The Banking Crisis

We must return now for a brief space to the two months preceding Mr. Roosevelt's inauguration and to the rising crisis hurried along by the events in the banking world. All through January, as the inauguration came into view, the newspapers chronicled daily the banking failures. Depositors were taking their money out of their own banks. Foreign depositors were withdrawing their balances here, which set in motion an increased flow of gold out of the country. Many large investors were turning their security holdings into cash and this into gold to ship abroad. The fears accumulated; the tension mounted. Then came the crash of the two great banking systems of Detroit and Governor Comstock's declaration of a bank holiday closing all the banks in the state. This sent a tremor through the country.

The next day—February 15, 1933—Mr. Roosevelt, who had been enjoying a vacation aboard Vincent Astor's yacht Nourmahal arrived at Miami. As he appeared before the crowd in his automobile, the shot was fired at him that struck Mayor Cermak. This miraculous deliverance came like a benediction upon Roosevelt's unscathed head and illuminated his rising fame with a new brilliance. The next day he was in New York. On the night of February 18, the Inner Circle—an organization of New York City political reporters—was staging its annual banquet and show in the grand ballroom of the Astor Hotel. Every prominent politician in New York State attends this famous spectacle at which the political writers stage burlesque skits about New York politicos. After midnight, i.e. the morning of February 19, and while the stage show was still in progress, Roosevelt, then being President-elect, arrived at the dinner with a large party. He took his seat of honor at the center of the head table.

Raymond Moley, then his closest adviser, sat opposite him. The newspaper actors on the stage were going through some particularly hilarious farce and the audience was in uproarious good humor. At this moment Roosevelt signaled to Moley and passed a slip of paper to him under the table. Moley read it. To his amazement it was from the President of the United States, Herbert Hoover, and in his own handwriting. Amidst the rising merriment Moley read with dismay:

"A most critical situation has arisen in the country of which I feel it my duty to advise you confidentially."

Moley looked toward Roosevelt. His head was thrown back in a roar of laughter at the show. Then Moley read on. Hoover pointed out with complete realism the threat to the whole national banking structure, the flight of gold from the country, the rush of cash from the banks into hiding. Fear, he said, had taken possession of the public mind. Hoover believed, rightly, that a new element had entered the situation—the appearance of terror. The air was full of rumors of inflation and of going off the gold standard. This was leading to the withdrawal of gold from the banks. Hoover enumerated the forces that were causing the trouble:

"The breakdown in balancing the budget by the House; the proposals for inflation of the currency and the widespread discussion of it; the publication of the RFC loans Cto banks) and the bank runs, hoarding and bank failures from this cause and various other events and rumors."

These, he said "had now culminated in a state of alarm which is rapidly reaching the proportions of a crisis."

Hoover believed that Roosevelt should now enter the situation. He proposed that Roosevelt issue some sort of statement to "clarify the public mind." After all, though Hoover was still President, his power to do anything effective was gone. He would be out of the White House in two weeks. A hostile House was in session in Washington. A majority of the people had repudiated his leadership. He could do nothing, and nothing he could say would have any effect now. He appealed to Roosevelt: "It is obvious that as you will shortly be in a position to make whatever policies you wish effective, you are the only one who can give these assurances." Mr. Roosevelt was in a position—the only one who was—to calm the public mind, to make some move or gesture that would encourage confidence and check the rising currents of terror.

When he finished reading, Moley realized that "the breaking point had come." He looked again at Roosevelt, who was in full laughter, bantering with those beside him and autographing programs. When the dinner ended, Roosevelt with his entourage went back to his 65th Street town home. There he seemed completely unmoved by the grave picture Hoover had painted for him—"of," as Moley describes it, "the bony hand of death stretched out over every bank in the country."

Roosevelt's answer to this solemn challenge is as singular an incident as appears in his career. One cannot understand it without at least a look at his whole attitude toward the banking problem. It was then and I am sure still is, a widely held view that Mr. Roosevelt had a plan for dealing with this problem, that he arrived for his inauguration with that plan fully matured. He promptly closed the banks and in a few days opened them and gave to the country a soundly reorganized banking system.

It is not easy to rid the popular mind of so deeply rooted an assumption. But let us at least have a look behind the scenes at what was happening which the public eye never beheld. The situation on that fateful February 19, when Moley read Hoover's letter amidst the shouts and laughter of the Inner Circle banquet, certainly called for action. Yet, whatever a generous public may think, it is a fact that the men around Mr. Roosevelt believed that he did not take the banking crisis seriously.

It must be remembered that Mr. Roosevelt had been governor of New York for four years, from 1928 to 1932; that the banking crisis was developing in that state during that time; that many of the worst banking scandals blossomed in the state banks under the jurisdiction of the governor. Senator Hastings of New York State wrote him early in his administration urging him to take some action to check stock market speculation and got no answer. After failure of the City Trust Company, Lieutenant-Governor Herbert Lehman, in Roosevelt's absence, appointed Robert Moses to investigate the banking situation. Moses made his inquiry and denounced the practices of some of the banks. In his report he mentioned the practices of the Bank of the United States.

About the same time I wrote in my column an appeal to the governor to do something about these shaky banks. Governor Roosevelt named a commission to do this and, to my horror, appointed a director and counsel of the Bank of the United States on the commission. Norman Thomas denounced him, charging "that he had completely disregarded the Moses report and solemnly concluded everything would be all right if everybody put his money in a sound bank." His action made it quite clear that the governor had not the slightest understanding of the banking situation. It was a good deal like appointing one of Al Capone's mob to make a study of the gangster problem. Very soon thereafter the Bank of the United States failed. But the governor still remained uninterested. Various appeals were made for some sort of action directly to the governor but he did nothing.

What was the explanation of this peculiar lack of alarm in the face of this serious threat? Later, as it grew more menacing, he remained silent. The Democratic platform made only an oblique reference to it. In his speech of acceptance of the nomination he talked about all sorts of problems, including the woes of Puerto Rico, but never mentioned the banks. In his discussion of the Democratic platform in his first radio address he ignored the banking question. He delivered a group of addresses on various specific problems—agriculture, labor, foreign policy—but none on the growing banking issue. He mentioned the subject only casually in one of these addresses.

After his election when the fatalities among the banks became critical, he remained quite unmoved by it. There can be no doubt about this. Ray Moley, who was at his side through these days, has written that between February 18, when he got Hoover's ominous warning, and March 1, he could not discover how seriously Roosevelt was impressed with the seriousness of the crisis.

With this in mind, let us return to the alarming letter which Hoover sent to Roosevelt. Hoover wrote that letter on February 17. He sent it by a Secret Service messenger who put it directly in Roosevelt's hands on February 18. It was the morning of February 19 that Roosevelt went over to the Inner Circle dinner. And all that day he never showed it to anyone. He did not hand it to Moley until hours after he got it. Twelve days later Hoover had not yet received even an acknowledgment of the letter. Then, on March 1, he got Roosevelt's reply with this curious explanation. Roosevelt said he had written an answer over a week before but through some oversight of his secretary it had not been sent. When he did reply, twelve days later, he indicated there was nothing he could do.

On March 2, Roosevelt arrived in Washington, as Moley described him, in the gayest possible humor, as fresh as a daisy, while Hoover, still President, his aides and Roosevelt's aides, Woodin, Moley and others were in a state of almost complete exhaustion over their long day and night conferences to meet the crisis.

There must be some explanation of this. And the explanation is simple, as we shall see. Hoover was struggling to save as many banks as possible. Every day the crisis was allowed to run meant the closing of more banks, the flight of more gold, the loss of more tens of millions and hundreds of millions in savings, in values, in business losses. But Hoover was powerless to do anything effective without the concurrence of the new President because he lacked powers to act alone and he would have to get the powers from Congress, or at least an assurance that Congress would validate his assumption of powers.

Roosevelt had no wish to stem the panic. The onrushing tide of disaster was sweeping the slate clean for him—at the cost of billions to investors and depositors. The greater the catastrophe in which Hoover went out of power the greater would be the acclaim when Roosevelt assumed power. When, therefore, he read Hoover's letter on February 18, he did nothing because the crisis which Hoover described was what he wanted. When he passed the letter under the table to Moley and when Moley, terrified by the import of the letter, was amazed to see Roosevelt in high glee, he explained it as a bit of showmanship by Roosevelt to conceal from the diners any alarm he might feel. But the real reason was that Roosevelt felt no terror at the news. The letter indicated to him that everything was going as he wished it. And from that day forward, as those around him at the time have testified, he showed not the least concern about doing anything to arrest the onset of the panic. What he wanted was a complete crash. He wished for the panic to sweep on to a total banking disaster. He wished for the public to see his predecessor go out in a scene of utter ruin, thus setting the stage for him to step upon it as the savior who would rebuild from the very bottom.

For this drastic decision there could be, of course, but one excuse, namely that Mr. Roosevelt had a definite plan and that such a plan could be better carried out with a full disaster. What, then, was his plan? We shall see presently.

President Hoover was prepared to act. He had a definite plan. But we must remember that the Congress was Democratic and any plan would require the use of extraordinary powers which would call for Congressional approval. He saw that there was before the country the general problem of the depression, which called for a number of techniques and for time. But within this problem was the banking crisis, which was desperate and had to be dealt with instantly. Roosevelt and Hoover might differ on the means of ending the depression, but it ought to be a simpler matter to agree on a means of stemming the banking crisis which was carrying down good banks as well as bad.

At the beginning of February, Hoover proposed to the Federal Reserve Board that every bank in the country should be closed for just one day. Each bank would then submit a statement of its assets and liabilities. It would list its live assets and its dying or dead assets separately. The Federal Reserve would accept the banks' own statement. The next day all solvent banks would be opened and the government would declare them to be solvent and would guarantee that solvency during the crisis. That would stop the runs.

As to the banks with large amounts of inactive assets, the live assets would be separated from the inactive ones. The banks would be reopened, each depositor getting a deposit account in proportion to his share of the active assets. The inactive assets would then be taken over to be liquidated in the interest of the depositors. This was an obviously sound and fair solution. Had it been done countless millions in deposits would have been saved and the banking crisis at least would have been removed from the picture. However, the Attorney-General ruled that the President did not possess the power to issue such an order unless he could have the assurance of Congress that it would confirm his action by an appropriate resolution, and that this, as a matter of political necessity, would have to be approved by the new President who would take office in a month. It was some such plan as this which Hoover had in mind when he wrote Roosevelt on February 17. It had one defect from Roosevelt's point of view. It would not do to allow Hoover to be the instrument of stemming the banking crisis before Roosevelt could do it.

However, Hoover took the view that, as the ultimate responsibility would fall upon Roosevelt, although Roosevelt was without power to act being still a private citizen, he, Hoover, would issue any orders Roosevelt would approve, provided he could do so in conscience and Roosevelt could assure approval by Congress.

But Roosevelt did not answer that letter of February 17 and meantime the crisis had assumed a terrifying aspect. To this was added the fear of inflation and of irresponsible and even radical measures by the new President. One of these, of course, was the agitation which went on behind the scenes for the nationalization of the whole banking system. Men close to the President-elect were known to be for this. The printing-press champions of various kinds of fiat currency had been ardent supporters of Roosevelt. Carter Glass had been weighing Roosevelt's offer of the Treasury portfolio and it was understood that he was trying to get some assurance of a sound money policy. On January 21, he refused the appointment because, it was understood, he feared Roosevelt's inflationary tendencies. On January 31, Henry Wallace said: "The smart thing to do would be to go off the gold standard a little farther than England has done."

Conservative newspapers attacked this in varying degrees of disapproval. Bernard Baruch three weeks before the inauguration said: "I regard the condition of the country the most serious in its history. The mere talk of inflation retards business. If you start talking about that you would not have a nickel's worth of gold in the Reserve System the day after tomorrow." By February 19, gold withdrawals from banks increased from five to fifteen million dollars a day. In two weeks $114,000,000 of gold was taken from banks for export and another $150,000,000 was withdrawn to go into hiding. The infection of fear was everywhere. Factories were closing. Unemployment was rising rapidly. Bank closings multiplied daily.

At this point Mr. Roosevelt announced the selection of William Woodin to be his Secretary of the Treasury. Ogden Mills, Hoover's Secretary of the Treasury, got in touch with Woodin at once. And then began that succession of conferences in which Hoover tried to arrest the march toward catastrophe and Roosevelt sought to checkmate him.

The public knew little or nothing of what was going on behind the Treasury and White House doors. The whole story has not before been fully told. Hoover sent for Atlee Pomerene, a distinguished Democrat who was then head of the Reconstruction Finance Corporation. He begged Pomerene to urge Roosevelt to join him in some action. Pomerene felt he had no influence with the President-elect.

Next day Ogden Mills appealed to Woodin to issue a statement that would set at rest the fears of inflation and stop the rush of gold from the banks. Woodin refused. Mills reminded him that in a similar though less grave emergency, Grover Cleveland, eight days before he was inaugurated, had issued a reassuring statement.

It was now dawning on Hoover that he and Roosevelt were talking about two different things. Hoover was talking about saving the banks and the people's savings in them. Roosevelt was thinking of the political advantage in a complete banking disaster under Hoover. Actually, on February 25, Hoover received a message from James Rand that Rexford Tugwell had said that the banks would collapse in a couple of days and that is what they wanted.

On February 26, Mills was informed that Woodin would be in Washington next day but was instructed to take no part in dealing with the banking crisis, as the new administration intended "to take over at the lowest point possible," to see the tidal wave rush over the body of Hoover and the Republican party no matter what it cost the unfortunate millions whose bank accounts were melting away in the process.

It is now easy to see why up to this point—February 28—Hoover had received not even an acknowledgment of the letter he had written Roosevelt. He therefore wrote Roosevelt again, saying that Congress should be called at once and that he and his colleagues stood ready to cooperate in any way to save the situation until Roosevelt should himself be in power. It was then he received from Roosevelt his incredible explanation that he had answered Hoover and that his answer had inadvertently not been sent. That same day Ogden Mills reported to Hoover that he had just learned that the men around Roosevelt believed that the worse the situation got the more evident to the country would be the failure of the Republican party. "In other words" Mills said, "they do not wish to check the panic."

It was now March 2. Roosevelt arrived this day in Washington accompanied by his family and the Brain Trust. He took up quarters at the Mayflower Hotel. Hoover now believed that the banks which had not gone under were sufficiently strong to survive if the withdrawal of currency and the flight of gold could he stopped. He instructed Mills to draw a proclamation stopping both. Mills took the proclamation to Woodin in the morning. But Roosevelt refused to issue a statement approving it and without that Hoover correctly felt he could not act. A repudiation of his action by the new Democratic Congress would have produced endless chaos. Mills told Hoover that Woodin seemed very much broken up. Woodin was in no sense a radical, and his position at that moment must have been extremely trying. Mills told him American history afforded no such instance of a refusal to cooperate in the presence of a great national emergency. Twenty-one states had now closed their banks. Over two hundred million dollars of gold had been taken out of the banks.

The night of March 2, Hoover urged Roosevelt to approve his plan for stopping gold and currency withdrawals. Roosevelt summoned the Democratic congressional leaders. And while Washington hotels were filling with the gay Democratic hosts, the rival conferences in the Mayflower and the White House were in session.

After long hours of discussion the Congressional leaders agreed with Roosevelt to do nothing. There is a little disagreement on history here. Moley says they sent word to the White House that Hoover was free to act as he thought best. Hoover says the message was that Roosevelt refused to issue a statement approving his act.

The following day the situation grew worse. New York and Chicago banks were forced to pay out $110,000,000 in gold to foreigners and $20,000,000 to others, while another $20,000,000 was drained away from the interior banks. At this point the panic spread to the Federal Reserve Board officials. Bankers in New York and Chicago had been in practically continuous session. Fatigue had done its work. Panic spread amongst them. Reserve officials demanded a proclamation closing the banks, but Hoover refused unless Roosevelt agreed to back him up. Washington streets were now gay with the arrival of the marching clubs behind their bands. The decorations were going into place. At Farley's hotel the politicians were crowding with little thought of the banking crisis. They were after the jobs. Rumors of all sorts flew around. None knew, of course, what was going on among the sleepless men in the White House, the Treasury, the Reserve Board and the Mayflower—Hoover and his aides getting reports from all over the country as they sought for means to hold back the crisis; Roosevelt and his aides equally bent on promoting it by evading action while the black tide rolled over the nation's banks.

Then in the afternoon these two men—Hoover and Roosevelt— were to meet face to face. On the eve of an inauguration, the President-elect, according to tradition, makes a courtesy call on the President. In the afternoon of March 3, Mr. Roosevelt went to the White House. Hoover decided to use the opportunity to make one last appeal to Roosevelt. He renewed his pleas for approval of a proclamation stopping gold and currency withdrawals. Roosevelt replied that the late Thomas Walsh, his Attorney-General designate, had advised it could be done. But Walsh was dead and Homer Cummings, who would be Attorney-General, had not yet reported on it. Roosevelt thought Hoover could act legally, but he was not sure and this was as far as he could go. Roosevelt left Hoover at 5 P.M., saying: "I shall be waiting at my hotel, Mr. President, to learn what you decide."

That night Roosevelt's quarters in the Mayflower were filled with callers. At 11130 the telephone rang. It was Hoover. He told Roosevelt he was still willing, with his consent, to issue the proclamation against hoardings and withdrawals. He asked Roosevelt if he agreed with him there should be no closings. Roosevelt answered: "Senator Glass is here. He does not think it is necessary to close the banks— my own opinion is that the governors of the states can take care of closings wherever necessary. I prefer that you issue no proclamation of this nature."

There the conversation ended. Roosevelt then told Glass that the Federal Reserve Board had urged Hoover to close the banks, that Hoover had refused saying most of the banks still open were solvent, and that he told Hoover Senator Glass agreed with him. Then Glass asked Roosevelt what he was going to do. To Glass* amazement, he answered: "I am planning to close them, of course." Glass asked him what his authority was and he replied: "The Enemy Trading Act"—the very act Hoover had referred to and on which Roosevelt had said he had no advice from Cummings as to its validity. Glass protested such an act would be unconstitutional and told him so in heated terms. "Nevertheless," replied Roosevelt, "I'm going to issue a proclamation to close the banks."

After this Moley and Woodin went to the Treasury where they found Mills, Ballantine, Await and Eugene Meyer hanging over banking figures. They had been calling up governors urging them to declare holidays. They were agreed that when morning came all over the country there would be crowds of frightened depositors in front of their banks. And so it turned out. Thus the negotiations ended. By noon next day the responsibility would be out of Hoover's hands and in Roosevelt's. And he would have what he had been striving for—a total blackout of banking in the United States.

After delivering his inaugural address, Roosevelt issued a proclamation closing all banks. The next problem was to open them. It was assumed by everybody who watched these proceedings that Roosevelt had a plan of his own which he was keeping secret. The strangest feature of this whole comedy-drama is now to come. Having closed the banks, Roosevelt had not the faintest notion how they were to be reopened. He had not the slightest flan of any kind in his mind. He had not even given the matter a thought. This, I know, is difficult to believe. Yet it is true, as we shall now see.

By March 4, Roosevelt had decided on three things: (1) He would summon Congress in extra session. (2) He would declare an emergency under the Trading with the Enemy Act, having what Hoover did not have—a friendly Congress that would confirm his act. (3) He would summon the leading bankers to Washington. Congress was called to meet on the 9th. And Will Woodin assured Roosevelt he would have legislation dealing with the banking situation in time.

On Sunday, Moley and the new Attorney-General, Homer Cummings, worked on an emergency proclamation. This invoked the powers granted the President under the Trading with the Enemy Act passed in the First World War. It declared the four days from March 6 to March 9 a bank holiday, forbidding all banks to pay out either gold or currency but providing that the President might in that time permit any or all banks to carry on such transactions as they deemed proper.

In preparing this document, the draft already prepared by Mills and Ballantine for President Hoover was used. It was issued on Monday, March 6. It was a clearly unconstitutional act but justified by the emergency provided Congressional confirmation could be quickly received and for this confirmation Roosevelt asked, though he had refused to tell Hoover he would do so.

Congress was summoned to meet on Thursday, March 5, and meantime a group of bankers was called in to confer on a plan for reopening the closed banks. While Roosevelt, Moley and Cummings worked in the White House over the proclamation, the bankers met with Woodin and later Moley in the Treasury. There were Melvin Traylor of Chicago, G. W. Davison and George Harrison of New York, Eugene Meyer, Miller of Richmond, Berle, Glass, Congressman Steagall, Adolph Miller, and Ogden Mills and Arthur Ballantine, Secretary and Under-Secretary of the Treasury under Hoover who remained over to help.

The problem before them was how to reopen the banks. They argued all day Sunday. But no program was presented either by the bankers or the administration. Moley reported to Roosevelt at night that the talk had been "absolutely desultory." A sub-committee was named to work at night on plans. Both Moley, representing Roosevelt, and Ogden Mills, representing Hoover, agree that there was no plan, so that the statement I have made that Roosevelt when he closed the banks had no idea how to open them is confirmed.

On Monday, the 6th, various plans were brought forward. The problem could be stated simply. Many banks were absolutely sound. Many others—most others, in fact—were sound but they had been subjected to such excited runs that they were without ready currency to do business and might well be subjected to further runs. There were a number of banks which were unsound, did not have assets to cover 100 percent of their liabilities and could not be safely opened.

Next, as almost all banks had suffered heavy withdrawals of currency, what would they use for money when they reopened? The problem was to get the currency and gold hoarders to return their hoarded dollars. But in the meantime, how would the banks be provided with fresh supplies of currency? Various suggestions were offered. Some urged the issuance of scrip, as had been used in former bank emergencies. Others were for issuing currency against the live assets of banks. There were proposals to convert Federal Reserve banks into banks of deposit, to guarantee the deposits in banks and to nationalize the banks. Ogden Mills reported in great distress to Hoover that the administration had actually come forward with a proposal to print 20 billion dollars in currency and redeem the outstanding national debt. But Mills said that no two men at the conference agreed. Moley says that frayed tempers produced angry exchanges between the New Dealers themselves and that Berle hotly declared that no man at the conference made any sense but Ogden Mills.

Meantime Moley and Woodin met alone and agreed on certain fundamental ideas. They decided that the action must be swift and staccato for its dramatic effect; that the plan, whatever it might be, must be a conservative one, stressing conventional banking methods and that all left-wing Presidential advisers must be blacked out during the crisis; and finally that the President must make almost at the same time a tremendous gesture in the direction of economy. They felt that Hoover had been looked upon as an expensive President and that people must feel they now had a President who was neither radical nor extravagant.

The following day, March 7, the group agreed on a plan. Ogden Mills said he didn't particularly like it but that it was so much better than the things they escaped from that he would go along. Actually in drafting the bill the group had to depend on Hoover's Secretary and Under-Secretary of the Treasury "whose superb technical assistance," says Moley, made the task possible.

The chief point of disagreement had been on the method of creating fresh supplies of currency. On the night of the 6th, the consensus of opinion had been they must use scrip, which would have served well enough. However, the plan finally adopted came from William Woodin—namely to get authority from Congress to issue fresh supplies of Federal Reserve notes instead of scrip. They would look like money. They would actually be money. They would create less suspicion and resistance. The manner in which he came by this idea must not be overlooked.

Woodin told Moley he sat in his room, played on his guitar a little while, then read a little while, then slept a little while, then played on his guitar a little while again, read some more and slept some more and then thought about the scrip thing and then, by gum! he hit on the idea of Federal Reserve notes and wondered why he hadn't thought of it before. Moley and Woodin rushed over to Roosevelt with the plan, told him about it in twenty minutes; Roosevelt was enthusiastic and so it was adopted.

Actually it was not so simple as that. Ogden Mills, who was one of the two or three men at the conference who knew what it was all about, said that as the discussions proceeded the big bankers came more and more into the ascendency and that in the end G. W. Davison, George Harrison, and Leffingwell and Gilbert of Morgan and Company, were chiefly responsible and that it was a bankers' plan.

The new Congress met at noon Thursday. Roosevelt's message was read and the bill introduced. This was the bill that was represented by a newspaper, as there had yet been no time to make copies. No one but the Congressional leaders had seen it and it was passed in an hour. A few hours later the Senate passed it. Briefly, it validated the things Roosevelt had done under the Trading with the Enemy Act, amended that act to give the President new powers over foreign exchange and banking institutions and the foreign and domestic movements of gold and silver, provided for issuance of Federal Reserve notes to banks up to 100 percent of their holdings of bonds and 90 percent of their holdings of rediscountable assets, provided for the progressive reopening of the banks by the Treasury and gave power to the Reconstruction Finance Corporation to subscribe to preferred stock of banking associations and make loans secured by preferred stocks.

The next day Roosevelt sent his now famous message to Congress deploring the disastrous extravagance of the Hoover administration, uttering many of those sentences about balancing the budget, the fatalities of government spending, etc., which were to be quoted against him so many times, and calling for powers to reduce salaries and government expenses. As one reads that message now it is difficult to believe that it could ever have been uttered by a man who before he ended his regime would spend not merely more money than President Hoover, but more than all the other 31 Presidents put together—three times more, in fact, than all the Presidents from George Washington to Herbert Hoover. This speech was part of the plan Moley and Woodin had devised to sell the banking plan in a single package with the great economy program.

Then on Sunday, March 12, Roosevelt delivered his first fireside chat. He announced he would begin reopening the banks the next day and he made a simple explanation of the steps he had taken. It was a masterpiece of clear, simple, effective exposition. Like the inaugural address, it produced an electric effect upon the people. One feature about that address remains unknown to most people to this day and that is that it was written, not by Roosevelt or any member of his Brain Trust, but by Arthur Ballantine, Under-Secretary of the Treasury under Hoover, who with Ogden Mills, his chief, had remained at the Treasury to help pilot the country through its famous banking crisis.

To the great audience that listened to the fireside chat, the hero of the drama—the man whose genius had led the country safely through the crisis of the banks—was not any of the men who had wrestled with the problem, but the man who went on the radio and told of the plan he did not construct, in a speech he did not write. Thus Fate plays at her age-old game of creating heroes.

The whole episode reveals a side of Mr. Roosevelt's character not fully understood until later. This was the free and easy manner in which he could confront problems about which he knew very little.

It would be very unfair to criticize Mr. Roosevelt because he knew so little about banking practice and literally nothing about banking economics. After all, there are many able men of whom this can be said. His experience had not been in this field and it was a subject to which Be had given very little attention. This explains his almost total lack of serious interest in the banking situation as it unfolded in New York State while he was governor. But while in fairness we must recognize that his ignorance of banking problems was not a point to be held against him, it is equally clear that he cannot be held up as a great master-mind in finance who took the banking problem into the convolutions of his massive brain and ground out a solution in a few days. His one contribution to the banking negotiations was a purely political one—the decision that it would be better for him politically to let the whole banking situation go to smash than to permit Hoover to check the crisis before he, Roosevelt, could get into the White House. But that was a costly thing for the nation.

When Roosevelt took office there were 19,000 banks in the country, mostly closed, all closed when he issued his decree. By March 16, about 9,883 were reopened fully and 2,678 on a restricted basis. But over 6,000 remained closed, many of which might have been saved in whole or in part if Roosevelt had been willing to open the way for the government to act after the crisis became acute in February.

That vast mercurial animal known as "The People" is indeed unpredictable. But this much we know of them. Once their imagination is captured by a leader he leads a charmed life as long as the spell lasts. In this case Roosevelt was hailed as a magician as he put into effect a plan worked out for him by bankers and announced it over the air in a speech written for him by one of Hoovers own Treasury officials.

In obedience to the program worked out by Woodin and Moley that the banking solution must be followed by a bold assertion of the policy of economy, his first message to Congress called for the passage of the economy act cutting salaries of government employees 25 percent. Thus at a stroke he put at rest the apprehensions of conservative critics who suspected he might be in the hands of his radical brain-trusters.