Jean Edward Smith

by FDR

  The CCC did more than reclaim natural resources. It literally gave 3 million young men a new lease on life. The money they sent home supported many times their numbers, and the funds spent on constructing and running the camps were a constant source of revenue for the communities in which they were located. Ultimately almost 2,500 camps were established, most west of the Mississippi. The Army provided the organizing talent, and its contribution was enthusiastic and effective.* Many officers associated with the CCC (such as Colonel George C. Marshall, who organized nineteen camps in Georgia and Florida) developed strong ties to the Roosevelt administration and, while not overtly political (most officers in the regular Army never voted), came to understand and sympathize with the aims of the New Deal.55

  Roosevelt’s two other pump-priming initiatives, emergency relief and public works, sailed through Congress as well. On March 30 the Senate approved (55–17) FDR’s request for $500 million for grants-in-aid to assist the states in their relief efforts. Three weeks later the House concurred, 326–42.56 The act established a Federal Emergency Relief Agency to administer the grants, and Roosevelt immediately named Harry Hopkins, who had led relief efforts in New York, to head it. Speed was important, and Hopkins knew it. Before nightfall on his first day in office he had cabled funds to the governors of Colorado, Illinois, Iowa, Michigan, Mississippi, Ohio, and Texas.57 At the end of its first year, FERA had assisted 17 million people and disbursed $1.5 billion.† All of this with a staff of 121 persons and a monthly payroll of $22,000.58 As Roosevelt knew from working with Hopkins in New York, money would flow swiftly to where it was needed, and overhead would be kept to a minimum.

  Passing the public works bill required more time. Assigned to Miss Perkins and the Department of Labor, the original draft included a wish list of projects that totaled $5 billion—roughly $400 million more than the entire federal budget in 1932–33.59 Roosevelt reviewed the proposal with his principal cabinet officers on Saturday afternoon, April 29, and pared it to $1 billion. According to Charles Wyzanski, the Labor Department solicitor who had drafted the bill, FDR took the New York projects one by one “and showed a remarkable knowledge of every single item. It was a masterly demonstration, and he convinced everyone how unsound most of the projects were.”60 By the time the bill was presented to Congress in May, the cost of the projects included had risen to $3.3 billion, a figure the Bureau of the Budget thought was sustainable. It was passed in the early morning hours of June 16, 1933, the final piece of legislation enacted during the hundred days.61*

  At the end of March, as the relief measures took shape, Roosevelt shifted the administration’s focus to Wall Street. Reflecting public demand for reform of the stock market, the Democratic platform had pledged legislative action to require full disclosure of all pertinent financial information whenever stocks and bonds were issued.62 On March 29 FDR sent the securities legislation forward. “This proposal,” he said, “adds to the ancient rule of caveat emptor, the further doctrine ‘let the seller also beware.’ ” Roosevelt told Congress that the bill put the burden of truth on the seller. “It should give impetus to honest dealing in securities and thereby bring back public confidence.”63 As with the Agricultural Adjustment Act and the CCC, the proposal for federal regulation of securities broke new ground. The bill required that complete information on new stock issues be filed with the Federal Trade Commission, which was empowered to stop the sale if the data were found defective. Company officials were made personally responsible, subject to both criminal and civil penalties. The legislation was put into final form for FDR by Felix Frankfurter and shepherded through Congress by Sam Rayburn, chairman of the Interstate Commerce Committee. Roosevelt signed it into law May 27, 1933. “If the country is to flourish,” said FDR, “capital must be invested in enterprise. But those who seek to draw upon other people’s money must be wholly candid regarding the facts on which the investor’s judgment is asked.”64

  Two weeks after sending the securities bill to Congress, FDR shifted gears by asking for the creation of a Tennessee Valley Authority to develop the economic potential of one of the nation’s great river basins—and one of the most poverty-stricken regions of the country. The Tennessee River and its tributaries, spilling into seven southern states,* drained an area of 640,000 square miles. Flooded might be more precise. The once-fertile bottomland was sadly depleted; the forests were cut over; the thin soil of the uplands was eroded, crisscrossed with gullies, barren of serious vegetation, and unable to contain the annual runoff from devastating spring rains. Income in the region was less than half the national average. Only two out of every hundred farms had electricity. Infant mortality was four times greater than elsewhere, pellagra and tuberculosis were endemic, medical care was sparse, and sanitation was primitive. There was no industry to speak of, little commercial life, and few prospects other than further descent into squalor.65

  It was a scene Roosevelt knew well from his exposure to similar rural poverty at Warm Springs. But the Tennessee valley had resources lacking in southern Georgia: specifically, the giant hydroelectric dam on the Tennessee at Muscle Shoals, Alabama, constructed by the federal government during World War I to produce power for the manufacture of munitions. Since the war, the great productive capacity had remained idle, water falling uselessly through its spillways. Twice progressives in Congress, led by George Norris of Nebraska, had passed legislation authorizing the government to operate the dam to produce electric power for the region, but both Coolidge (in 1928) and Hoover (in 1931) had vetoed the bills. For the government to produce electricity, said Hoover, would be “the negation of the ideals upon which our civilization has been based.”66

  The dam at Muscle Shoals was the focus of FDR’s proposal. In January 1933 Roosevelt had taken time from Warm Springs to visit Muscle Shoals with his daughter, Anna, accompanied by Norris and an imposing delegation of power experts and congressional leaders.67 “It is at least twice as big as I ever had any conception of it being,” he told Norris. Later that evening, speaking impromptu to a large crowd from the portico of the state capitol in Montgomery, Roosevelt said he was determined to do two things: “The first is to put Muscle Shoals to work. The second is to make of Muscle Shoals a part of an even greater development that will take in all of that magnificent Tennessee River from the mountains of Virginia down to the Ohio.… We have an opportunity of setting an example of planning, tying in industry and agriculture and forestry and flood prevention, tying them all into a unified whole over a distance of a thousand miles.”68

  On April 10 FDR asked Congress for authorizing legislation. The brief message, which he wrote in his own hand, forcefully restated Roosevelt’s commitment to use the power of government for the general welfare. The Tennessee Valley Authority, he said, involves “the future lives and welfare of millions. It touches and gives life to all forms of human concerns.”69

  Norris called Roosevelt’s message “the most wonderful and far-reaching humanitarian document that has ever come from the White House.” In the House of Representatives, Mississippi’s John Rankin said, “The power that can be generated at Muscle Shoals now exceeds the physical strength of all the slaves freed by the Civil War.”70 Norris introduced the bill in the Senate, where it passed 63–20. Rankin led the administration forces in the House, where opposition was stiffer. Joseph Martin of Massachusetts spearheaded the Republican attack, asserting that the TVA was “patterned closely after one of the soviet dreams”—a theme embellished by New Jersey’s Charles Eaton, who charged that the scheme “is simply an attempt to graft onto our American system the Russian idea.” Even The New York Times expressed alarm: “Enactment of any such bill at this time would mark the ‘low’ of Congressional folly.”71 But the Democrats were riding high, the leadership was in firm control, and the House voted its approval, 306–91. Roosevelt signed the Tennessee Valley Authority Act the afternoon of May 18, 1933.72 At a stroke FDR had solidified his support among the two most disparate elements of his coalition: traditio
nal southern Democrats and Republican progressives. He had also taken a massive step toward modernizing the South.73*

  From Wall Street and the TVA Roosevelt turned his attention to the plight of home owners beset by mortgages and taxes they could not pay. In 1932, 273,000 home mortgages had been foreclosed—almost four times the normal rate—and in early 1933 the rate had doubled yet again. Increased foreclosures not only caused enormous personal hardship but further endangered the assets of hard-pressed banks, savings and loan associations, and insurance companies. House prices plummeted, and the entire real estate market was threatened with collapse. New-home construction shrank to 10 percent of its 1929 level. Even home owners and prospective purchasers who had money found it difficult to negotiate new mortgages or renew old ones.74 The impact on the nation’s morale was devastating. The decline in home values, combined with the threat of foreclosure, struck at the roots of the American dream.

  On April 13 FDR asked Congress for legislation to protect individual home owners from foreclosure. Home ownership was a guarantee of social and economic stability, said Roosevelt, and to protect home owners from “inequitable enforced liquidation at a time of general distress is a proper concern of the Government.”75 The resulting legislation, which marched swiftly through Congress, was patterned on the farm mortgage bill. It established a Home Owners’ Loan Corporation to refinance the mortgages of distressed home owners, provide money for taxes and repairs, and set repayment schedules over a long term at a relatively low (5 percent) interest rate. To ensure that the act benefited only small home owners, the ceiling for HOLC loans was $20,000.76

  The act was not only a lifesaver for millions of Americans, it initiated a housing boom that has continued to this day. New loan criteria, longer amortization periods, and lower interest rates made home ownership readily accessible for the first time in American history. The HOLC assumed one sixth of all urban mortgages in the United States. When its loan authority expired in 1936, it had made more than one million loans totaling $3.1 billion.77 Like the TVA, which brought southern Democrats and northern progressives together, nothing solidified FDR’s support among the American middle class as the HOLC.78

  After six weeks in office, Roosevelt could relish his accomplishments. The banking crisis had been ameliorated, the government’s budget pruned, and the heavy hand of mandatory temperance overturned. The farm crisis, if not under control, was being dealt with; young men were being mobilized in the cause of conservation; and relief was flowing to embattled home owners and the unemployed. A significant public works program was in the making, the administration had undertaken to tame Wall Street, and a breathtaking experiment in government planning—the Tennessee Valley Authority—had been approved. FDR was at the top of his game. He was improvising from crisis to crisis and savoring every minute. The legislation passed and the initiatives undertaken shaped the New Deal and decisively altered the nation’s course. Yet each measure represented Roosevelt’s nimble response to circumstance rather than any grand design. “To look upon these policies as the result of a unified plan,” wrote Raymond Moley afterward, is “to believe that the accumulation of stuffed snakes, baseball pictures, school flags, old tennis shoes, carpenter’s tools, geometry books, and chemistry sets in a boy’s bedroom could have been put there by an interior decorator.”79

  Nothing better illustrates FDR’s response to circumstance than his decision on April 18 to take the United States off the gold standard. At issue was whether to inflate the nation’s currency and hope that commodity prices would rise in the aftermath. Advice was divided. Traditional economists and the Bureau of the Budget believed that prosperity would return only when government expenditures were brought under control. Adherence to the gold standard ensured a sound dollar and generous protection for creditors and bondholders. Most of Wall Street agreed. Bernard Baruch, an oracle of orthodoxy, ridiculed the idea that to inflate the currency might help restore prices. “People who talk about gradually inflating might as well talk about firing a gun off gradually.… Money cannot go back to work in an atmosphere filled with a threat to destroy its value.”80

  Those favoring inflation included most members of Congress, particularly those from the farm states, brain trusters like Moley and Tugwell, and, surprisingly, the House of Morgan. Rising above conventional wisdom, J. P. Morgan and his partners, Thomas Lamont and Russell Leffingwell, worried about the unrest that continued to sweep the farm belt and believed a rise in commodity prices was essential to ensure the nation’s political stability.* The fastest way to achieve that was to go off the gold standard and let the market set the value of the dollar. A cheaper dollar would make American farm products more attractive to foreign buyers, and the increased demand would raise domestic prices. Morgan and his partners were not idle spectators. They made whatever overtures they could to the administration through Treasury secretary Woodin and enlisted Walter Lippmann, the nation’s premier political analyst, in the cause. “Walter,” said Leffingwell over lunch in New York, “you’ve got to explain to the people why we can no longer afford to chain ourselves to the gold standard. Then maybe Roosevelt, who I am sure agrees, will be able to act.”81

  Roosevelt may or may not have agreed. On monetary matters FDR was agnostic. He was amused at the doctrinal intensity of the gold bugs but wary of unleashing a runaway inflation such as the one that had helped destroy the Weimar Republic in Germany. Eventually he came to the conclusion that if the nation was to recover, inflation was inevitable. The gold standard would have to go. Lippmann’s article may have helped. On April 18 Lippmann wrote that the United States faced a choice between keeping up prices at home and defending the gold content of the dollar abroad. “No nation has been able to do both.” If Washington stayed with the gold standard, it would be unable to fund the ambitious relief and public works programs the New Deal had initiated. In Lippmann’s view, there was no question what the president should do.82

  That evening Roosevelt summoned his financial advisers to the White House.83 Normally such conclaves began with considerable jocularity and small talk. This time Roosevelt got right to the point. “Congratulate me,” he said. “We are off the gold standard.”84 FDR had made the decision. He wasn’t asking advice. Woodin and Moley had been informed beforehand, but for everyone else the news was a shock. “All hell broke loose,” Moley remembered.85 For two hours the discussion raged, much to Roosevelt’s amusement. James Warburg, then an adviser to the president, called the plan “harebrained and irresponsible.”86 Budget Director Lewis Douglas wailed, “This is the end of Western civilization.”87 FDR was unmoved. The following day he announced the decision to the press. He had come down with a cold overnight and received reporters in his quarters upstairs in the White House. “I have gotten to the point where even a cigarette tastes bad,” he said. After sparring a few rounds with correspondents, FDR broke the news: the United States was off gold. “The whole problem before us is to raise commodity prices. Let the dollar take care of itself. If you want to know the reason why, I think the best exposition of it was by Walter Lippmann yesterday morning.”88 Congress quickly endorsed FDR’s action and enacted legislation abrogating the clauses written into public and private contracts stipulating payment in gold—the so-called gold clauses.* The day after Roosevelt’s announcement, stock prices soared on record volume. In a rare public statement, J. P. Morgan called the retreat from the gold standard “the best possible course under existing circumstances.” Russell Leffingwell wrote FDR, “Your action in going off gold saved the country from complete collapse. It was vitally necessary and the most important of all the helpful things you have done.”89

  On May 9, as the legislative calendar moved forward, the first contingent of Bonus Marchers descended on Washington for another attempt to secure early payment of their insurance policies. They also wanted to protest FDR’s Economy Act, which had reduced veterans’ benefits substantially. By the end of the month more than three thousand were on hand. Alerted in advance to the
veterans’ arrival, FDR had quarters prepared for them at Fort Hunt, an old Army post across the Potomac near where the Pentagon stands today. Tents, latrines, showers, mess halls, and a large convention tent were ready and waiting when the veterans arrived. The Army provided a never-ending supply of coffee and three hot meals a day; the Medical Corps treated their ills; service dentists fixed their teeth; and the Navy Band played daily concerts. Louis Howe took personal charge of the arrangements. He met regularly with the leaders, arranged conferences for them with senior congressmen and senators, and took them to the White House to meet FDR. Roosevelt was dead set against yielding to the veterans’ demands, but he was determined to give them a full hearing. The breaking point came in late May when Howe took Eleanor to Fort Hunt, unannounced and unaccompanied by the Secret Service or anyone else.

  Although Louis often asked me to take him for a drive in the afternoon, I was rather surprised one day when he insisted that I drive him out to the veterans’ camp just off Potomac Drive. It did not take long to get there. When we arrived he announced he was going to sit in the car but that I was to walk around among the veterans and see just how things were. Very hesitatingly I got out and walked over to where I saw a line-up of men waiting for food. They looked at me curiously and one of them asked my name and what I wanted. When I said I just wanted to see how they were getting on, they asked me to join them.90