by Oliver Stone
Between 1930 and 1932, one-fifth of U.S. banks had failed. Many others were tottering. On October 31, 1932, with the Nevada governor off in Washington seeking a federal loan, Lieutenant Governor Morley Griswold declared a twelve-day bank holiday, preventing depositors from withdrawing their funds and thereby safeguarding against a run on the banks. Mayors and governors across the nation anxiously eyed the situation, hesitating to follow suit. Things began to unravel when Michigan declared an eight-day bank holiday on February 14, closing 550 state and national banks. The New York Times assured nervous readers that “there is no reason why [Michigan] should be taken as a precedent.” Maryland and Tennessee saw sufficient reason to act, as did Kentucky, Oklahoma, and Alabama, as panicky depositors lined up to get their money out while they still could.5 By the time Roosevelt was inaugurated, banking had been halted completely or sharply limited everywhere.
Conditions were ripe for dramatic changes in the banking system. Public anger against bankers had been building since the stock market crash. The year before, in February 1932, New York Times reporter Anne O’Hare McCormick had described the widespread antipathy toward Wall Street bankers afoot throughout the land: “In a country which suffered more than 2,000 bank failures last year . . . the tendency is to blame the bankers for almost everything that has happened at home and abroad. . . . Not in a generation at least has the feeling against money barons been so bitter. . . . The average citizen always suspected the morals of the financial hierarchy, but now his distrust goes further: he doubts its intelligence.”6
A year later, mistrust of Wall Street financiers was at an all-time high, fueled by Senate inquiries into the banks’ role in precipitating the economic collapse. Peter Norbeck, the chair of the Senate Committee on Banking and Currency, appointed former New York County Assistant District Attorney Ferdinand Pecora to run the hearings. Pecora blistered the nation’s leading bankers. When announcing, in early February, that Charles E. Mitchell, the powerful chairman of the board of National City Bank, the world’s largest bank, was being called to testify, Norbeck, a Republican from South Dakota, issued a statement: “The investigation so far shows that some of the large banks were highly responsible for the wild stock market boom . . . some banks were in on the promotion scheme. . . . It was just a polite way of robbing the public.” Norbeck added that when the Federal Reserve Board in Washington tried to slow down the stock market boom, Mitchell, chair of the New York Federal Reserve Bank, had “defied the board and speeded up the boom. He took a ‘go-to-hell’ attitude toward the Board and got away with it.”7
News of the hearing was splashed across the front pages of newspapers. Pecora exposed fraud and wrongdoing on the part of the nation’s top bankers, including obscene salaries, unpaid taxes, hidden bonuses, unethical loans, and more. Mitchell, one of the most powerful men in the country, was forced to resign. He managed, however, to win acquittal on charges of defrauding the government of $850,000 in income taxes, narrowly escaping a possible ten-year prison sentence.
Magazines began calling bankers “banksters.” The Nation observed, “If you steal $25, you’re a thief. If you steal $250,000, you’re an embezzler. If you steal $2,500,000, you’re a financier.”8 In this climate, Roosevelt had pretty much a free hand to do what he wanted. Brain Truster Raymond Moley noted, “If ever there was a moment when things hung in the balance, it was on March 5, 1933—when unorthodoxy would have drained the last remaining strength of this capitalist system.” Senator Bronson Cutting concluded that Roosevelt could have nationalized the banks “without a word of protest.” Rexford Guy Tugwell, director of the Agricultural Adjustment Administration, and other advisors urged Roosevelt to do just that.
A run on a bank, February 1933. Between 1930 and 1932, one-fifth of U.S. banks failed. By the time Roosevelt was inaugurated, banking had been halted completely or sharply limited everywhere.
But Roosevelt chose a much more conservative course of action. He declared a four-day national bank holiday, conferred with the nation’s top bankers on his first full day in office, called a special session of Congress to pass emergency legislation, and calmed citizens’ fears with the first of his famous fireside chats. Congress passed and Roosevelt signed the Emergency Banking Act, written largely by the bankers themselves. The banking system had been restored without radical change. Congressman William Lemke remarked, “The President drove the money-changers out of the Capitol on March 4th—and they were all back on the 9th.”9 Roosevelt’s solution to the banking crisis would serve as a template for how he would handle most issues. His instincts were fundamentally conservative. He would save capitalism from the capitalists. As Secretary of Labor Frances Perkins, the first female cabinet officer in the nation’s history, explained, Roosevelt “took the status quo in our economic system as much for granted as his family . . . he was content with it.”10 But the means he would use to save capitalism would be bold, visionary, and humane. They would transform American life for decades. Perhaps longer.
Though clearly not a radical, Roosevelt laid out an ambitious recovery program during his first hundred days in office. It included the Agricultural Adjustment Administration, to save farming; the Civilian Conservation Corps (CCC), to put young men to work in the forests and parks; the Federal Emergency Relief Administration (FERA) under Harry Hopkins, to provide federal assistance to the states; the Public Works Administration (PWA) under Harold Ickes, to coordinate large-scale public works projects; the Glass-Steagall Banking Act, which separated investment and commercial banking and instituted federal insurance of bank deposits; and the National Recovery Administration (NRA) to promote industrial recovery.
Established by the National Industrial Recovery Act (NIRA), which Roosevelt considered “the most important and far reaching legislation ever enacted by the American Congress,” the NRA was modeled, in part, on the War Industries Board (WIB), which Bernard Baruch had directed during World War I.11 The NRA suspended antitrust laws, effectively sounding the death knell for laissez-faire capitalism. Centralized planning would instead revitalize the shattered economy. Under the NRA, each industry drew up its own code covering wages, prices, production, and working conditions. The largest corporations dominated the code-setting process in their respective industries, with labor and consumer groups playing, at best, a minor role.
The initial NIRA legislation was hastily cobbled together and did not provide clear guidelines for what was to follow. Many liberals applauded it. The Nation welcomed it as a step toward a “collectivized society.”12 It was Roosevelt’s choice of General Hugh Johnson to administer the NRA that gave it its distinctive coloration. Johnson was Baruch’s man. They had worked closely together on the WIB. After retiring from the army, Johnson became an advisor to Baruch in his business dealings. Johnson’s leadership of the NRA has fueled allegations that the New Deal was fascistic—a nonsensical and dangerous notion later peddled by Ronald Reagan and more recently by conservative writer Jonah Goldberg. Reagan touched a raw nerve when he said during the 1976 presidential campaign that “fascism was really the basis of the New Deal.”13
Johnson was the exception rather than the rule. He did not hide his fascist sympathies. In September 1933, he reviewed the 2 million–strong NRA parade down New York’s Fifth Avenue. Time magazine reported, “General Johnson, his hand raised in a continuous Fascist salute, had declared the parade to be ‘the most marvelous demonstration I have ever seen.’ ”14 Johnson gave Frances Perkins a copy of Raffaello Viglione’s fascist tract The Corporate State. Roosevelt finally removed him because of his erratic behavior, abrasive personality, heavy drinking, and penchant for antagonizing labor. In his deeply emotional farewell speech, he celebrated the “shining name” of Benito Mussolini.15
There was great uncertainty about where Roosevelt was taking the country, leading some observers to compare the United States with Fascist Italy. The Quarterly Review of Commerce wrote in autumn 1933, “Some see in his programme a movement toward a form of American fascism. In f
act the tremendous concentration of power in the hands of the president, the new codes under the National Industrial Recovery Act regulating competition, the fixing of minimum wage rates, of maximum working hours in industry, and the general policy of economic planning and coordination of production, all strongly suggest essential features of the Italian fascist programme.” The writer described Johnson’s anti-labor proclivities, including his delivering, on October 10, “a warning to labour in no uncertain terms that ‘strikes were unnecessary’ under the Roosevelt plan and that no opposition of any kind would be tolerated.”16
Civilian Conservation Corps (CCC) crew at work in Idaho’s Boise national forest.
Public Works Administration (PWA) had carriers carry bricks for the construction of a high school in New Jersey. The CCC and PWA were part of Roosevelt’s ambitious recovery plan laid out during his first one hundred days in office.
Established by the National Industrial Recovery Act (NIRA), which Roosevelt considered “the most important and far reaching legislation ever enacted by the American Congress,” the NRA sounded the death knell for laissez-faire capitalism by suspending antitrust laws and endorsing centralized planning.
Although a plethora of right-wing groups emerged during the 1930s, the fascist threat that Sinclair Lewis warned about in his 1935 novel It Can’t Happen Here never took hold in the United States. That is not to say that Mussolini and Hitler lacked admirers. Time and Fortune were unabashed supporters of Mussolini. In 1934, the editors of Fortune magazine extolled Italian fascism, which embodied “certain ancient virtues of the race [including] discipline, duty, courage, glory, sacrifice.”17 Many American Legionnaires felt the same way. Legion Commander Alvin Owsley declared in 1923 that “the Fascisti are to Italy what the American Legion is to the United States,” and the organization invited Mussolini to address its national convention in 1930.18 Elected officials including Pennsylvania Senator David Reed praised Mussolini and proclaimed, “if this country ever needed a Mussolini it needs one now.”19
Hitler, too, had more than his share of U.S. defenders. Among the more notorious was Republican Congressman Louis T. McFadden of Pennsylvania. He took to the floor of the House in May 1933 to decry the international Jewish conspiracy, reading passages from The Protocols of the Elders of Zion, an anti-Semitic screed purporting to prove a Jewish conspiracy to take over the world, into the Congressional Record and announcing that the president’s abandonment of the gold standard “had given the gold and lawful money of the country to the international money Jews of whom Franklin D. Roosevelt is the familiar.” “This country has fallen into the hands of the international money changers,” he charged. “Is it not true,” McFadden asked, “that in the United States today the Gentiles have the slips of paper while the Jews have the gold and the lawful money? And is not this repudiation bill a bill specifically designed and written by the Jewish international money changers in order to perpetuate their power?”20
The infamous “radio priest” of Royal Oak, Michigan, Father Charles Coughlin, took to the airwaves to proclaim his corporatist and increasingly anti-Semitic vision. His weekly publication Social Justice serialized The Protocols and urged followers to join the Christian Front armed militia. Gallup reported in 1938 that 10 percent of American families owning radios listened to Coughlin’s sermons on a regular basis and 25 percent did so occasionally. Eighty-three percent of the steady listeners approved of the priest’s messages.21 Even in 1940, Social Justice had over 200,000 readers weekly.22
Even farther to the right were the so-called shirt movements, which took their inspiration from Mussolini’s black shirts and Hitler’s brown shirts. William Dudley Pelley’s Silver Legion may have enlisted as many as 25,000 members in 1933. In Kansas, Gerald Winrod, the “Jayhawk Nazi,” whose Defender newspaper reached a hundred thousand readers, garnered 21 percent of the Republican vote in the Kansas U.S. Senate primary in 1938.23 With West Virginia’s Knights of the White Camelia, Philadelphia’s Khaki Shirts, Tennessee’s Crusader White Shirts, and New York City’s Christian Mobilizers, the country was awash in extremists.24 One of the most violent of these organizations was the Midwest-based Black Legion, which had split off from the Ku Klux Klan in 1925. Wearing black robes instead of the Klan’s white sheets, the Legion had a membership estimated at between 60,000 and 100,000 in 1935. Its head, electrician Virgil Effinger, spoke openly about the need for mass extermination of American Jews25 before the federal government cracked down on the group in 1937. Although not a “shirter,” a failed haberdasher, Harry Truman, had earlier applied for membership in the Klan before thinking the better of it.
In reality, Hugh Johnson’s influence on the New Deal was fleeting and the far Right’s nonexistent. Not only did the New Deal reject fascist solutions, it resisted attempts to impose any unified, coherent philosophy. It was more of a hodgepodge of agencies. Raymond Moley wrote that viewing the New Deal as the product of a consistent plan “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.” Roosevelt was more pragmatic than ideological. And he was willing to allow government to play a vastly bigger role than any of his predecessors could have imagined.26
Roosevelt focused from the outset on jump-starting the U.S. economy and getting Americans back to work. Solving international problems would take a backseat. He made that abundantly clear at the World Economic Conference in London in July 1933. He had already issued executive orders to release U.S. monetary policy from the constraints of gold in April but held out the prospect of returning the United States and, if possible, the rest of the world to the gold standard. By the summer, however, he had had a change of heart. So when confronted with the choice between an inflationary economic recovery program at home and going along with the Europeans’ demand for currency stabilization and a restored international gold standard, Roosevelt opted for the former. Fully expecting that Roosevelt would go along with the joint declaration by Great Britain and the gold-bloc nations to return to the gold standard and halt speculation in exchange rates, the fifty-four world leaders attending the London summit were taken aback by Roosevelt’s July 3 announcement that the United States would be party to neither exchange rate stabilization nor a gold standard. The conference broke up, leaving most European leaders bitterly disappointed. Many, including Hitler, concluded that the United States was withdrawing from world affairs.
Back home, Roosevelt received a mixed response. Certain business and banking titans, including Frank A. Vanderlip, J. P. Morgan, and Irénée du Pont, offered measured support, at least in public.27 Moley surmised that nine out of ten bankers—“even those in the lower part of Manhattan”—supported Roosevelt’s rejection of the gold standard.28 But former Democratic presidential candidate turned New Deal critic Al Smith dismissed Roosevelt’s monetary policy, calling it a commitment to “baloney dollars” instead of “gold dollars.” Smith expressed astonishment that “the Democratic party is fated to be always the party of greenbackers, free silverites, rubber dollar manufacturers, and crackpots.”29
Moley’s assurances notwithstanding, many bankers adamantly opposed Roosevelt’s currency measures. The Federal Reserve advisory council, made up of leading bankers throughout the nation, warned the Federal Reserve Board that economic recovery required a gold standard. “Demands for currency inflation and further credit inflation,” the council instructed, “. . . rest upon reasoning again and again proved . . . to be a tragic illusion.”30 The most scathing condemnation of both Roosevelt and his currency decisions, however, came from the Chamber of Commerce. After rejecting a resolution offering support for Roosevelt’s monetary policy, the New York State Chamber applauded when railroad magnate Leonor F. Loree declared that “the ending of the gold standard was as great a violation of trust and a denial of what is printed on that bill as was Germany’s wartime disregard for Belgium’s neutr
ality.”31 By the next May, having been bludgeoned with a constant barrage of criticism, Roosevelt felt compelled to send a letter to the U.S. Chamber of Commerce’s annual convention, asking members to “stop crying wolf” and to “cooperate in working for recovery.”32 But businessmen’s attacks on Roosevelt and his New Deal policies intensified. In October 1934, Time noted that businessmen’s enmity toward Roosevelt had become quite personal: “It was no longer a matter of Business v. Government but of Business v. Franklin Delano Roosevelt.”33
Roosevelt’s inward-looking approach was apparent across the board. He repudiated his earlier support for joining the League of Nations and willingly sacrificed foreign trade in order to stimulate domestic recovery. He even took steps to reduce the country’s 140,000-man army, which prompted a visit by Secretary of War George Dern. Dern brought along General Douglas MacArthur, who told the president that he was endangering the country’s safety. In his memoirs, MacArthur recalled:
The President turned the full vials of his sarcasm upon me. He was a scorcher when aroused. The tension began to boil over. . . . I spoke recklessly and said something to the general effect that when we lost the next war, and an American boy, lying in the mud with an enemy bayonet through his belly and an enemy foot on his dying throat, spat out his last curse, I wanted the name not to be MacArthur, but Roosevelt. The President grew livid. “You must not talk that way to the President!” he roared.
