Nothing to Fear

by Adam Cohen

  The most controversial reform being proposed was federal deposit insurance. Progressives strongly supported deposit insurance, which they saw as the best way to guard against runs on banks and bank failures. It was also being pushed by the small-bank lobby, which considered it a way of helping small banks to hold off competition from larger banks. Steagall, who had supported federal deposit insurance for fifteen years, included it in his House bill. But deposit insurance also had some powerful enemies, including the American Bankers Association and many large Eastern banks. They argued that it would unfairly require healthy banks to bail out struggling ones, and in the process put a strain on the entire system. Opponents of deposit insurance also insisted that it would encourage bankers to act recklessly, since they would know their mistakes would be covered. New York banks were among the most outspoken critics. With one-quarter of the nation’s deposits, they would end up paying a large portion of the insurance fees.25

  The administration did not take a strong stand for or against the Glass-Steagall bill, which was formally called the Banking Act of 1933, but Roosevelt made clear his opposition to federal deposit insurance. Vice President Garner, who supported it, had raised the issue with Roosevelt before the inauguration and had gotten nowhere. “It won’t work, Jack,” Roosevelt replied. “The weak banks will pull down the strong.” William Woodin told Congress of the administration’s opposition, but deposit insurance had enormous support in both the House and Senate. Roosevelt spoke out against deposit insurance at a May 23 Cabinet meeting and threatened to veto the whole banking reform bill if it stayed in. Support in Congress, however, remained overwhelming, and Huey Long declared that if the bill was vetoed there were enough votes in Congress to override. In the end, Roosevelt yielded to congressional sentiment and agreed to sign a bill with deposit insurance.26

  The Glass-Steagall Act “was not written to please the bankers,” Steagall said, and for the most part it did not. The big banks deeply resented the insurance provision. Time magazine, which spoke for this group, lamented that the most responsible banks would see “their deposits which they had spent a lifetime to build up and protect with their good names confiscated by the Government to pay for the mistakes and dishonesty of every small-town bankster.” Small banks worried that the law would open the door to greater incursions by large banks. Glass-Steagall was, however, popular with the public, who could now feel more secure about the safety of their deposits. The Federal Deposit Insurance Corporation, the agency set up by the law, would be one of the New Deal’s most important creations. In their history of American monetary policy, the economists Milton Friedman and Anna Schwartz called federal deposit insurance “the structural change most conducive to monetary stability since state bank notes were taxed out of existence immediately after the Civil War.” In later years, few people would remember where Roosevelt had stood. “Roosevelt at first endured and then embraced it,” Moley wrote. “I am convinced that finally he made himself believe he had favored it from the beginning.”27

  Roosevelt had been eager to keep Congress in special session as long as it kept passing his initiatives. By mid-June, however, the legislative storm had died down. Banking reform, government economy, agricultural and industrial recovery, and unemployment relief had all passed Congress, and the focus had turned to implementing them. Several other lower-profile bills had also passed in recent days. On June 5, Roosevelt had signed a joint resolution that abrogated the gold payment clauses in public and private contracts, an extension of what had been done when he took the nation off the gold standard. The Farm Credit Act formalized Roosevelt’s executive order of March 27, creating a new system of farm credit to make loans more readily available to farmers. Roosevelt had also gotten his Emergency Railroad Coordination Act through Congress, which established a federal coordinator to help improve efficiency among the nation’s troubled railroads. Roosevelt had other reasons for wanting to bring the session to a close, beyond the fact that his immediate legislative agenda was nearing completion. Over the previous few weeks, with the uprisings over the Agricultural Adjustment Act and the National Industrial Recovery Act, Roosevelt had begun to worry that the tide on Capitol Hill was shifting against him. “He is becoming frankly nervous about Congress staying on much longer,” Ickes wrote in his diary after a visit to the White House. “The situation on the Hill is really dangerous, although so far he has kept Congress within reasonable bounds.” The World Economic Conference was also about to convene in London to discuss international monetary policy. The United States was sending a high-level delegation led by Cordell Hull, and Roosevelt did not want congressional work to interfere. In any case, summer was only days away and many people, Roosevelt included, were ready to flee Washington in search of cooler climates and a break from more than three months of frenetic activity.28

  There was one last thorny issue to be resolved, and it was Lewis Douglas’s doing. The reductions in veterans’ pensions that he had been eagerly carrying out had been deeper than expected. The cuts, which had been projected to total $383 million, had reached $460 million. The “presumptive” cases, the veterans whose injuries had manifested themselves after their service, were being cut off completely, including some who may have had a valid claim to benefits. There were reports that even soldiers who had been wounded in combat had seen their pensions reduced by 60 percent or more. “Down many Main Streets go armless veterans who used to get $94 a month from the government and now get $36,” The New York Times reported. At a meeting with the American Legion on May 10, Roosevelt and Douglas had admitted the cuts were excessive, and Roosevelt had promised a review. Congress still had to appropriate Veterans Administration funds for the next fiscal year, and the veterans’ lobby was pushing hard to use the appropriation to restore the cuts. It was backing up its campaign with stories of disabled veterans who had been left in dire straits. Roosevelt met with one of them, a double-amputee whose benefits had been slashed. Even if some of the veterans’ lobby’s stories were overstated, it seemed clear that the cuts were too deep.29

  Roosevelt issued executive orders restoring $50 million in benefits, but he wanted to hold the line there. Progressives in Congress, led by Senator Thomas Connally, a Texas Democrat, were insisting on restoring $170 million in cuts. On June 10, Roosevelt and Congress reached a compromise, to restore $77 million or more. The administration agreed to keep making payments to 154,000 veterans with “presumptive” disabilities until review boards could investigate their claims, and to keep widows and children of “presumptives” on the rolls indefinitely. It also put on hold plans to close regional Veterans Administration offices. The veterans’ lobby wanted more, including a commitment that all veterans with “presumptive” injuries would receive benefits permanently, but Roosevelt said that if Congress demanded any more concessions he would issue a veto and broadcast his veto message to the nation. Congressional progressives pushed to restore more of the cuts, but in the end the compromise held. “President Roosevelt was master of Congress until the end,” Time magazine declared. Douglas had not gotten all of his veterans’ benefits cuts, but he had gotten most of them. With the number of veterans receiving benefits dropping from nearly one million to 581,000, the veterans’ supporters felt that an injustice had been done. In a letter home, Senator Hiram Johnson, a progressive California Republican, complained that the Budget Bureau had acted “in the most shameful, outrageous, and cruel manner,” and that Douglas had “a heart of stone.”30

  On June 16, 99 days after the start of the special session, and 105 days into the new administration, Roosevelt held a midday signing ceremony at the White House. Flanked by members of Congress, reporters, and aides, he signed the Glass-Steagall Act, handing the pens he used to Glass and Steagall. He joked that the banking reform bill had more lives than a cat, pointing out that it had been killed “fourteen times in this session,” a good-natured admission of his ultimate defeat on deposit insurance. Roosevelt declared himself a believer in the new law, which he called the
“second most important banking legislation in the history of the country.”31

  The centerpiece of the signing ceremony was the National Industrial Recovery Act, which Roosevelt said history would probably judge to be “the most important and far-reaching legislation ever enacted by the American Congress.” The law included a new conception of government-industry cooperation, he said, one that would allow corporations to “act in unison” for “the general good” in a way that antitrust laws had until then prohibited. Roosevelt enumerated the good things the NIRA would do. It would free up industry to set new standards of workers’ rights that had been impossible when there was cutthroat competition. It would also establish a “vast program of public works” that would put up to a million people to work by October 1. Most important, Roosevelt said, it would restore American industry to health, which Roosevelt anticipated would “put millions of men back in their regular jobs this summer.”32

  Roosevelt’s great hopes for the NIRA never came to pass. The American people rallied to the National Recovery Administration, the agency created by the new law. The Blue Eagle, the NRA symbol, became ubiquitous, appearing on store windows, billboards, and clothing labels. Two million employers signed NRA pledges, and 250,000 New Yorkers marched down Fifth Avenue to show their support. Under Hugh Johnson’s leadership, the NRA helped industry and labor to adopt some 750 codes of fair competition, covering everything from the oil industry to the dog food industry and shoulder pad manufacturing. But the results were disappointing. Consumers complained that the codes were slanted toward industry and drove up prices. Small business complained that they were slanted in favor of big business. Big business complained that the codes gave labor unions too much power. The NIRA modestly stimulated the economy, but nowhere near as much as Tugwell, Moley, and Wagner had led Roosevelt to believe it would. By the time the Supreme Court ruled the law unconstitutional in 1935, it had already been dismissed as a failure.33

  While the main element of the NIRA did not work out, the other parts of the law—the workers’ rights and public works provisions—were notable successes. The codes of fair competition hammered out by industry, government, and labor included minimum wages and maximum hours for both men and women. That marked a major advance, since the limited number of states that had such laws covered only women and children, and the protections they offered were not what they should have been. Some allowed women to be put to work twelve hours a day. The Cotton Textile Code, the first one to be approved, established a forty-hour week, set a minimum wage of $13 a week in the North and $12 a week in the South, and prohibited the employment of children, which had been common in the industry. Although the codes of fair competition would be lost when the NIRA was struck down, they set a precedent for the federal government to regulate working conditions. Under Perkins’s guidance, these principles would reemerge in the Fair Labor Standards Act, which imposed mandatory national minimum wages and maximum hours. Section 7(a)’s guarantee of the right of workers to organize would be revived in the National Labor Relations Act of 1935.34

  The NIRA’s $3.3 billion in public works had an equally lasting impact. The Public Works Administration, which the law established, created one of the greatest building drives in history. Under Ickes’s leadership, it undertook massive projects like New York’s Triborough Bridge, and many smaller ones, including school buildings and courthouses across the country. The federal commitment to large-scale public works that the NIRA established led to other major public works programs, including the Civil Works Administration and the Works Progress Administration. Public works would be perhaps the New Deal’s single best-known undertaking, one that would make a crucial difference in the lives of the unemployed and the millions of family members who relied on them to survive.35

  The signing of the NIRA was a fitting conclusion to the Hundred Days. The law had been put together quickly by government officials motivated, above all, by Roosevelt’s inauguration-address injunction of “action, and action now.” Although much of it failed, it still changed America. The workers’ rights and public works provisions not only improved the lives of millions of destitute Americans—they marked a triumph for one faction of the administration, led by Perkins, Wallace, and Hopkins, and a defeat for another, led by Douglas. Taken together, these provisions stood for something fundamental: a recognition of the federal government’s responsibility to look after its citizens. The NIRA was the ultimate sign that the old America—of citizens struggling as individuals while their government looked on indifferently—was drawing to a close. Roosevelt was wrong about many of the things he expected the law to accomplish, but he was right about its larger significance. “As in the great crisis of the World War, it puts a whole people to the simple but vital test—,” he declared: “Must we go on in many groping, disorganized, separate units to defeat or shall we move as one great team to victory?”36

  EPILOGUE

  “A Lot Happened Out of That Determination of a Few People, Didn’t It?”

  The explosion of new legislationa during the Hundred Days transformed vast swaths of American life, from banking to agriculture to public welfare. These laws created the first “alphabet soup” agencies—the CCC, the AAA, the NRA, the FERA—government entities that would have enormous influence in the New Deal, and in some cases long afterward. The Hundred Days’ greatest impact, though, was one of national philosophy. In just over three months, the federal government changed from being a nearly passive observer of its citizens’ problems to an active force in solving them. From this point on, it would be a matter of concern to Washington when farmers were unable to support themselves, when depositors lost their life savings in failed banks, and when parents could not afford to feed their children. The relationship between the American people and their government would never be the same again. “We have had our revolution,” Collier’s declared, “and we like it.”1

  The accomplishments of the Hundred Days were in large part a matter of timing. Roosevelt took office at a moment of unprecedented national crisis. The journalist Ernest K. Lindley spoke for many when he warned that Roosevelt had less than a year to save the country from complete collapse. The desperate economic conditions made the American people rethink their fundamental values. They were willing to consider things when there was 25 percent unemployment that they would not have contemplated in better times. The 1932 election put Roosevelt in a strong position to deliver on this clamoring for change. He took office with vast reservoirs of political capital after his landslide victory. He also had a new Congress with lopsided Democratic majorities—and a good number of Republicans who were inclined to follow his lead. Congress was not a rubber stamp. It fought him on some issues and prevailed on a few. Still, The New Republic was not far off when it declared that “no legislature in modern history, ever yielded more completely to the wishes of the head of state than did the Seventy-third Congress.”2

  Roosevelt arrived in Washington prepared to seize the moment. The Hundred Days has been called a hodgepodge—as thrown together, Moley said, as the stuffed snakes, baseball pictures, chemistry sets, and other things in a boy’s bedroom. It was improvised, and often chaotic, but as Tugwell observed, “a bright thread of intention ran through the confusions and contradictions.” That intention was to bring an end to the national philosophy of “rugged individualism,” and to replace it with one of mutual responsibility. The Hundred Days created an affirmative government duty to protect workers and help the needy that would be expanded on repeatedly throughout the New Deal. The spirit of the Federal Emergency Relief Act would animate Social Security, Aid to Families with Dependent Children, and the federal unemployment insurance program. The Civilian Conservation Corps and the Public Works Administration would lead to the other important public works programs, including the Works Progress Administration. The voluntary minimum wage, maximum hour, and anti-child-labor provisions of the National Industrial Recovery Act codes of fair competition would evolve into the mandatory workers’ righ
ts standards of the Fair Labor Standards Act.3

  The Hundred Days also established the principle that laissez-faire capitalism could not be relied on to protect the public interest. The Truth in Securities Act laid the groundwork for the creation of the Securities and Exchange Commission in 1934 and the broader regulation of capital markets that followed. Section 7(a) of the National Industrial Recovery Act would be expanded into the National Labor Relations Act of 1935 and the National Labor Relations Board, which enforced workers’ rights to organize and bargain collectively. With the Agricultural Adjustment Act, the federal government took responsibility for sustaining the nation’s farmers and protecting them from the vagaries of the free market. The system of government price supports, which was supposed to be an emergency measure, lasted into the twenty-first century, doing considerable damage along with the good.4