell thought “almost as good as Walter Huston[’s]”—Roosevelt explained the intricacies of the banking industry. Neither condescending nor patronizing, like a patient country doctor or loving father, he selected his words carefully to restore confidence, presenting his timetable for reopening the banks and commending both Democratic and Republican members of Congress for their swift and forceful action to save the nation.
I want to talk for a few minutes with the people of the United States about banking—with the comparatively few who understand the mechanics of banking but more particularly with the overwhelming majority who use banks for the making of deposits and the drawing of checks. I want to tell you what has been done in the last few days, why it was done, and what the next steps are going to be.
Because of the undermined confidence on the part of the public, there was a general rush by a large portion of our population to turn bank deposits into currency or gold—a rush so great that the soundest banks could not get enough currency to meet the demand. The reason for this was that on the spur of the moment it was, of course, impossible to sell perfectly sound assets of a bank and convert them into cash except at panic prices far below their real value.
… [We] start tomorrow, Monday, with the opening of the banks in twelve Federal Reserve Bank cities … This will be followed on Tuesday by the resumption of all their functions by banks already found to be sound in cities where there are recognized clearing houses … On Wednesday and succeeding days banks in smaller places all over the country will resume business … I can assure you that it is safer to keep your money in a reopened bank than under the mattress.
Rather than besmirch all of the nation’s bankers, he distinguished between those who were crooked and those who were victimized.
Some of our bankers had shown themselves either incompetent or dishonest … They had used the money entrusted to them in speculations and unwise loans. This was, of course, not true in the vast majority of our banks, but it was true in enough of them to shock people for a time into a sense of insecurity … It was the Government’s job to straighten out this situation … And the job’s being performed … Confidence and courage are the essentials of success in carrying out our plan. You … must have faith; you must not be stampeded by rumors or guesses. Let us unite in banishing fear. It is your problem no less than it is mine. Together we cannot fail.
“Our President took such a dry subject as banking,” Will Rogers wrote in the New York Times, “… and made everyone understand it, even the bankers.” A stunning departure from the stuffy and pedantic addresses of his predecessors, Roosevelt’s first radio chat signaled a revolutionary use of mass media technology, and the transformative power of the radio was instantly apparent. Forever changing the relationship between the government and the governed, the radio address had the immediate effect of restoring certainty in a jittery nation. “People edge their chairs up to the radio,” the novelist John Dos Passos said of the historic drama. “There is a man leaning across his desk, speaking clearly and cordially so that you and me will completely understand that he has his fingers on all the switchboards of the federal government, operating the intricate machinery of the departments, drafting codes and regulations and bills for the benefit of you and me worried about things, sitting close to the radio in small houses on rainy nights, for the benefit of us wagearners, us homeowners, us farmers, us mechanics, us miners, us mortgagees, us processors, us mortgageholders, us bank depositors, us consumers, retail merchants, bankers, brokers, stockholders, bondholders, creditors, debtors, jobless and jobholders. ‘Not a sparrow falleth but …’ ”
Accurately gauging the mood of the country and the responsiveness of Congress, Roosevelt capitalized on the good will he was afforded. First he assuaged the fears of a terrified nation, inspiring confidence, hope, and camaraderie. He then moved quickly to send a historic number of bills to Congress—landmark legislation that would mark the beginning of the New Deal. “Consummate politician that he was,” his biographer Jean Edward Smith wrote, “Roosevelt feinted right before turning left.”
While historians have debated how much of the New Deal Roosevelt had in mind on taking office, those closest to him depicted a period of extreme fluidity. To see policies of the early legislation as “the result of a unified plan,” Moley wrote, “was to believe that the accumulation of stuffed snakes, baseball pictures, school flags, old tennis shoes, carpenter’s tools, geometry books, and chemistry sets in a boy’s bedroom could have been put there by an interior decorator.”
For his part, Roosevelt compared himself to a football quarterback who had to make quick decisions based on the results of the first move. In one of his early press conferences he said, “Future plays will depend on how the next one works.” Such a remark emblemized the invention and improvisation of the New Deal. A shining example of this innovative approach to governing was the president’s sudden repeal of Prohibition. It began with dinner at the White House that Sunday evening, before his first radio chat, as he supped with a few close friends. “I think this would be a good time for beer,” Roosevelt said. That, as his friends well knew, meant he was ready to send to Congress a bill to amend the Volstead Act—the National Prohibition Act that, since 1919, had prohibited the production, sale, and transport of alcohol and in Roosevelt’s view fostered racketeering.
Yet another adroit political move, Roosevelt’s proposed modification of the Volstead Act to legalize beer of 3.2 percent alcoholic content was a bill that the Senate would be eager to pass—thereby preempting the possibility that it might stall on the economy bill. By sending to Congress a wildly popular bill, Roosevelt prevented a drawn-out Senate debate on the controversial economy legislation, knowing that the senators could not turn to the exciting new business at hand until they had dealt with the
economy. His brief, seventy-two-word message was greeted with whoops and hollers on the floor of Congress.
I recommend to the Congress the passage of legislation for the immediate modification of the Volstead Act, in order to legalize the manufacture and sale of beer and other beverages of such alcoholic content as is permissible under the Constitution; and to provide through such manufacture and sale, by substantial taxes, a proper and much-needed revenue for the Government.
I deem action at this time to be of the highest importance.
On Wednesday, March 15, the Senate passed the economy bill with a 62–13 vote. The next day, the beer-wine legislation passed into law as well. Arguably one of the most sweeping and influential acts of 1933—the opening shot in what would result in the repeal of Prohibition a few months later—the amendment changed American culture in deep and abiding ways. With the repeal would come a reassessment of the role that government should play in moral reform. Even more significantly, it would shape how government would deal with the gangster interests that had flourished under the illegal and underground bootleg system—“the government is going to muscle in on your racket,” a fictional Roosevelt tells a fictional Al Capone in a Hollywood movie.
For now, the new bill mostly served to make the budget cuts, bank failures, and bread lines less dreary. Fascists and Communists were thrown off the front pages. Newspaper editors estimated that during the first twenty-four hours of the new legislation “the amount of beer sold in the United States … would float a battleship,” as Newsweek put it, and bring in federal income ranging from seven and a half million to ten million dollars on the first day since 1920 that beer was sold legally.
“In the midst of the Depression it was a note of hope that something would be better,” author Studs Terkel said of the moment.
