CHAPTER 1
LET'S MAKE A DEAL!
"Let every American, every lover of liberty, every well wisher to his posterity, swear by the blood of the Revolution, never to violate in the least particular, the laws of the country; and never to tolerate their violation by others. Let reverence for the laws, be breathed by every American mother, to the lisping babe, that prattles on her lap - let it be taught in schools, in seminaries, and in colleges; - let it be preached from the pulpit, proclaimed in legislative halls, and enforced in courts of justice. And, in short, let it become the political religion of the nation." Abraham Lincoln, January 27, 1838.
SO LET IT BE SAID!
This country has had its share of depressions. Both the people and the government weathered these economic storms without resorting to extraordinary remedies. Somehow, the "great depression" of the 1930's was perceived differently than the others this nation had endured.
During the early 1930's, factories, mines, and mills throughout the country had to be shut down. Railroads and steamship companies lost a considerable part of their business and many of them were forced into bankruptcy. Stock brokerage and investment houses, some of good standing, closed or failed, causing serious losses to their customers. Farmers were unable to sell their products. Homes and farms were being foreclosed. Unemployment and misery became widespread. Inaction by the Federal Government and the Hoover administration added to the discontent of the people. Strikes were reported from all parts of the country. The Capitol became the Mecca of thousands of "marchers" who came to Washington to voice their discontent with the government. In agricultural states the temperament of the farmer was indicated by rioting against foreclosures and forced sales. In the business centers of many states loss of confidence in the government causes many people to convert credit into cash and put it in hiding. Heavy withdrawals brought about the closing of many banks with the consequent results that in addition to scarcity of a flowing currency there was also a lack of credit.
The governors and legislatures of many states took drastic steps to remedy the situation existing in their respective states, but the people were not satisfied with the results and instead demanded a "savior." Thus emerged Franklin Delano Roosevelt, to fulfill this role. Roosevelt offered the people peace and prosperity and the people offered themselves and their posterity as payment. Such was the state of affairs of the country when on Saturday, March 4, 1933, at 1:08 P.M., a day that was cloudy and chill, Franklin Delano Roosevelt became the thirty-second President of the United States.
Crowded on the grounds of the Capitol, 100,000 people saw Roosevelt take his oath of office just as thirty-one previous presidents had sworn that sacred oath to cherish and defend the Constitution of this country. Over the vast throngs there hung another cloud - a cloud of worry and despair, because of the economic and business outlook for the country.
Roosevelt stood on the main steps of the Capitol building before Charles Evans Hughes, Chief Justice of the Supreme Court of the United States, Footnote1 who held out to him the 300 year-old Roosevelt Family Bible. Roosevelt placed his left hand on it as Chief Justice Hughes read the oath of office as mandated under Article II, Section 1 of the Constitution of the United States of America which reads:
I do solemnly swear (or affirm) that I will faithfully execute the Office of the President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States.
As the Chief Justice finished Roosevelt answered in a clear voice "I DO." Then facing the great throng, the new President of the United States delivered his inaugural address:
"President Hoover, Mr. Chief Justice, my friends:
"This is a day of national consecration, and I am certain that my fellow-Americans expect that on the induction into the Presidency I will address them with a candor and a decision which the present situation of our nation impels.
"This is pre-eminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shirk from honestly facing conditions in our country today. This great nation endure as it has endured, will revive and prosper.
"So first of all let me assert my firm belief that the only thing we have to fear is fear itself-nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.
"In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.
"In such a spirit on my part and on yours we face our common difficulties. They concern, thank god, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.
"More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.
"Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply.
"Primarily, this is because the rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
"True, they have tried, but their efforts have been cast in the pattern on an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money.
"Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers.
"The money changers have fled their high seats in the temple of our civilization. We may now restore that temple to the ancient truths.
"The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
"Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.
"The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and our fellow-men.
"Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political positions are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing.
"Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligation, on faithful protection, on unselfish performance. Without them it cannot live.
"Restoration calls, however, not for changes in ethics alone. This nation asks for action, and action now.
"Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously.
"It can be accomplished in part by direct recruiting by the government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.
"Hand in hand with this, we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land.
"The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities.
"It can be helped by preventing realistically the tragedy of the growing loss, through foreclosure, of our small homes and our farms.
"It can be helped by insistence that the Federal, State and local governments act forthwith on the demand that their cost be drastically reduced.
"It can be helped by the unifying of relief activities which today are often scattered, uneconomic and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character.
"There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act, and act quickly.
"Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money, and there must be provision for an adequate but sound currency.
"These are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States.
"Through this program of action we address ourselves to putting our own national house in order and making income balance outgo.
"I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.
"The basic thought that guides these specific means of national recovery is not narrowly nationalistic.
"It is the insistence, as a first consideration, upon the interdependence of the various elements in and parts of the United States - a recognition of the old and permanently important manifestation of the American spirit of the pioneer.
"It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.
"We are, I know, ready and willing to submit our lives and property to such discipline because it makes possible a leadership which aims at a larger good.
"This I propose to offer, pledging that the larger purpose will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.
"With this pledge taken, I assume unhesitatingly the leadership of this great army of our people, dedicated to a disciplined attack upon our common problems.
"Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors.
"Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form.
"That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations.
"It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.
"I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require.
"These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring speedy adoption.
"But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me.
"I shall ask the Congress for the one remaining instrument to meet the crisis-broad executive power to wage war against the emergency as great as the power that would be given me if we were in fact invaded by a foreign foe.
"For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.
"We face the arduous days that lie before us in the warm courage of national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike.
"We aim at the assurance of a rounded and permanent national life.
"We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action.
"They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.
"In this dedication of a nation we humbly ask the blessing of God. May He protect each and every one of us! May He guide me in the days to come!"
Roosevelt departed from the Capitol and went to his new home, the White House, where a luncheon was served to 500 guests. The members of his cabinet which included nine men and one woman were sworn in before their relatives and friends in the Oval Rooms by Supreme Court Justice Benjamin Cardozo. Footnote2 This was the first time this had been done. Never before had a Cabinet been sworn in at the same time and in the same place and by the same official administering the oaths. Never before was the White House the scene of the swearing in of the cabinet. Roosevelt told the gathering that he was breaking a precedent. "It is my intention to inaugurate precedents like this from time to time," he laughed. The streets outside were given over to the crowds which had become quite merry and milled around until late into the night. At the inaugural ball, the guests danced, sang and laughed while the crowds outside applauded at the arrival of the invited guests.
It can be truly said that the nation responded to the ringing utterance of the inaugural address. Congress was prepared to go along in an extraordinary effort. Everywhere Roosevelt was hailed with unprecedented applause. In spots the acclaim rose to almost hysterical strains. Newspapers began to refer to him as, the darling of destiny, the Messiah of American's tomorrow. However, four years later with growing criticism to his programs and growing power, Roosevelt would deliver in May, 1937, his famous midnight radio address, in an attempt to quiet his critics and to debunk their claims that he (Roosevelt) was becoming an American dictator.
SO LET IT BE DONE!
Roosevelt's inaugural address was merely a prologue uttered before the curtain rose upon the stirring drama of his first months in office.
On March 5, 1933, Roosevelt summoned a special session of Congress beginning March 9. At 11 o'clock that same night Roosevelt issued a proclamation declaring a national emergency to exist, closing the banks and prohibiting the hoarding and exporting of gold bullion and currency. Footnote3
On March 9, 1933, Congress, gathering in special session, passed the National Banking Emergency Relief Act, Footnote4 which, after approving the actions taken by Roosevelt prior to March 9, gave the government, among other things, the power to authorize the reopening of the closed banks which were ascertained to be in sound condition and to reorganize and reopen such other banks as may be found to require reorganization to put them on a sound basis, and authorized national banks to issue preferred stock in order to secure additional capital.
On March 10, 1933, Roosevelt sent his economy message to Congress. "For three long years," he said, "the Federal Government has been on the road toward bankruptcy. For the fiscal year of 1931 the deficit was $462,000,000. For the fiscal year of 1932 it was $2,472,000,000. For the fiscal year 1933 it will probably exceed $1,200,000,000. For the fiscal year 1934 based on appropriation bills passed by the last Congress and the estimated revenues, the deficit will probably exceed $1 billion unless immediate action is taken. Thus we shall have piled up an accumulated deficit of $5 billion." Then Roosevelt warned: "Too often in recent history liberal governments have been wrecked on the rocks of loose fiscal policy. We must avoid this danger."
Supposedly, here at last was the man to put an end to the deficits. Roosevelt declared these deficits had:
"contributed to the recent collapse of our banking structure. It has accentuated the stagnation of the economic life of our people. It has added to the ranks of the unemployed. Our government's house is not in order, and for many reasons no effective action has been taken to restore it to order."
Roosevelt declared "the credit of the national government is imperiled." And then he asserted, "the first step is to save it. National recovery depends upon it." The first step was a measure to cut payroll expenditures 25 percent. The second step, was to authorize a bill providing for the biggest deficit of all - $3,300,000,000. In order to reduce government costs, Congress on March 20, 1933, passed the Veterans and Federal Employees Economy Act, Footnote5 which reduced federal salaries and discontinued "bonus" payments to ex-soldiers whose disabilities had no direct connection with war service. To provide immediate employment for about 500,000 people, Congress on March 31, 1933, passed the Civilian Conservation Corps Act, Footnote6 establishing forest camps for the unemployed. Because of widespread unemployment, Congress passed the Federal Emergency Relief Act, Footnote7 creating a Federal Emergency Relief Administration to cooperate with similar state agencies, the funds, about $500 million to be made available by the Reconstruction Finance Corporation.
Farmers received special attention when on March 16, 1933, Roosevelt sent a message to Congress calling for the passage of the Agricultural Adjustment Act. The Act was approved by Congress on May 12, 1933. Footnote8 The Agricultural Adjustment Act or AAA as it was called, was intended to establish and maintain a proper balance between the production and consumption of agricultural commodities, increase the agricultural purchasing power, provide emergency relief with respect to agricultural indebtedness and to provide for the orderly liquidation of joint-stock land banks. The Farm Credit Act of 1933, Footnote9 approved by Congress on June 16, 1933, created a revolving fund of $120 million for the establishment of twelve Production Credit Corporations and twelve banks for cooperatives in the same cities as the federal farm loan bank are situated to aid in financing the production and distribution of farm products.
Mortgage debtors found relief in the Home Owner's Loan Act, Footnote10 intended to provide emergency relief with respect to home-mortgage indebtedness by refinancing home mortgages and giving financial aid to the owners of homes occupied by them and unable to amortize their debt.
To protect bank depositors, Congress passed the Banking Act of 1933, Footnote11 which required commercial banks to divorce the security affiliates organized by them and to segregate the functions of investment banking from those of deposit banking. This Act also provided a system whereby bank deposits were to be insured. The investor who invested his savings in spurious securities came up for consideration when Congress passed the Federal Securities Act. Footnote12 This Act establishes supervision over the sale of investment securities and gave investors grounds for legal action in case of omission or misrepresentation of material facts by those connected with the issue.
The actions taken by Roosevelt and Congress affecting the currency of the nation were equally important. On April 20, 1933, the gold standard was suspended when Roosevelt by executive order imposed an embargo on all gold exports. Footnote13 Then on May 12, 1933, both houses adopted the Thomas amendment to the farm bill. Footnote14 The amendment gave Roosevelt power to (a) provide for an expansion of credit by arranging for the purchase of $3 billion of Government bonds by the Federal Reserve Banks; (b) to issue $3 billion in paper currency; (c) to authorize an unlimited coinage of silver at the ratio of gold to be fixed by Roosevelt in his own discretion; and (d) to reduce the gold content of the dollar by not more than fifty per cent.
On June 5, 1933, Public Resolution No. 10 was approved. This resolution in substance provided that: (a) it is the declared policy of Congress to maintain at all times the equal power of every dollar, coined or issued by the United States, in markets and in the payment of debt; (b) every provision contained in or made with respect to any obligation which purports to give the obligee a right to require payment in gold or a particular kind of coin or currency, or in an amount in money of the United States measured thereby, is declared to be against public policy; (c) every obligation, heretofore or hereafter incurred, whether or not such provision is contained therein or made with respect thereto, shall be discharged upon payment, dollar for dollar, in any coin or currency which at the time of payment is legal tender for public and private debt; and (d) all coins and currencies of the United States (including Federal Reserve notes and circulating notes of the Federal Reserve banks and national banking associations), heretofore or hereafter coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties and dues.
Then came the "Great Charter of Free Business," the National Industrial Recovery Act Footnote15 or NRA. It was rushed through Congress with little or no debate. Few members of Congress had even the foggiest idea what it was, save that it was what Roosevelt wanted. The National Industrial Recovery Act was approved June 16, 1933. The purpose of the Act was contained in Section 1 of Title I of the Act itself, which reads as follows:
A national emergency productive of widespread unemployment and disorganization of industry, which burdens interstate and foreign commerce, affects the public welfare, and undermines the standards of living of the American people, is hereby declared to exist. It is hereby declared to be the policy of Congress to remove obstructions to the free flow of interstate and foreign commerce which tend to diminish the amount thereof; and to provide for the general welfare by promoting the organization of industry for the purpose of cooperative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries, to avoid undue restriction of production (except as may be temporarily required), to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, to improve standards of labor, and otherwise to rehabilitate industry and conserve national resources.
The NRA authorized the expenditure of $3.3 billion for public works. The purpose of this expenditure was to increase employment and particularly to stimulate activity in the major industries, such as those producing steel, cement, brick, lumber, machinery and other capital needs.
Upon signing the National Industrial Recovery Act, Roosevelt said:
"History probably will record the National Industrial Recovery Act as the most important and far-reaching legislation ever enacted by the American Congress. It represents a supreme effort to stabilize for all time the many factors which make for the posterity of the nation, and the preservation of American standards."
In a radio address delivered July 31, 1933, the chief of the legal division of the recovery administration said:
"I wonder how many of the fortunate people of this country understand that the long-discussed revolution Footnote16 is actually under way in the United States. There is no need to prophesy. It is here. It is in progress. In this favored land of ours we are attempting possibly the greatest experiment in history."
On July 8, 1933, Roosevelt created the Public Works Administration (PWA) for the administration and allocation of the fund provided by and authorized to be expended under the NRA. Footnote17 Originally using part of the same fund, the Federal Civil Works Administration (CWA) was organized on November 9, 1933, as a branch of the Public Works Administration. Footnote18 The function of the CWA was to create emergency employment and thereby supplement the relief measures already adopted by Congress earlier in its session. As part of the same program which included the NRA, and PWA and the CWA, the Reconstruction Finance Corporation on August 1, 1933, was authorized to invest $1 billion in the preferred stock of national banks, in order to strengthen the banks and make it possible for them to respond to the credit needs of the country.
On August 28, 1933, Roosevelt issued an executive order prohibiting the hoarding, exporting and earmarking of gold coin and currency, Footnote19 and on December 28, 1933, the Secretary of the Treasury issued an order requiring the delivery to the Treasury of the United States of all gold coin and gold certificates.
On January 15, 1934, the Secretary of the Treasury fixed midnight of Wednesday, January 17, as the final date before which time gold coin and currency had to be delivered to the Treasury of the United States. Finally, the Gold Reserve Act Footnote20 was passed, which authorized Roosevelt to (a) fix the limits for the valuation of the dollar at from fifty to sixty per cent. in terms of its old gold content, (b) manage the dollar within these limits, by making such changes in its value as were deemed necessary, (c) impound in the treasury the stocks of gold held by the Federal Reserve Banks, (d) assure to the Government whatever profit might result from the increase in the value of gold, and (e) use part of this profit to create a fund of $2 billion with which to "stabilize" the dollar. Pursuant to authority vested in him by the Gold Reserve Act, Roosevelt by proclamation, dated January 31, 1934, Footnote21 declared and fixed the weight of the dollar to be fifteen 5.21 grains, 9/10th fine, or 59.06 cents in terms of its old parity.
On June 27, 1934, in order to aid those employed by rail carriers, Congress passed the Railroad Retirement Act. Footnote22 This Act established a compulsory retirement and pension system for all carriers subject to the Interstate Commerce Act.
Finally, Roosevelt's New Deal program was complete. The banks were open. Business was moving back into activity, the country was saved.
People everywhere were talking about the coming Roosevelt boom. Roosevelt was calling everybody by their first names. People were saying: "Whata man!" Several times a week, the White House press corps gathered around Roosevelt's desk, to hear his lectures on economic theory. The whole nation sat quietly around their radios several evenings a week to hear the voice of Roosevelt explain to them in simple terms the meaning of all the great measures he was driving through Congress.
Praise for Franklin Delano Roosevelt came from every quarter as the country settled down to the happiest times it had seen in some years. The New York Times said editorially:
The President seized upon a wonderful opportunity in a way that was at once sagacious and dynamic. With insistent determination and great boldness he sought to render the very emergency of the nation, the wreck of business and the fears for the future, the means of establishing his authority and leading both Congress and the country into a more hopeful and resolute temper. In a true sense the public disaster was transmuted into an official triumph for him. But that was because he appeared to the American people to be riding the whirlwind and directing the storm. The country was ready and even anxious to accept new leadership. From President Roosevelt it got a rapid succession of courageous speeches and effort and achievement which included multitudes of his fellow citizens to acclaim him as the Heaven-sent man of the hour.
All that was now left to do was to let the people settle down to assimilate themselves into this new order of things. Congress had put vast emergency powers into the hands of Roosevelt and had put a fabulous sum of money ($3,300,000,000) in addition to all the other specific appropriations for government, into his hands to be spent in any way he desired. Meanwhile, the "spendthrift" Hoover as Roosevelt referred to him during the 1932 presidential election was in California at his Palo Alto home putting his own affairs in order, while the great Economizer who had denounced Hoover's deficits during the 1932 presidential election, had produced in his first 100 days in office, a deficit larger than Hoover had produced in two years. Footnote23
The members of the Supreme Court when Roosevelt took office included the following Justices: Chief Justice Charles Evans Hughes; Willis J. Van Devanter; Pierce Butler; James Clark McReynolds; George Sutherland; Harlan Fiske Stone; Louis Dembitz Brandeis; Benjamin N. Cardozo; Owen J. Roberts.
Roosevelt's cabinet included the following: Timothy Hull - Secretary of State; William Woodlin - Secretary of the Treasury; George Dern - Secretary of War; Homer Cummings - Attorney General; James Farley - Postmaster General; Claude Swanson - Secretary of the Navy; Harold Ickes - Secretary of the Interior; Henry Wallace - Secretary of Agriculture; Daniel Roper - Secretary of Commerce; and Frances Perkins - Secretary of Labor, the nation's first woman Cabinet officer.
Proclamation 2039.
48 Stat. 1.
48 Stat. 8.
48 Stat. 22.
48 Stat. 55.
48 Stat. 31.
48 Stat. 257.
Act of June 13, 1933, c. 64, 48 Stat. 128.
Act of June 16, 1933, c. 89, 48 Stat. 162.
Act of May 27, 1933, c. 38, 48 Stat. 74.
Executive Order 6111.
48 Stat. 51.
Act of June 16, 1933, c. 90, 48 Stat. 195.
The correct term used by the chief of the recovery administration should be "counter-revolution." This government is a revolutionary government, born while under a condition of war. Roosevelt through his counter-revolutionary ideas and so-called economic and social experiments, sought to destroy the very foundation of our revolutionary government.
Executive Order 6198.
Executive Order 6420.
Executive Order 6260.
Act of January 30, 1934, c. 6, 48 Stat. 337.
Proclamation 2072.
48 Stat. 1283.
It is interesting to note the very last Act passed by the Congress and signed by Roosevelt before the summer adjournment of the Congress was the Act of June 16, 1934, entitled, "An Act to establish a uniform system of bankruptcy throughout the United States."