Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt (69 page)

He shared his thinking with the press. “The idea is to put people to work in the national forests and on other government and state properties on work which would not otherwise be done—in other words, work that does not conflict with existing so-called public works,” he said. A reporter asked how many people he had in mind. “On the national forests, the Forestry Bureau says two hundred thousand men,” Roosevelt answered. The plan would be much more than make-work, although it would certainly provide employment. In the East, where the unemployment was greatest, nearly all the government timber land was second or third growth. The trees—saplings, in many cases—were small and overcrowded. Roosevelt’s army of foresters would thin the stands, yielding cordwood today and lumber in the future. They would also build firebreaks, to keep forest fires from spreading.

Roosevelt mentioned the figure of a dollar a day as the wage the two hundred thousand conservation corpsmen would make. One reporter did some quick estimates. “I can see it will run into many millions of dollars,” he said. “You would need half a billion or one billion on this one item.” Where did the president propose to find the money?

Roosevelt dodged the question, declining to go into the details of a program that didn’t yet exist. But speaking on background, he said, “These people would be people who are today on the dole. They are performing no useful work. Those are the only people we would take—people who are performing absolutely no work at all and just being barely supported by communities and states.”

One of the reporters pointed out that most of the national forests were in the West. “That would involve a movement from the centers of population for the men to be put to work in those forests. Is that contemplated?”

In fact it was. Roosevelt had long believed that the American population was poorly distributed, with too many people in the East and too few in the West. He hoped the conservation corps would encourage some of those Easterners to relocate to the West. But such ambitious social engineering was more than he wished to share at the moment. “Haven’t got to that yet,” he said. “Can’t tell you.”

On March 21 Roosevelt submitted a bill to Congress. He emphasized that the conservation corps would not interfere with the normal labor markets and would confine itself to work on the public domain. The War and Labor departments would handle the logistics of identifying and enrolling 250,000 young men, training them, and transporting them to their work sites; the Interior and Agriculture departments would direct the actual work. The program would require no new funds at once; unspent public works monies would suffice for several months at least. The corps would benefit the public in several ways, Roosevelt said. It would conserve America’s natural resources. It would improve the nation’s public lands. Not least, it would strengthen the country’s moral resources. “The overwhelming majority of unemployed Americans, who are now walking the streets and receiving private or public relief, would infinitely prefer to work,” the president asserted. “We can take a vast army of these unemployed out into healthful surroundings. We can eliminate, to some extent at least, the threat that enforced idleness brings to spiritual and moral stability.”

Not everyone bought into Roosevelt’s vision. Most Republicans disliked anything that gave the Democratic president more power, and though none went so far as to predict that the corpsmen would become Roosevelt’s equivalent of Mussolini’s Black Shirts, they distrusted and resented the creation of a large class of impressionable young people dependent on the administration for a living. The Mussolini comparison, ironically, was left to the Democrats, including William Green, the president of the American Federation of Labor, who said the president’s program smacked “of fascism, of Hitlerism, and in some respects of sovietism.” Green told a joint session of the House and Senate labor committees that he objected to the dollar-a-day wage as undermining everything that organized labor had been struggling for. On a more philosophical level, he distrusted the military overtones of the president’s scheme. “Labor is deeply apprehensive of this plan,” Green said. “It dislikes the regimentation of these men in the army. Labor is always jealous of its rights to voluntary action.”

Roosevelt didn’t wish to get into a fight with Green, as organized labor was a critical Democratic constituency. But neither did he intend to let such a statement go unanswered. A reporter asked if the president cared to comment on the negative reaction from labor. “No, because I might seem to be answering Bill Green,” Roosevelt said. “I will tell you, if you will write it in such a way that it does not appear as an answer to Bill Green. You might take it just for background.” The reporters lowered their pens and listened. “In the first place, they all talk about military control and militarization, but that is just utter rubbish,” Roosevelt said. “The camps will be run just like those in any other big project—Boulder Dam or anything like that. Obviously you have to have some form of policing. In other words, you cannot allow a man in a dormitory to get up in the middle of the night and blow a bugle.” This drew the desired laugh. “You have got to have order, just perfectly normal order that you would have in any kind of big job. That is so much for the military end.”

As to the conservation corps disrupting the labor market, Roosevelt said, nothing could be more ridiculous. “This is not competition, because these fellows have no chance to get a job at the present time, and 250,000 men, as Arthur Brisbane”—a Hearst columnist—“pointed out this morning in his column, is a mere drop in the bucket. It is just a little step toward the relieving of 12 million people, but it is a practical step.” Regarding the wage rate: “To be sure, they are to be paid only a dollar a day, but it costs the government another dollar a day to take care of them…. A two-dollar-a-day wage for that type of work would probably be higher in a great many places than what labor is actually paid.” That really
would
disrupt the labor market. Roosevelt cited his own experience as an employer of unskilled workers in Georgia. “In 1929 their pay was about $1.50 or $1.75 a day with no quarters, no food, no clothing.” And wages had fallen considerably since 1929.

The Senate approved Roosevelt’s conservation corps bill on a voice vote after cursory debate. The House spent longer with it, largely because of labor’s opposition. Representatives proposed various amendments; one that stuck was sponsored by Oscar De Priest of Illinois, who in 1928 had become the first African American elected to the House in three decades. De Priest specified that the conservation corps must not discriminate on account of race, color, or creed. Almost no one else would have sponsored such an amendment, but De Priest having done so, few wished to go on record as opposing it. The amended bill passed the House and was reconciled with the Senate’s version, and on March 31 Roosevelt signed the law creating the Civilian Conservation Corps.

T
HE ROOTS OF
the Securities Act of 1933 lay in the same progressive soil that motivated much else about the New Deal. Samuel Untermyer had come to national prominence as the antagonist of J. P. Morgan in the 1912 Pujo Committee hearings into the money trust. Untermyer, as counsel to the committee, probed, prodded, and embarrassed the great financier, who refused to admit not simply wrongdoing but almost any doing at all, on grounds that his private business was none of Untermyer’s or the public’s business. Morgan left the hearings in a huff, sailed for Europe on his annual art-buying vacation, and dropped dead in Italy. While the art sellers mourned, Morgan’s friends blamed Untermyer for overtaxing Morgan’s delicate constitution. Whatever the link, Morgan’s passing cleared the way for the Federal Reserve Act of 1913, which transferred effective control of the money supply from the big bankers to the federal government.

The Republican administrations of the 1920s had predictably little use for Untermyer, but the return of the Democrats found him, at seventy-five, as eager as ever to bring the barons of Wall Street to account. Roosevelt knew Untermyer, but it was Ray Moley who enlisted his services shortly after the election. Precisely what Roosevelt wanted Moley and Untermyer to do was as uncertain as much else about the early New Deal. Unlike banking and farming, the securities business was hardly in crisis in 1933. In the doldrums, yes, but Wall Street’s crisis had occurred in the six months starting in October 1929. Consequently there was no pressing need for emergency legislation. All the same, Roosevelt and the Democrats had railed against the speculators and profiteers of the stock exchange for so long that they felt compelled to do something to rein them in, even if they weren’t currently threatening to break away.

So popular was the idea of restraining Wall Street that multiple groups set to work on the project. At least two of the groups worked for Roosevelt. Besides Moley and Untermyer, Roosevelt commissioned Commerce Secretary Daniel Roper and Attorney General Homer Cummings to get up some legislation, with the assistance of Huston Thompson, another old Wilsonian. The two administration groups worked in parallel and in ignorance of each other till an embarrassing moment of recognition in March. Moley thought Roosevelt had simply forgotten about him and Untermyer when he put Roper and Thompson on the case; more likely Roosevelt let Moley draw that conclusion lest he be offended. In fact Roosevelt wanted to see who had the better ideas.

The ideas differed sharply. Untermyer, whose legal career reached well back into the nineteenth century, recalled when Republican justices had invalidated the most innocuous efforts to restrain business. Eyeing the current makeup of the Supreme Court, he feared that efforts to regulate the securities industry might be similarly tossed out. For this reason he aimed to put the regulators in the Post Office, which had an irrefutable federal mandate. He argued that securities were marketed and delivered via the mails and on this account could be regulated. Roper and Thompson thought the Post Office scheme silly. What did the postmaster general know about Wall Street besides the addresses of the big firms doing business there? Thompson had run the Federal Trade Commission and was perfectly comfortable with the exercise of federal power. But Thompson, and Roper too, knew much less about the securities business and securities law than Untermyer, and their information deficiency became apparent in the imprecision of their arguments.

Roosevelt brought the disputants together and told them to work out their differences. Moley found the experience painful. “The peace conference in the President’s study was a frost,” Moley remembered. “Old Untermyer felt, and showed, a cold contempt for Thompson’s work. Thompson, in self-defense perhaps, kept shooting at the Achilles heel of Untermyer’s—the Post Office idea. Untermyer then got on his high horse. Not only was the Thompson bill a mess, but his own was perfect. And that, he wished it understood, included the Post Office idea.” Moley despaired, concluding that reconciliation was hopeless. But Roosevelt laughed off his pessimism. He had Thompson incorporate some of Untermyer’s suggestions into a revised bill he could send to Congress at once, and he kept aside the rest of Untermyer’s plan for subsequent use.

The heart of the bill Roosevelt sent up was a novel concept in the American securities industry. “The big objective is to restore the old idea that a person who uses other people’s money does so in a fiduciary capacity,” Roosevelt explained in a press conference on March 29. “A person who works in either a stock or a commodity exchange is acting as the agent for other people.” This being so, the agent had a responsibility to be as honest and forthcoming as possible. Roosevelt proposed a new standard for the securities trade, what he called “caveat vendor.” The common-law principle of caveat emptor allowed sellers to get off too easily. “Let the seller beware as well as the buyer,” the president said. “There is a definite, positive burden on the seller for the first time to tell the truth.” Roosevelt insisted that he wasn’t requiring omniscience, nor was he banning speculation. He gave an example: “If a company is organized to develop a gold mine, and it has got what it and the engineers honestly believe to be a perfectly good speculation, and it is not over-capitalized, there is no reason why it should not get a license to operate, provided that the public is informed that it is, like most gold-mining operations, a speculative venture.” The point was to level the field between those issuing the securities and those buying them.

Roosevelt’s proposal sparked an immediate reaction from the financial industry. Most brokers and investment bankers didn’t want to be regulated at all and loudly said so. Even those who accepted that some regulation was inevitable predicted that the president’s concept of caveat vendor would provoke endless litigation. One could easily imagine disappointed investors suing corporate directors or the underwriting banks if a stock issue failed to meet the investors’ hopes. With the burden of proof now on the sellers, juries would likely side with the investors.