Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt (62 page)

Roosevelt said that he and Stephen Early, whom he had made his principal spokesman, had discussed how they wanted to handle attributions. “Steve and I thought that it was best that street news for use out of here should always be without direct quotations. In other words, I don’t want to be directly quoted, with the exception that direct quotations will be given out by Steve in writing.” Two other categories of news would be treated differently. “The first is ‘background information,’ which means any material which can be used by all of you on your own authority and responsibility and must not be attributed to the White House, because I don’t want to have to revive the Ananias Club.” The Ananias Club—named for the early Christian said to have dropped dead for lying to God—was the exile Theodore Roosevelt imposed on journalists who broke his reporting rules; some of those present at this first conference were old enough to remember TR’s limbo, as their nervous laughter revealed.

The second category was off-the-record information. This was confidential material intended for only those present at a conference. As sharing of such information had caused problems under Coolidge and Hoover, Roosevelt elaborated: “There is one thing I want to say right now on which I think you will go along with me. I want to ask you not to repeat this ‘off the record’ confidential information either to your own editors or to associates who are not here, because there is always the danger that while you people might not violate the rule, somebody may forget to say, ‘This is off the record and confidential,’ and the other party may use it in a story.”

I
N THE BEST
of circumstances Roosevelt’s administration might have eased into its responsibilities—might have had the benefit of the equivalent of a shakedown cruise. But like the destroyer that carried Roosevelt to Europe in 1918, his administration received its shakedown under full battle conditions. Roosevelt closed the banks on March 6; he had to figure out how to reopen them on March 10. The bank holiday would have mitigated the panic by then—at least he could hope so—but it wouldn’t by itself have altered the underlying weaknesses in the banking system. The American banking industry in 1933 suffered from the same problem that afflicted farming and manufacturing: excess capacity relative to demand. The banking business had boomed during the 1920s as demand for banking services tracked the surge in the stock market and business generally. The bust of 1929 and afterward had shrunk the demand without immediately shrinking the supply.

Another factor contributed to the banks’ distress. The failure of the Federal Reserve to prevent the drastic contraction of the money supply had deprived the banking system of a large part of its liquidity. As the money dried up, so did the ability of the banks to meet their depositors’ demands. The vicious circle tightened as the banks’ inability to meet demands intensified those very demands.

The obvious solution was to reduce the supply of bank services, which meant reducing the number of banks. To some extent this was happening on its own; the thousands of banks that had failed since the stock crash represented perhaps a third of the preexisting number. Had Roosevelt not cared for the human consequences of the bank failures, he might have allowed the winnowing to continue until supply and demand in bank services achieved a new equilibrium.

But he did care, and Americans cared, which was why he had closed the banks and why he felt compelled to devise some method to reopen the stronger ones while shielding depositors from the consequences of the permanent closure of the weaker. And he had to do it all in a matter of days. The country could survive without banks in much the way a person can survive without water: for a few days and with rapidly increasing distress. Individual wallets and purses emptied; cash drawers and tills ran out; business slowed and then halted. Not even the First Family escaped the effects of the bank closing. Eleanor reported that without new cash she couldn’t keep the White House larder stocked.

Much of the work required to reopen the banks took place behind the closed doors of the Treasury and the White House. Will Woodin and Ray Moley met with the governors of the Federal Reserve, with private bankers, with members of Congress, with economists, and with just about anyone else thought to have a large stake or substantial influence in the operation of the nation’s banks. Through long days and longer nights they labored, determined to have a bank bill to present to Congress when the special session opened on March 9.

Yet to a surprising extent—to an extent unimaginable in any earlier administration—the discussions of bank reform took place in the plain view of the president’s press conferences. Other presidents had treated financial policy as highly confidential; Grover Cleveland’s elaborate effort to conceal his oral surgery had been occasioned by his desire to avoid alarming the financial markets. There was good reason for shrouding policy in secret: speculators were ready to leap on the slightest hint of a change in policy. Jay Gould, the most notorious of American speculators, had paid officials of the Grant administration hundreds of thousands of dollars merely to tip him off if any change in policy was imminent during his 1869 attempt to corner the gold market. White House and Treasury officials didn’t even have to
say
anything to set the markets tumbling; observers read institutional body language the way poker players read the faces of their opponents, and bet accordingly.

On this account, when Roosevelt commenced his first press conference, on March 8, with a candid discussion of administration thinking on the bank and money question, the reporters listened with astonishment. To be sure, Roosevelt didn’t let himself be quoted on the issue, but the information he supplied for background far exceeded anything Hoover or other presidents had provided. The first question put to Roosevelt referred to the bank policy he was expected to announce: “Will you go to Congress or send your message?”

“Send it,” Roosevelt replied.

“When will it be available here for us?”

“Judging by the fact that I haven’t started to write it, I should say at the last minute possible.”

The simple fact that the president hadn’t started writing such a momentous document, twenty-four hours before it was due, was news in itself. “Administration in Disarray!” the headlines might have read. Some of the reporters must have been tempted to race for the door, to file their alarming stories at once. But they waited to hear what else Roosevelt had to say. With money in such short supply, various participants and observers were suggesting the use of scrip—essentially IOUs of the kind banks employed among themselves and which were already circulating in places where the banks had been closed for more than a few days. Any advance notice of the administration’s thinking on the subject could be extremely valuable, for a decision to employ scrip would devalue the dollar, while a decision not to use it would have the opposite effect.

“Do you favor national scrip or scrip issued by clearing houses?” a clever correspondent asked, before Roosevelt had said anything about scrip at all.

Roosevelt didn’t bat an eye. “About Monday, the day before yesterday, a very, very wide use of scrip seemed necessary,” he said. “By last night it looked possible to avoid such general use of scrip. But that doesn’t mean that scrip will be eliminated by any means. Scrip may be used in many localities pending the working out of a sounder plan and more permanent plan to get additional currency into use.”

Reporters who reflected on Roosevelt’s answer realized he hadn’t given anything away. Scrip might be used; then again it might not be. But the fact that he was willing to discuss the subject freely was seductive. Hoover had treated reporters as adversaries; he met them in the same mood in which many people approach their dentists, and he often seemed as reluctant to open his mouth. Roosevelt, by contrast, brought the journalists into his confidence, making them almost co-conspirators in governing the nation. By accepting his ground rules, they limited what they could write about; for precisely this reason, some reporters deliberately stayed away. But for the great majority he was simply too good a story to pass up.

Roosevelt understood his advantage and played it for all it was worth. He knew he was brilliant in press conferences. His command of policy options was far greater than he had often been given credit for; those long conversations with Moley and the other professors, and with the various experts he had buttonholed over the years, hadn’t been for nothing. More important was his ability to break complicated questions down into pieces the ordinary reporter could understand and use. The White House press corps included a few experts on finance and on other specific subjects, but most of its members were generalists, not unlike Roosevelt himself. And in those days journalists rarely boasted advanced degrees, or even undergraduate degrees. They typically learned by watching and listening—again, not unlike Roosevelt.

Roosevelt’s self-confidence and personal presence in conducting his news conferences was by itself worth the price of admission. Even within the constraints he placed on what could be reported, each performance was a high-wire act. If he put something on the record that should have stayed off, the damage to his administration, and conceivably to the country, could be immense. If he stumbled, even in confidence, he could betray his ignorance to the reporters, losing their respect and damaging himself, perhaps no less severely.

He almost never stumbled. Twice a week, month after month, year after year, he opened the doors and put on his show. The great majority were in his office; others took place at Hyde Park, Warm Springs, or on the road when he was traveling. The performances were typically informative, frequently edifying, always entertaining. Theodore Joslin had worked in the Hoover White House before taking a job with the
Washington Star
; he contrasted his old boss with the new president. “Mr. Hoover always had a smile for the press,” Joslin said, giving Hoover some benefit of the doubt. “But he often was restrained. Mr. Roosevelt will wisecrack any day.” Yet jokes carried Roosevelt only so far. “The prime difference is in their attitude toward the depression. Mr. Hoover kept his problems to himself. Mr. Roosevelt talks with amazing freedom. There have been times when he has said little of consequence, but he has talked—and remember, that is the one thing the press wants the President to do.” As a result, Joslin observed, Roosevelt was “ace high with most of the corps.”

T
HE REPORTERS
at the March 8 press conference inquired into Roosevelt’s position on gold. The banking question was inextricably linked to the money question, in that a surfeit of banks might be also interpreted as a dearth of money. Until his eleventh hour, Hoover had tried to get Roosevelt to commit to defending the American gold standard and thereby the full value of the dollar. Hoover understood what he was asking. “I realize that if these declarations be made by the President-elect,” Hoover confided to a fellow Republican, “he will have ratified the whole major program of the Republican Administration; that is, it means the abandonment of 90 percent of the so-called new deal.” But Hoover was convinced the New Deal needed to be abandoned, for he believed that Roosevelt’s promised agenda was what was destabilizing the financial markets. “Unless this is done, they run a grave danger of precipitating a complete financial debacle.” Hoover wrote this letter for the record, and to warn against the nefarious designs of the Democrats. “If it”—the debacle—“is precipitated, the responsibility lies squarely with them, for they have had ample warning—unless, of course, such a debacle is part of the ‘new deal.’”

Roosevelt hadn’t fought and won the election in order to ratify the very Republican policies he considered responsible for America’s distress. He ignored Hoover’s entreaties on gold, to the point of refusing to answer Hoover’s letters. Whether as a result of his refusal (Hoover’s interpretation) or Hoover’s policies (Roosevelt’s view), the strain on the dollar reached nearly the cataclysmic proportions the lame duck president predicted. During the week before the inauguration hundreds of millions of dollars flowed out of America’s banks and hundreds of millions in gold from the federal Treasury. The drain of dollars reflected a loss of confidence that the banks would be able to meet their obligations to repay depositors; the drain of gold a loss of confidence that the government would fulfill its promise to convert dollars to gold. The former was chiefly a domestic problem, as healthy banks were essential to the economies of every city and state; the latter had serious international ramifications, as much of the gold was being withdrawn by foreigners for export to their home countries.