Nothing to Fear

by Adam Cohen

  Roosevelt’s proclamation stopped the hoarding, but it could not bring back the gold that was already gone. Most of the hoarders were ordinary Americans worried about losing their life savings, who saw gold as a safe harbor. Given the last few years of economic turmoil and bank failures, the instinct was understandable. Roosevelt believed, however, that to shore up the banking system it was critical to get as much gold back as possible. Hoarders came under heavy pressure to turn in their holdings. People who held on to withdrawn gold were publicly vilified and blamed for the banks’ weakened state. Reverend Christian Reisner, pastor of New York’s Broadway Temple Methodist Episcopal Church, went so far as to denounce gold hoarders as traitors and called for them to lose their citizenship. Angry bankers, who saw the flight of gold as a risk to their institutions, demanded that hoarders’ names be published, and that the offenders be taxed and fined. On Wednesday, March 8, the Federal Reserve Board ordered its member banks to report the names of everyone who had withdrawn gold since February 1, if they did not return it by the following Monday. Yielding to the bankers, the Federal Reserve threatened to publish the names of people holding on to hoarded gold.53

  These new directives set off the “Gold Rush of 1933.” Fearful of being taxed or fined, or simply vilified, bank customers who had withdrawn gold raced down to their banks on Thursday and Friday to return gold. They showed up with briefcases, paper-wrapped parcels, canvas bags, and children’s wagons filled with gold bars and coins. Some even offered up their gold teeth, so worried were they about being prosecuted for hoarding. The New York Times declared it a “gold stampede in reverse,” in which “men and women waited in long lines for the privilege of shoving coin and gold certificates through the tellers’ windows.” In St. Louis, a man showed up with gold coins he said he had saved for thirty years, some of which the teller had to pry apart with a chisel. At the Federal Reserve Bank of New York, tellers counted out gold pieces and crossed depositors’ names off a list of gold hoarders that had been prepared to send to Washington. By the week’s end, an estimated $200 million in gold and gold certificates had been turned in.54

  Monday, March 6, after issuing the banking proclamation, Roosevelt began his first weekday as president with a scare. He ate breakfast in his strange new bedroom and read the morning newspapers. After he shaved and dressed, his valet, Irwin McDuffie, wheeled him into his office and left him to work. Roosevelt found himself alone in front of a bare desk. He knew the nation was waiting for him to implement the initiatives he had talked about in his inaugural address, but he could not even find a pad to scribble ideas on. Roosevelt looked with increasing agitation for a button to summon his aides, opening and closing desk drawers in vain. He ended up shouting for help. Missy LeHand, his personal secretary, ran in from a nearby office, and Marvin McIntyre, his appointments secretary, came from another.55

  Roosevelt often told this story of his helpless first moments in his office. Rexford Tugwell, who heard it firsthand, was convinced that Roosevelt was invoking not just his physical incapacity, but something larger. “What seemed appalling to him,” Tugwell would later write, “was the implication that the national paralysis had struck so nearly to the center and, for that short time, had reached the vital organ of direction.” What would it have meant for the country, Roosevelt was asking, if his immobilization had been permanent?56

  Roosevelt could not mull the question over for long. He had to attend a ten a.m. memorial service for Thomas Walsh, his late attorney general designee, in the Senate chambers. While he was there, he met briefly with congressional leaders and submitted several nominations for Senate confirmation, including Moley’s. Afterward, he had to host a governors’ conference. When he had invited the governors a month earlier, he had intended to talk with them about federal-state relations. When they showed up in the East Room, however, the subject quickly turned to the banking crisis. The governors wanted to know what his plan was for reopening the banks. Roosevelt was vague about the details, but he assured them that the bank holiday would end soon and that the banking system would survive. The governors’ other main concern was unemployment relief. They were being inundated with requests for help, and state and local resources were quickly running out. Governors of states that were being flooded with impoverished migrants wanted to know what Roosevelt would do to help them handle the burden of the new arrivals. He offered no immediate solutions, but the governors were impressed by his commitment to take action. At the conference’s end, the governors—“without regard to our political affiliations,” as their resolution put it—expressed their unanimous “confidence and faith in our President.”57

  While Roosevelt met with the governors, Eleanor held the first press conference ever hosted by a first lady. The idea for the gathering, to which only female reporters were invited, had come from her good friend Lorena Hickok, a veteran reporter. Eleanor’s motives were partly charitable. Women journalists had been hit especially hard by the Depression, and the press conference would provide them with stories they could sell to newspapers and magazines. Eleanor also hoped to help her husband’s standing with women voters. Questions about politics were off-limits; the focus would be on homier subjects. Thirty-five reporters showed up in the Red Room, so many that some had to sit on the floor. Eleanor went into it with “fear and trembling,” she would later recall, and tried to cover her nervousness by passing around a box of candied fruit. She spoke casually about her experiences so far in Washington. The White House was a “very delightful house,” she said, and she was still “trying to unpack.” The way to deal with the hard economic times, she said in response to a question, was with “courage and common sense on everybody’s part.” The press conference was the start of Eleanor’s public role, which would far surpass anything any first lady had ever tried. Eleanor would begin writing a widely syndicated newspaper column, “My Day,” and she would become her husband’s roving ambassador, appearing in places that his crowded schedule and physical infirmity made it difficult for him to go. After a trip to a coal mining region or a farm county, she would report back to Roosevelt on the conditions she observed, and make recommendations for how they should be addressed. Her sympathies were always with the struggling people she met on her travels. “Some miner’s child will receive glasses which he needs,” a reporter observed, “but no one will ever know that they came from Mrs. Roosevelt.”58

  Proclaiming a national bank holiday was the easy part of dealing with the banking crisis—“the anesthetic before the major operation,” Moley called it. The “operation” would require coming up with a plan to restore the nation’s banks to financial health, and to restore the public’s faith in the banks. The responsibility once again lay with Moley, Woodin, and the Hoover officials. On Monday morning, Moley had breakfast in his hotel room with his nominal boss, Secretary of State Cordell Hull. He then raced over to the White House, where he met with Roosevelt, who was still in bed, to update him on the progress that was being made on drafting an emergency banking bill. From the White House, Moley went to the Treasury Department. The visiting bankers were there and the “babble of tongues was so deafening,” Moley complained, that he and Woodin found it impossible to get anything done. The two men retreated to Woodin’s rooms at the Mayflower Hotel to work on the banking bill in peace.59

  Moley and Woodin believed it was important to open as many banks as possible when the bank holiday was over, to build up public confidence. It was not clear how the banks would prepare themselves for the end of the holiday. Many bankers wanted the government to issue scrip, as it had done during the Panic of 1907, which they could use to pay off depositors who showed up when the holiday was lifted. Woodin decided instead to accept the prevailing view among the group at the Treasury Department that more dollars should be printed, which could be advanced to the banks against their assets. Currency would be more reassuring to depositors, Woodin believed. “It won’t frighten people,” he said. “It’ll be money that looks like money.” Moley and Woodin
were convinced that the key to reviving the banking system was restoring the public’s faith in banking. If depositors did not believe in the reliability of their own bank, they would continue withdrawing their money, and the banks would not be able to maintain the cash reserves they needed to operate. To reassure depositors, Moley and Woodin wanted Roosevelt to make a direct appeal to the public to put their faith in the banks. “There was magic, we knew, in that calm voice,” Moley recalled.60

  Tuesday morning, Moley and Woodin met with Roosevelt in his bedroom, where he was reading the morning’s newspapers in bed. They updated him on the latest developments in the plan they were cobbling together. Roosevelt approved all of it, including the printing of currency. He wanted a bill ready for delivery to Congress at the start of the special session, which was then just two days away. Moley and Woodin returned to the Treasury Department, where the banking team was finishing up the drafting. The Emergency Banking Act formally authorized all of the actions Roosevelt had taken so far in the banking crisis, settling once and for all the question of whether the Trading with the Enemy Act gave him the power to close the banks. It also set up a system by which banks would be able to apply to the Treasury Department to reopen. The department would give licenses right away to banks that were financially sound. Banks in worse condition would be put under conservators, who would help restore them to financial health. Banks that could not be saved would be closed permanently. The bill authorized the issuance of currency not backed by gold, Federal Reserve bank notes, so banks would have enough money to pay off depositors who showed up to make withdrawals .61

  On Wednesday morning, more than one hundred reporters packed into Roosevelt’s office for his first press conference. Prodded by Stephen Early, a former Associated Press reporter, Roosevelt created a new set of ground rules for what he announced would be twice-weekly events. He would not require questions to be submitted in advance, as Hoover had. Roosevelt hoped that his press conferences would be, he said, “merely enlarged editions of the kind of very delightful family conferences I have been holding in Albany.” When the press conference began, Roosevelt joked, “Now, as to news, I don’t think there is any.” The reporters immediately asked about the banks. Roosevelt would not go into detail about the emergency bill that was being drawn up, and he tried to lower expectations about it. “We cannot write a permanent banking act for the nation in three days,” he said. Roosevelt promised that there would be more far-reaching banking legislation before long. He did not yet know what that broader bill would look like, but he made clear that he did not support federal deposit insurance. It would be a mistake, he said, for the government to “guarantee bad banks as well as good banks.” Roosevelt warned the reporters that they should regard what he said about the banks as tentative. “Everything is subject to change these days,” he said, “within twenty-four or even twelve hours.” By the end, Roosevelt had thoroughly charmed the press corps. The Baltimore Sun’s correspondent declared the press conference “the most amazing performance of [its] kind that the White House has ever seen.”62

  Wednesday afternoon, Woodin and Moley sent the final version of the Emergency Banking Act to the White House. That evening, they joined Roosevelt in briefing congressional leaders on it. Since there was not yet a draft available for distribution, Senate Majority Leader Joseph T. Robinson and House Speaker Henry T. Rainey, their Republican counterparts, and Senator Glass, Representative Steagall, and other influential members of Congress listened as Roosevelt read from his draft and explained what the new law would do. Three hours later, all of the attendees, Democrats and Republicans, pledged their support. When a reporter asked Woodin if the bill was finished, he responded wearily that it was. “Both bills are finished,” Woodin said. “You know my name is Bill, and I’m finished, too.”63

  The banking bill arrived in Congress the morning of Thursday, March 9. “Our first task,” Roosevelt declared in his congressional message, “is to reopen all sound banks.” When the special session began at noon, the galleries were packed. It was, according to one newspaper account, “a grim Congress which met today, the most momentous gathering of the country’s legislators since war was declared in 1917.” Most members of Congress knew that they were being called in to vote on a banking act, but little more. Steagall, the chairman of the House Banking and Currency Committee, who had the only draft of the bill, one with pencil corrections scrawled on it, walked down the aisle of the House chamber, waving it overhead and shouting, “Here’s the bill; let’s pass it.” The debate was over in forty minutes. Bertrand H. Snell, the House Republican leader, urged a “Yes” vote even though he had not been able to read the bill. Snell conceded that it was “entirely out of the ordinary” to vote on a bill that had not even been printed yet, but he said that “there is only one answer to this question, and that is to give the President what he demands and says is necessary to meet the situation.” The bill passed without a recorded vote.64

  By the time the Senate began considering the banking bill, copies had been distributed to the whole chamber. Glass walked his colleagues through the main provisions. Several progressive senators complained that the bill favored larger, wealthier banks, and suggested it was part of a plan to phase out small, state-chartered banks. Huey Long, the Louisiana populist who would be one of Roosevelt’s great antagonists until his assassination in 1935, insisted the licensing provisions would make it difficult for smaller banks—the banks “at the forks of the creeks,” he called them—to get approval to reopen. He accused the administration of planning to reopen only five thousand of the nation’s nineteen thousand banks, while closing the rest. Long was fighting, he said, not for the banks themselves, but rather for “the men and women, the bootblacks, the farmers, and widows who have money in these little State banks.” William Borah, the progressive Republican from Idaho, insisted that the bill would lay “the foundation for the creation of a financial dictatorship with headquarters in New York.” Long introduced an amendment to help small banks, but Glass, who believed a healthy banking system should not prop up “the little corner grocerymen who run banks,” fought against it. He had vowed to protect the bill from the “pin pricks” of amendments, and he succeeded. The Senate passed the bill as introduced, 73-7.65

  Within nine hours of its introduction, Roosevelt signed the Emergency Banking Act into law. He then met with Moley, Woodin, and Ballantine to draft a proclamation extending the bank holiday, which was scheduled to expire that night. Earlier in the week, Roosevelt had said many banks would be able to open on Friday. It was now clear, however, that the Treasury Department would not be able to evaluate the banks that quickly. Roosevelt issued the new proclamation, extending the bank holiday and the gold embargo indefinitely. The following day, he announced that the first banks determined by the Treasury Department to be fit would open on Monday. That would be a pivotal moment. If depositors showed up and demanded all of their money, an already dire banking crisis would become even worse. Roosevelt decided that the night before the banks reopened he would speak directly to the American people to explain why they should now have faith in the banking system. 66

  On Sunday evening, March 12, Roosevelt addressed the nation. “The President wants to come into your home and sit beside your fireside for a little fireside chat,” the announcer said, and an institution was born. Roosevelt described the banking crisis in calmly reassuring tones to an estimated 60 million people gathered around their radio consoles. “When you deposit money in a bank, the bank does not put the money into a safe deposit vault,” he said. “It invests your money.” That did not mean, he emphasized, that the money would not be there when they wanted it. “I can assure you,” he said, “that it is safer to keep your money in a reopened bank than under the mattress.” Roosevelt set out the reasons he had declared a bank holiday and described what would happen next. The following day, Monday, March 13, banks that had been certified as financially sound would begin to reopen in the 12 cities with Federal Reserve banks. The
day after, banks would open in 250 more cities, and more would follow. “Let me make it clear to you that if your bank does not open on the first day you are by no means justified in believing that it will not open,” Roosevelt said. “A bank that opens on one of the subsequent days is in exactly the same status as the bank that opens tomorrow.” He concluded with an appeal to his listeners that echoed his inaugural address. “You people must have faith; you must not be stampeded by rumors or guesses,” he said. “Let us unite in banishing fear.”67

  This first fireside chat, a modest fifteen-minute radio talk, was a breakthrough in presidential communication. Roosevelt had spoken in a similar way to the people of New York when he was governor, as Al Smith had before him, but no president had ever talked to the American people on such friendly, informal terms. “I tried to picture a mason at work on a new building, a girl behind a counter, a farmer in his field,” Roosevelt would later say. “There was no attempt at oratory,” Samuel Rosenman observed. “It was as if the microphone had been removed and he was seated in the living rooms of America.” Roosevelt’s performance won accolades. The New York Times praised his use of radio as “a fresh demonstration of the wonderful power of appeal to the people which science has placed in his hands.” His explanation of banking was so clear, Will Rogers declared, that he made everyone understand it, even the bankers.68

  While Roosevelt spoke, Treasury Department officials were working around the clock, sleeping on couches and having sandwiches brought in, deciding which banks should be licensed to reopen Monday morning. Chartered airplanes were on standby to rush newly printed currency to the banks, so they would have enough on hand to meet depositors’ demands. The power of Roosevelt’s fireside chat became clear the following morning. When the banks reopened, there was no need for the freshly printed money. There were long lines at the teller windows, but more customers had come to make deposits than withdrawals. Roosevelt’s success in reopening the banks restored the nation’s confidence and boosted the economy. When the stock market reopened on March 15, after having been shut since March 3, it soared 15 percent on heavy volume. By the end of March, the banks had taken in $1 billion in deposits. In April, another $1 billion flowed in. Walter Wyatt, the Federal Reserve Board general counsel, who had wanted Hoover to try to fix the banks before he left office, decided things had worked out for the best. “Roosevelt could inspire confidence in the measures proposed to rehabilitate the banking system,” he later wrote. “Poor Hoover could not.”69