by Robert Sobel
Ever since Coolidge made the announcement, historians and journalists have debated the meaning of these words. At the time many believed Coolidge wanted to be drafted for another term. Why did he use the phrase, “I do not choose”? What if the people chose to have him in office for another four years? But others noted that in Vermont, “I do not chose” signifies refusal—the speaker has decided not to do something. So it was not so equivocal as it may have at first seemed.
August 2 marked the fourth anniversary of Coolidge’s accession to the presidency, but to most that was not a particularly notable date. Coolidge was scheduled to have a press conference that morning. He remarked to his wife after breakfast, “I have been president four years today.” Just before 9:00 AM, he set out with his host, Senator Arthur Capper, to face the reporters. Coolidge indicated to Sanders that he wanted to make the announcement then, but Sanders encouraged him to wait until noon: “I think it would be well if you made it at twelve o’clock instead of nine o’clock. There is a three-hour difference in time between Rapid City and New York, and if the announcement is made at twelve o’clock, it will come after three there, and the stock market will be closed. News of this kind is sure to affect the stock market. It is always best to have the news break at a time when the effect can be digested while the stock market is closed.” Coolidge agreed.
Coolidge started off the press conference by saying, “If the conference will return at 12:00 I may have a further statement to make.” One of the reporters seems to have asked what Coolidge considered the most important contributions he had made during his White House years, providing the president with a chance to sum up the accomplishments of his administration. It was another of the rare times Coolidge appeared to take credit for the economic prosperity—perhaps because he considered that a form of political valedictory was expected on such occasions:It is rather difficult for me to pick out one thing above another to designate what is called here the chief accomplishments of the four years of my administration. The country has been at peace during that time. It hasn’t had any marked commercial or financial depression. Some parts of it naturally have been better off than other parts, some people better off than other people, but on the whole it has been a time of a fair degree of prosperity. Wages have been slightly increasing. There has been no time that there has been any marked lack of employment. There have been certain industries like the textile industry and the boot and shoe industry in certain localities like New England, which have not been running on full time. But generally speaking, there has been employment for everyone who wished employment. There has been a very marked time of peace in the industrial world. There have been some strikes. When I first came into office there was a strike in the hard coal fields and another strike I think in the same line a couple or three years later, but those differences have been adjusted without any great conflict or any great suffering on the part of the industries or the public, so that there has been rather a time of marked peace in industry as between employer and employees. There has been considerable legislation which you know about, and which I do not need to recount. There have been great accomplishments in the finances of the national government, a large reduction in the national debt, considerable reduction in taxes.
At 11:00 AM Coolidge summoned Sanders, picked up a pencil, and wrote the message again. He handed it to the secretary and said, “Take this, and about ten minutes before twelve call in Mr. Geisser [his stenographer], have him run off a number of these lines on legal-sized paper, five or six on a sheet, with carbons enough to supply the newspapermen, and some to spare. Then bring the sheets to me uncut.” When it was done, Coolidge cut the papers into slips. He said, “I am going to hand these out myself; I am going to give them to the newspapermen, without comment, from this side of the desk. I want you to stand at the door and not permit anyone to leave until each of them has a slip, so that they may have an even chance.”
The reporters received the slips from a clearly amused president, and as expected they rushed from the press conference to the telephones. Afterward Senator Capper saw Mrs. Coolidge and remarked, “That was quite a surprise the president gave us this morning.” Mrs. Coolidge, who had suspected something like this, said, “Isn’t that just like the man! He never gave me the slightest intimation of his intention. I had no idea!”
The effect on the securities markets was as Sanders expected. The Dow Industrials closed at 185.55 on August 2, on a trading volume of 2.6 million shares. The following day’s trading ended at 183.56, with 2.7 million shares traded, making it the busiest session of the year to that date. Since there had been a rally late in the session, the interday index had been lower. The market continued to fall, hitting 177.13, and then went on to new highs.
The reason for the rally, according to some analysts, was that the public realized that prosperity did not rest on the shoulders of one man. Others, however, thought investors had concluded that Coolidge would still accept a draft in 1928. Then, too, he stated he would not run specifically in 1928. Did this mean he would be willing to return to the political wars in 1932? Upon such slender reeds Coolidge supporters hung their hopes.
Why did Coolidge decide not to run in 1928? In his Autobiography he sent mixed signals: “But irrespective of the third-term policy, the presidential office is of such a nature that it is difficult to conceive how one man can successfully serve the country for a term of more than eight years.” He then added, “While I am in favor of continuing the long-established custom of the country in relation to a third term for a president, yet I do not think that the practice applies to one who has succeeded to part of the term as vice president. Others might argue that it does, but I doubt if the country would so consider it.”
Some two-term presidents had hungered for a third term, among them Wilson, and, if he is indeed considered a two-term president, Theodore Roosevelt as well. Coolidge had a different temperament. For one thing, while self-assured, he was more modest than most presidents. And for another, he recognized the dangers of self-deception the office could engender:It is difficult for men in high office to avoid the malady of self-delusion. They are always surrounded by worshipers. They are constantly, and for the most part sincerely, assured of their greatness. They live in an artificial atmosphere of adulation and exaltation which sooner or later impairs their judgment. They are in grave danger of becoming careless and arrogant.
I had never wished to run in 1928 and had determined to make a public announcement at a sufficiently early date so that the party would have ample time to choose someone else. An appropriate occasion for that announcement seemed to be the fourth anniversary of my taking office. The reasons I can give may not appear very convincing, but I am confident my decision was correct.
A typical Coolidge statement: apparently straightforward, but it doesn’t really answer the question. Historians and journalists, then and now, have put forth other explanations. In 1938 General Sherwood Cheney, a White House military aide, said that his physician had warned Coolidge that he had a heart condition, and this, perhaps, prompted his decision. But his personal physician, Dr. Edward Brown, writing in 1935, denied it. Coolidge suffered from minor digestive problems, he said, adding, “Indigestion is occasionally mistaken for heart trouble, but I do not believe this was true in his case. About two months before his death I had examined him. There were no heart symptoms at that time.” Edmund Starling offered a more plausible answer:The novelty of being president had worn off; the glory of it had gone with [young] Calvin’s death; there was no great national crisis which demanded a continuation of his leadership. From now on the office was more a burden than anything else. The steady grind of work was wearing him down, and the duties of the First Lady, plus Washington’s weather, were weakening Mrs. Coolidge’s health.
Mrs. Coolidge offered another explanation after her husband’s death that later on became the subject of much discussion.
In a conversation with a former member of his cabinet a short time before he left Wa
shington, that gentleman expressed his conviction that the president’s decision not to run again had been a wise one; that, not to mention other reasons, he felt the country would undergo the most serious economic and financial convulsion which had occurred since 1875; that the president would carry a heavy burden and one which no man should be asked to bear who had passed through two successful terms.
To this, the president replied in terse colloquial style, “It is a pretty good idea to get out when they still want you.”
Writing in 1935, Mrs. Coolidge offered this insight into Coolidge’s thoughts at the time. In another discussion with a cabinet member, he said:I know how to save money. All my training has been in that direction. The country is in a sound financial position. Perhaps the time has come when we ought to spend money. I do not feel that I am qualified to do it.
A friend recalled her replying to the question of why he was leaving office, “Poppa says there’s a depression coming.”
There is scant evidence for this. His public statements of this time were invariably optimistic. As for private statements, these were always aired years after the fact, and of doubtful provenance. For example, according to White House Secretary Edward Clark, writing in 1935, Coolidge had been worried for a long time about the possibility of economic troubles. In 1927, after naming Dwight Morrow his special envoy to Mexico—shortly before announcing his decision not to run for another term—Clark recalled him praising Morrow as the kind of person who should be in power in the event of a financial crisis. Clark asked, “Do you expect some sort of financial crisis?” “I do not attempt to predict anything,” Coolidge replied, “but people do not seem to see that while we in this country are increasing production enormously, other countries are closing their doors more and more against our products. Our foreign outlets are constantly diminishing.” Coolidge named the USSR, an independent India, and China as future powers and potential danger spots: “Competition is increasing tremendously. We shall have to meet it in every field.”
Finally, what remained to be done? On the domestic scene he had his tax cuts and had blocked McNary–Haugen. The Kellogg–Briand Pact was generally applauded. Nicaragua and Mexico were problems, but hardly major ones. Europe was at peace, and the national economies seemed healthy enough. On a more personal level, what did he have to prove and whom did he have to impress? His father had died, and Coolidge had made him proud of his accomplishments. Those fellow students at Black River Academy and Amherst now knew that the person they thought would not amount to much had done pretty well. The novelty of the presidency might have interested him initially, but that was gone, too. In other words, he saw no reason to remain, and so he intended to leave office.
Hoover went to the White House in September 1927 to speak with Coolidge about the nomination. On this occasion and two others he said he would support a Coolidge candidacy, but, were the president not to run, he wanted to enter the lists. Coolidge replied in his usual cryptic fashion, but in the end Hoover believed the president would not be a candidate. Still, Hoover made one last try the following May 1928. At the time Hoover had pledges from four hundred delegates, close to half the total. He told Coolidge that, though by law most had to vote for him on the first ballot, he still thought the president could win the nomination on that ballot, and that he would be pleased to continue serving under Coolidge. Hoover later recalled that Coolidge was skeptical about the figure, but said, “If you have four hundred delegates, you better keep them.” Hoover added, “I could get no more out of him.”
Hoover, Senator Charles Curtis of Kansas, and Senator F.B. Willis of Ohio announced their candidacies. Senators Norris and James Watson of Indiana were interested. And there was some support for Senator Guy Goff of West Virginia. Lowden, too, remained a possibility, and his old friend, Vice President Dawes, supported him, but Lowden would be sixty-nine years old by the next inauguration day.
Late that year several Washington insiders opined that Coolidge might consider a Hoover candidacy as a run by a protégé, but might change his mind about his own candidacy if it appeared Lowden, Dawes, or some other hopeful who supported McNary–Haugen had a chance to be nominated. In any case, as 1927 drew to a close, Coolidge hadn’t budged on his refusal to make the race. Even so, in January 1928 Senator Robert La Follette, Jr., who had taken his father’s place, introduced a resolution declaring that failure to observe the two-term tradition would constitute a precedent “unwise, unpatriotic, and fraught with peril to our free institutions.” It was a transparent effort to block a draft Coolidge movement, but at the same time so bland as to be meaningless. Nonetheless it passed by a vote of 56 to 26; the senatorial Republicans were still not Coolidge devotees.
As always, the economic scene was mixed. There was a slowdown in 1927; corporate earnings fell to $5.5 billion from the previous year’s $6.9 billion, but dividends rose, a sign that businesses were confident and that the corporations were not in need of funds for expansion of physical plant.
Today, business news is featured in newspapers and on television and radio, but this was not the case in the 1920s. Few outside the professional circles understood the impact of the growing financial relationship of America to Europe, Wall Street to Lombard Street, and their unanticipated consequences. One development, in retrospect, might have been the beginning of a problem that brought on the economic disaster of 1929. At the time, however, it was perceived only as an attempt to resurrect the prewar glory of the British Empire.
In 1925 the UK chancellor of the exchequer, Winston Churchill, resumed the convertibility of sterling at its prewar rate of $4.86 a pound. This made the pound far too dear, raised the costs of the UK’s exports, lowered those for imports, and resulted in an outflow of gold, much of it to the United States. Individuals in other countries were sending their gold to America for the best reasons: their economies appeared sluggish, while the American economy was strong. This money flowed out of their markets and economies, and much of it was used to purchase American government securities, which offered attractive yields. But if this continued for long, the European recoveries might abort, bringing down the triangular system of the Dawes Plan, in which American loans to Germany helped pay reparations to the UK and France, who then repaid their loans to the United States.
If this situation had been allowed to persist, it would have surely created serious international problems, as it may have forced European nations from the gold standard. Benjamin Strong and Secretary Mellon both saw the situation as dire. Strong, who headed the New York Federal Reserve Bank, had inherited some of J.P. Morgan’s aura. Not only was Strong trusted in American banking circles, but he had an international reputation, as well, and worked smoothly with his European counterparts.
In 1927 the two Americans conferred with their counterparts at the Bank of England, the Reichsbank, and the Bank of France. The Europeans urged the United States to lower its interest rates in order to make American securities less attractive to European investors. This would also encourage borrowing in the United States, and so stimulate the economy there. They believed a booming American economy was the engine that drove the European economies. Lower interest rates would also encourage borrowing by speculators who would then use the money to purchase American stocks, but at the time this was not considered too important a matter.
This situation prompted the New York Federal Reserve Bank to reduce the rediscount rate from 4 percent to 3½ percent in August 1927. However, this was not unexpected; the Fed had kept the rate between 4 percent and 3½ percent since 1922, and investors were learning to expect stimulation in declining markets, and dampening when recovery appeared. In addition, in the second half of the year the Fed purchased close to half a billion dollars in open market operations, thus increasing the money supply. So all looked well. The Fed, originated in part to perform the stabilizing effects once provided by J.P. Morgan, seemed to be the friend of business and the investors.
Additional support came from the brokers’ loan money market
. Nowadays, Wall Street looks to such money indicators as the discount and prime rates, money supply, and open market operations, but not so in the late 1920s. The key rate then was the brokers’ loan rate. In this period the purchaser typically would put up only a portion of the funds required for the purchase of stocks and borrow the rest at competitive bank rates, a practice known as “buying on margin.” Solid customers could borrow 90 percent of the price, putting up the purchased stock as collateral, while others might borrow 75 percent.
In the 1920s one of the key distinctions between investors and speculators was that the former paid cash and held their securities, while the latter bought on margin and sold when they had profits or were “called out”—that is, when the stocks fell to the point at which no margin remained. If the stock declined to that point, the customer might be asked to provide “more margin,” which might be borrowed from the broker with additional collateral. The increase in the money supply, combined with the growing financing by corporations, meant that more funds were available for brokers’ loans. The low rates and ease of obtaining money fueled the stock market and led it into new high ground. Speculators continued to borrow when rates increased, because by then they were convinced there were fortunes to be had.
Given his earlier knowledge of the securities markets, Coolidge might have concluded there were dangers ahead, but then, anyone who knows investments well realizes that this is ever the case. Nonetheless, he did what he could to maintain confidence in business, and by extension, indicate the situation was not hazardous. In early 1927 Coolidge predicted—accurately, as it turned out—that the year would be “one of continued healthy business activity and prosperity.” When asked to comment on the Fed’s rate cut, Coolidge, wary as always, noted that the central bank was an independent agency: “A great many times a question seems to be very complicated and almost insoluble.” Coolidge indicated that he would not interfere with the Fed on the matter of policy. Strong was universally trusted; Coolidge certainly could not have been blamed for letting him take charge.