Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt (60 page)

Franklin Roosevelt in March 1933 couldn’t know the extent of the calamity; no one could. But if his inaugural address sounded like a war message, it fairly reflected the fact that the depression of the 1930s had done—and was doing—the kind of damage commonly associated with wars. It destroyed lives and livelihoods; it uprooted families and sowed despair; it blighted a whole generation. It cast a grimmer pall over America, and over the American future, than any development of the lifetime of Roosevelt and his generation.

A
T THE MOMENT
of Roosevelt’s inauguration the American banking system verged on dissolution. Banking law in America in the early 1930s was a federal-state hodgepodge. National banks—which was to say, nationally chartered banks; individual bank corporations didn’t yet operate across state lines—were controlled by federal law, while state banks followed state laws. Some banks, both national and state, were members of the Federal Reserve system; others were not. As various governors watched banks in their states succumb to “runs”—uncontrolled withdrawal demands by depositors, which frequently ended with the failure of the banks—several pondered the drastic step of declaring “bank holidays,” that is, simply closing the banks to business. The idea, or hope, was that the panic would pass: that if depositors were temporarily prevented from withdrawing their funds, they would calm down and decide they really didn’t need the money. In fact most neither needed nor really wanted the money. Bank deposits earned interest; cash in a can in the garden or in a shoe box under the bed did not. If the depositors could have been sure their money was safe in the banks, nearly all of them would have been happy to leave it there. With this in mind, the governor of Louisiana declared a state bank holiday in early February. Michigan did the same at midmonth, followed by Maryland, Indiana, Arkansas, and Ohio. At the beginning of March twenty other states closed the doors of their banks. By inauguration day, the American banking system was nearly at a standstill.

The crisis in banking daunted Roosevelt but also afforded him an opportunity. Hoover and the Republicans blamed the new president for the financial paralysis, charging that his attacks on business had sapped the confidence that in ordinary times underwrote the banking system. Some conservatives, apparently including the former president, detected a design in Roosevelt’s words and actions; by encouraging the collapse, they said, Roosevelt was paving the way to socialism. Roosevelt had no such plan, as events would soon prove. But the paralysis of the banks left him free to address the problem in almost any way he chose. His first step was to make the de facto national bank holiday official. Inauguration day was a Saturday; on Sunday the banks were all closed anyway; and at one o’clock on Monday morning Roosevelt declared a four-day national bank holiday. From Monday through Thursday, his executive order said, “all banking transactions shall be suspended.” In particular, no bank or branch “shall pay out, export, earmark, or permit the withdrawal or transfer in any manner or by any device whatsoever, of any gold or silver coin or bullion or currency or take any action which might facilitate the hoarding thereof.”

Roosevelt’s closing of the banks was the kind of bold action his inaugural address had promised. Whether it was legal was another matter. He cited a section of the 1917 Trading with the Enemy Act as justification. The act had never been formally repealed, but a body of legal theory held that that law, along with other wartime legislation, had expired upon the signing of the peace treaty with Germany in 1921. (After the Senate rejected Wilson’s Treaty of Versailles, the United States had negotiated separate treaties with its wartime adversaries.) Roosevelt solicited the opinion of Thomas Walsh, a Montana senator who was his first choice to be attorney general. Walsh delivered the opinion Roosevelt wanted: that the law was still in effect and that it allowed the president to close the country’s banks. But Walsh never had to defend this opinion before a court of law, for he died on March 2 while traveling to Washington for the inauguration.

Had the emergency not seemed so dire, and had the banking system not been paralyzed anyway, Roosevelt surely would have met greater resistance. But even the
Wall Street Journal,
the principal organ of institutional capital, acknowledged that the unprecedented circumstances required strong measures. “A common adversity has much subdued the recalcitrance of groups bent upon self-interest,” the paper observed. “All of us the country over are now ready to make sacrifices to a common necessity and to accept realities as we would not have done three months ago.”

Moreover, the brief duration of the bank holiday meant that Roosevelt’s affront to the corporate sector, if affront it was, would be passing. And it would shortly be submitted to Congress for approval or rejection. Even as Roosevelt closed the banks he acted to reopen Congress, calling the legislature into emergency session. The lawmakers would meet at noon on Thursday, March 9; their first order of business would be banking reform.

The nature of the reform remained to be seen—and to be decided. Hoover and the conspiracy-minded conservatives gave Roosevelt too much credit for foresight and conceptual coherence. Within days it became apparent that the hallmark of Roosevelt’s New Deal was improvisation. “I have been so occupied since noon on Saturday that I have not had a chance to prepare any formal remarks,” Roosevelt told the annual governors’ conference on Monday, March 6. But he extemporized regarding his “four or five main objectives” in closing the banks and calling the legislature into special session. The first objective was to prevent further withdrawals from the banks. The second was “to provide some form of circulating medium for the country in addition to the outstanding currency,” so much of which had gone into hiding. A third was to arrange the timely reopening of the banks and their subsequent smooth operation. A fourth—and here he came closest to Hoover’s dark forebodings—was to reform the banking system to prevent a repetition of the current crisis. “We want if possible to have a general banking system,” Roosevelt explained, “that is to say one covering national banks and state banks, as uniform as possible throughout the country.”

N
O COMPETENT
commander goes to war without able lieutenants. Ray Moley, Rex Tugwell, Adolf Berle, and the other members of the Brain Trust had been indispensable during the campaign, running a kind of graduate seminar for a law school dropout who wanted to be president. Their ideas and words continued to inform Roosevelt’s thinking and speeches after the inauguration. But putting the ideas into action required expertise and political heft the professors lacked. Roosevelt had been watching presidents and taking mental notes since Uncle Ted entered the White House; he had seen cabinets go right and cabinets go wrong, watched brilliant ideas languish for lack of support in Congress, witnessed the frustration that followed failure to cultivate those persons who could make or break an administration. He intended a revolution in governance, and he knew enough to start with a strong cabinet.

Yet not too strong. Woodrow Wilson had erred by making William Jennings Bryan his secretary of state. The error was natural: Wilson wanted to appease an important constituency in the Democratic party. And Wilson had no way of knowing a world war was about to break out. Yet having a pacifist for chief diplomat during wartime handcuffed the administration, and Bryan’s abrupt departure during the
Lusitania
crisis dealt Wilson’s presidency a serious blow.

Roosevelt learned a further lesson from Wilson. The unforgivable failure of Wilson’s administration was the president’s failure to persuade the Senate to ratify the Versailles treaty. Here again the problem wasn’t entirely Wilson’s, or at least not within Wilson’s control: his sudden incapacity at the climax of the treaty fight left the pro-treaty forces leaderless. But Wilson had prepared the ground for defeat by ignoring the Senate in the negotiation of the treaty and in the formulation of foreign policy generally.

Roosevelt took care to avoid both of Wilson’s mistakes in choosing a secretary of state. The leading prospect for the position was Owen Young, the president of General Electric, who had headed the second international debt renegotiation plan of the 1920s and was considered reassuring to both the American business community and the transatlantic financial world. Young had another mark in his favor: amid the efforts by Al Smith to stop Roosevelt’s candidacy before the Democratic convention, Young had been mentioned as a compromise candidate. But he took himself out of the running, leaving Roosevelt to sweep to victory.

For such reasons Roosevelt had to consider Young, and to make the considering obvious. He talked about Young with Moley and Berle and Louis Howe, and let them mention the conversations to reporters. But Moley perceived that Roosevelt was never comfortable with the idea of Young as secretary of state. “I got the sense that he didn’t feel he could run around in his mental carpet slippers in Young’s presence,” Moley wrote. Moley overestimated Roosevelt’s need for pajama talk with his cabinet secretaries, but he was right that Roosevelt didn’t really want Young. When Young objected that his wife’s illness would prevent him from doing justice to the senior position in Roosevelt’s cabinet, the president-elect didn’t contradict him.

Roosevelt settled instead on Cordell Hull, an eleven-term congressman from Tennessee whom voters in the Volunteer State had elevated to the Senate in 1930. Hull’s experience in the Senate offered reassurance that whatever treaties the Roosevelt administration negotiated would receive a fair hearing in the upper house, while the long time it took Hull to reach the Senate suggested a lack of the kind of ambition that might distract or disrupt the administration. “I was really almost thunderstruck,” Hull said of being offered the State Department, and his amazement reassured Roosevelt.

In the House and in the Senate, Hull had distinguished himself as an advocate of tariff reduction. This placed him in the mainstream of the Democratic party and promised to keep him busy in the State Department, a prospect that again appealed to Roosevelt, who likewise favored tariff reduction but didn’t intend to waste much of his own time and political capital on such a long-term and comparatively thankless project. The only question about Hull was whether he would take the job. In fact he required a month to accept Roosevelt’s offer. He explained that the Senate suited him quite well, that foreign policy wasn’t his strength, and that Mrs. Hull didn’t look forward to the entertaining the wife of a secretary of state was expected to do. Roosevelt waved away Hull’s objections, letting him know that the nation needed him at the State Department, that he underestimated his knowledge of foreign affairs, and that Mrs. Hull could stay home if she didn’t like fancy dinners. A slightly larger impediment arose when several Democratic senators told Moley that Hull lacked the breadth required of an international statesman. “It’s an open secret that he’s got only one string to his bow,” one of the senators said of Hull’s preoccupation with tariffs. “Every time he makes his speech on tariffs, he empties the Senate.” When Moley passed this objection along, Roosevelt brushed it aside too. “Tell the senators I’ll be glad to have some fine idealism in the State Department,” he said.

After State, the most important cabinet position was the Treasury. Here the obvious choice was Carter Glass. The diminutive Virginian reminded some contemporaries of James Madison, others of Alexander Hamilton. Glass had been in Congress as long as Hull and had held a cabinet post as well: Treasury secretary for two years during Wilson’s second term. He knew more about money than anyone else in the Democratic party, having helped author the Federal Reserve Act of 1913 and kept a close eye on the Fed and the currency since.