Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt (47 page)

The wheel continued to turn. Roosevelt predicted that radio would supplant the press as the primary means of connecting candidates to voters. Or
re
connecting candidates to voters: Roosevelt saw the new technology as a return to earlier forms:

The pendulum is rapidly swinging back to the old condition of things. One can only guess at the figure, but I think it is a conservative estimate to say that whereas five years ago 99 out of 100 took their arguments from the editorials and the news columns of the daily press, today at least half of the voters, sitting at their own fireside, listen to the actual words of the political leaders on both sides and make their decision based on what they hear rather than what they read. I think it is almost safe to say that in reaching their decision as to which party they will support, what is heard over the radio decides as many people as what is printed in the newspapers.

This development was good news for the Democrats, who in most parts of the country had faced a skeptical, often hostile Republican press; it was even better news, though he didn’t mention it in his Tammany speech, for Roosevelt himself, who was becoming a master of radio. His mastery faltered on this occasion, though. He didn’t personally attend the meeting, held at the Commodore Hotel in Manhattan, but expected to have his voice transmitted from his office in Albany. The technology balked at the last minute, however, and a stand-in, New York supreme court justice William Collins, was summoned to read a telegraphed version of Roosevelt’s text.

Roosevelt took to the airwaves more successfully in the months that followed. The Republicans in the legislature refused to budge, obviously intending to sabotage Roosevelt’s administration and hoping to elect a governor of their own in 1930. Roosevelt berated them for putting party interests ahead of the welfare of the people. The Republicans had promised sound policies on the development of hydroelectric power, but “not a single move was made by the writers of this platform to put forward any program, sound or unsound,” he said. The Republicans had cast themselves as friends of labor, yet when the state labor commission recommended measures to improve the lot of workers, “the Republican leaders decreed the death of these bills and, then going still further, failed to continue the life of the commission.” Roosevelt had pressed the lawmakers on maximum-hour legislation, but “the Republican majority refused to allow the bills even to come to a vote.”

Roosevelt required time and practice to perfect the form of his radio addresses. Listeners to these early broadcasts thought he sometimes tried to communicate more information than the medium could readily handle. But the overall response was favorable, and he made his radio reports to the people of New York a regular part of his routine as governor.

He discovered something about radio he hadn’t realized at first: that it was particularly effective in the hands of the executive branch of government. Since the beginning of the century, political power had been shifting from the legislature to the executive. The trend was especially noticeable in Washington, where Theodore Roosevelt and Woodrow Wilson had made themselves the center of national political attention, but it applied in the states as well. The larger government grew, the greater the power wielded by the person who headed the government, either a governor or the president. At the national level, the emergence of the United States as an international power with global interests elevated the president still further, in that foreign affairs, to a much greater degree than domestic affairs, had always been the peculiar province of the executive.

Radio added a technological boost to the institutional trend toward greater executive power. Any legislature speaks with many voices, an able executive with one. In the nineteenth century, the many voices were often more effective than the one, since no voice carried farther than the physical sound waves generated by the speaker. But radio neutralized the advantage of multiplicity and in fact negated it. Radio allowed the single-voiced executive to communicate with a clarity that reduced the many-throated legislature to relative cacophony. A Roosevelt at the microphone could enter the homes of the millions of his listeners, forging a personal relationship that left even the most powerful legislators at an irretrievable disadvantage. Over time Roosevelt’s radio audience would come to feel they knew him as they had known no other executive; it was an aspect of his political genius, amplified by radio and sharpened by experience, that he made them think
he
knew
them.

B
Y THE SUMMER
of his first year in office Roosevelt had accomplished nothing of note in bending the Republican legislature to his will. The economy remained strong, and neither the leaders of the GOP nor their corporate supporters saw any reason to alter the conservative course that had served them well since the start of the decade. Roosevelt recognized what he was up against. “The business community is not much interested in good government,” he told a fellow Democrat. “And it wants the present Republican control to continue just so long as the stock market soars and the new combinations of capital are left undisturbed.” Some Democrats had been urging the party to shift to the right, to accommodate the mood of the New Era; Roosevelt preferred to stay the progressive course till the New Era ran out of steam. “Prevailing conditions are bound to come to an end some time,” he predicted. “When that time comes, I want to see the Democratic party sanely radical enough to have most of the disgruntled ones turn to it to put us in power again.”

He was preaching his radical patience in the summer and early autumn of 1929 as Wall Street bounded along in the seventh year of its bull market. The bounding grew more vigorous by the month; the daily swings of share prices, after averaging in the mid-single digits till mid-decade, had tripled by the end of 1928 and nearly doubled again during 1929. Stock pickers and stock watchers didn’t know what to make of it. Joseph Kennedy, one of the most successful of the speculators, thought things had gone too far when he stopped on Wall Street to have his shoes shined and received, in addition, advice to go long in oil and railroads. He determined at once to get out of the market, explaining to his wife that when a bootblack started offering stock tips, there was no room for professionals. Other pros—Bernard Baruch, Owen Young, David Sarnoff, apparently even Herbert Hoover—likewise liquidated their stock holdings. Baruch told Will Rogers to run for his life. “You’re sitting on a volcano,” the speculator quietly advised the humorist. “Get as far away as you can.”

An assortment of pessimists spoke publicly and loudly. Roger Babson, whose projections had won him a following during the previous years, told the National Business Conference that the sky was about to fall. “A crash is coming which will take in the leading stocks and cause a decline from 60 to 80 points in the Dow Jones barometer,” Babson declared at a moment when the Dow stood at 380. “Fair weather cannot always continue. The economic cycle is in progress today, as it was in the past. The Federal Reserve System has put the banks in a strong position, but it has not changed human nature. More people are borrowing and speculating today than ever in our history. Sooner or later a crash is coming, and it may be terrific.”

But pessimists had been predicting the end of the bull market for years. Some had been disinterested in their forecasts of doom, while others, notably short-selling speculators, had been hoping to profit from a fall. Either way, they had been wrong. After each downward lurch, the market had resumed its climb, rising higher than before.

This explained the failure of most observers to absorb the full meaning of the events that began to unfold on Wednesday, October 23. Just after midday, for reasons no one could fathom, investors began to shed automobile stocks. Similar sell-offs had occurred many times since the beginning of the bull market, but in this case the selling continued longer than before, and it triggered unusual alarm. That the heaviest selling took place at the end of the day didn’t help matters, for it allowed nervous investors to spend the hours after the market closed poring over the ticker tape for signs of the direction stocks would take the next morning.

Market stalwarts professed undiminished confidence. Irving Fisher, a Yale economist, ascribed the recent gyrations to a “lunatic fringe of reckless speculation” and declared that the fundamentals of the market were as sound as ever. Share prices would recover quickly and would regain the “higher plateau” upon which modern efficiencies in production and distribution had rightly placed them. Rumors circulated that the big banks, doubtless assisted by the Federal Reserve, would flood the market with liquidity to ensure that leveraged investors not be caught out.

The jawboning had worked in the past, but this time it failed. Again for reasons no single person could entirely fathom, the market collectively panicked. By the opening bell on Thursday, October 24, the orders to sell were already backlogged beyond the ability of the staff of the stock exchange to process them. The logjam intensified the panic, as investors realized, with prices falling, that each minute that an order went unfulfilled signified that much deeper a loss. The bull market had been built, to an unprecedented degree, on borrowed money, with many lenders free to call in their loans should the value of their collateral—the shares the loans purchased—decline. As the prices fell, the lenders called their loans, forcing the investors to sell. The glut of sell orders depressed the price further, prompting new loan calls, and the virtuous circle that had lifted share prices as the bubble expanded suddenly turned vicious. Market volume broke previous records by 50 percent; the informal “curb market,” outside the exchange itself, nearly doubled its previous largest day. The ticker ran hours behind, leaving sellers uncertain how badly they had been wounded. The normally circumspect
New York Times
described Wall Street as a war zone. “Wild-eyed speculators crowded the brokerage offices, awed by the disaster which had overtaken many of them,” the paper declared. It proceeded to detect a sign of hope amid the debacle, relating reports of a banker bailout and recounting the assertion of the city’s big financial houses that the market remained sound in the face of this “technical” correction. (Thomas Lamont of J. P. Morgan & Co. attributed the falling prices to “air holes” in the market.) The
Times
put particular emphasis on some last-minute buy orders, especially in steel. “The tide had turned,” the paper proclaimed.

Other voices joined the hopeful chorus. “We believe that present conditions are favorable for advantageous investment in standard American securities,” one large brokerage informed its customers and the broader public. Herbert Hoover called a special press conference to offer his personal reassurance. “The fundamental business of the country, that is, the production and distribution of commodities,” the president said, “is on a very sound and prosperous basis.”

The bullish rhetoric appeared to pay off on the Friday after what already was being called “Black Thursday.” Prices held steady and actually gained a bit on average; volume was healthy but not outlandish. In that era the market operated half-time on Saturdays, and this second day after the debacle proved almost boring. Brokers and the staff of the exchange caught up on their sleep on Sunday; the cleaning crews removed the last signs of the Thursday disaster.

Then on Monday, from causes no more explicable than those of Thursday, the bottom fell out of the market once more. This time blue-chip stocks suffered most grievously, driving the Dow Jones average farther down than it had ever plunged in a single day. The market’s hall of fame was transformed into a hall of horror; U.S. Steel lost 17 points, Union Carbide 20, Westinghouse 34, General Electric 47. The liquidation continued on Tuesday, and it took the especially unnerving form of block trading—sales of ten thousand shares, twenty thousand, fifty thousand—which suggested that banks and other financial institutions, far from riding to the rescue of the market, were fleeing. Volume on Bloody Tuesday surpassed that of Black Thursday; by the close of business that day, the Dow had lost 30 percent in less than a week. The broader
New York Times
index fared even worse, plunging 40 percent.