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the Great Depression -- the New Deal -- First 100 Days March 4-July 16, 1933
The Great Depression: The New Deal--First Hundred Days (March 4-July 16, 1933)
i>Figure 1.--The Depression beginning with Wall Stree Crash (September 1929) crippled the lives of millions of Americans like these little girls. By the time that President Roosevelt took office (March 1933) it had been raging for more than 3 years. President Roosevelt acted very swiftly. And the first step was not a massive welfare program, but actions to 1) save the banks and 2) take the United States off the gold standard. Economists today debate the impact of the New Deal, but the one simple fact is undeniable. The New Deal wih all its spending and welfare prograns did not end the Depression. These two actions by the President, however, saved the American economy and prevented the Depression from becoming even worse. Photographer: Marion Post Wolcott.
The new president undertook immediate actions to address the most pressing priblems and rally the nation. The idea was to restore confidence and jump-start a faltering economy with emergency action. To halt depositor panics, he closed the banks temporarily. Then he worked with a special session of Congress during the first "100 days" to pass recovery legislation. It was the most productive 100 days in Congressionl history. The Congress was willing to follow the President's lead as few times in history. The result was the alphabet agencies, some of which continue to play major roles in American life. The Agricultural Adjustment Administration (AAA) was created to
support farm prices. The (Civilian Conservation Corps (CCC) employed young men. The Federal Emergency Relief Administration (FERA) was created to deal with the the emergency needs of those most severely affected by the Repression. The Home Owners Loan Corp. was created to help avoid evictions and make new home mortgages possible. The Public Works Administraion (PWA) was established to create jobs for needed public construction projects. The Securities and Exchange Commission (SEC) was created to regulate the stock market. Wall Street strenuously resisted the bill creating the SEC. The fight was led by the imperious President of the New York Stock Exchange, Richard Whitney. A few years later, Whitney was arresed when his investment company collapsed. He was found to have been looting the accounts of clients and convocted of embezzlement, receiving a prison sentence. Other New Deal agencies were created to assist business and labor, insure bank deposits, subsidize home and farm mortgage payments, and assist the unemployed.
Impending Crisis (November 1932-March 1933)
Roosevelt was elected in a land slide (November 8, 1932). The Depression worsened after the election. Four months separated the election and Roosevelt's inaguration. Roosevelt and Hoover met to discuss European debt repayment (November 22). There was virtually no cooperation between the two. Roosevelt was nearly assasinated in Miami February 15, 1933). The most serious problem was the virtual collapse of the country's banking system. On the day that Roosevelt was inagurated, the govenors of Illinois and New York closed their banks (March 4).
Inaguration (March 4)
Confidence
The new president undertook immediate actions to address the most pressing problems and rally the nation. The idea was to restore confidence and jump-start a faltering economy with emergency action. The theme was set in his stirring inagural address.
Key Steps
President Roosevelt's First Hundred Days has become the touch stone by which other presidents are measured. It was a period of intense executive and legislative activity. Amist all this flurry of activity, there were two key steps taken which ended the economic spiral downwards. To be sure these steps did not end the Depression. But these two steps did prevent the Depression from becomong even worse. The steps were a bank hoiliday followed by reopening the solvent banks. This stabalized the teetering financial system. Roosevelt also took the United States off the Gold Standard. This enable the Federal Reserve to act to end the vocious deflation which was crippling the economy.
Bank Holiday (March 5)
The most pressing problem President Roosevelt faced upon becoming president was a spiraling string of bank failures which was triggering a frenzied run on banks. This was reaching a point that even well capitalized banks were being threatened. The panic-stricken depositors were making unsustainable demands on the banks' badly depleted supply of liquid assets. When the President took the oath of office, the nation's banking system was posed on the brink of disaster. The govenors of Illinois and New York closed their banks (March 4). President Roosevelt the day after his inaguration boldly acted to halt depositor panics. He declared a bank holiday and closed all American banks temporarily. This closed the nation's banks and halted all financial transactions for 4 days. This "holiday" thus prevented further depositer demands and gave the President time to act. He used that time to push the Emergency Banking Act through the Congress. This was an extrodinary achievement in such ashort period of time a reflection of the severity of the banking problem. Congress passed the Act (March 9). It gave the president unprecedented authority over bank dealings and "foreign transactions". The legislation also provided a path for solvent banks to reopen as early as March 10. As a result almost 1,000 banks were up and running again and the public reassured did not continue to demand their deposits.
Dropping the Gold Standard (April 19)
Until the Dpression, the major industrial nations maintained a gold standard, meaning that their currencies were pegged to the price of gold and maintained large gold reserves. The centrl bankrs of the era were committed to the gold standard with a virtually religious devotion. [Ahamed] The Depression forced the majorindustrial nations off the gold standard. Britain's decesion to drop the gold standard was especially critical because Britain was a pillar of the international financial system. The Hoover Administration, however, steadfastly maintained the gold standard. This was a major factor in the vicious deflation which was devestating the economy. In addition the American gold standard meant that the dollar increased in value compared to countries which dropped the gold standard. This also made American products expensive on the world market. The resulting drop in exports further weakened American companies causing lyoffs and plant closing. With prices falling domestically, many companies were forced to lay off workers or actually close. The Presidents first step was to limit gold exports (March 5). President Roosevelt signed Executive Order 6102 'forbidding the Hoarding of gold coin, gold bullion and gold certificates within the continental United States'.
(April 5). The ban lasted for 42 years. The Emergency Banking Act gave the President expansive authority to oversee all gold transactions, both public and private. President Roosevelt ordered all persons owning gold (coins, certificates, and bullion) to exchange it at a Federal Reserve Bank for other forms of currency.
Going off the gold standard did not necessarily mean that Americans could not own gold, but President Roosevelt decided to prohinit private ownership of non-nusmismatic gold. It was an ct of desperation, with the ecinmy in tatters, gold owners and business people were being scapegoatted for the failed policies of the Federal Rserve and government officals (Democrats and Republicabs). This was th greatest Governmnt entrusion in private finances in American history. Americans had to turn in their gold coins, bullion, and certificates. There was a non-ngotiable exchnge rate of $20.67 an ounce. Executive Order 2039 mafe private ownership punishavle by a $10,000 fine and/or 10 years in prison. The coins were melted own and added to the gold reserve at Fort Knox.
The Treasury announced that no further licenses for gold exports would be granted. The Roosevelt Administration decided to defintively take the United States off the gold standard (April 19). The President announced that further restritions were placed on the export of gold and that the dollar would be allowed to fluctuate in foreign exchange markets. Officials talked about a policy of 'controlled inflation'. The primary purpose was to restore pre-depression price levels as a step in reviving business activity. This was a controversial step as the finanxial community was so committed to the gold standard as a way of preventing inflation. President Roosevelt insisted that there would be no resort to 'printing press money'.
Special Session of Congress
The President then worked with a special session of Congress during the first "100 days" to pass recovery legislation. It was the most productive 100 days in Congressionl history. The Congress was willing to follow the President's lead as few times in history. The result was the alphabet agencies, some of which continue to play major roles in American life. The Agricultural Adjustment Administration (AAA) was created to support farm prices. The (Civilian Conservation Corps (CCC) employed young men. The Federal Emergency Relief Administration (FERA) was created to deal with the the emergency needs of those most severely affected by the Repression. The Home Owners Loan Corp. was created to help avoid evictions and make new home mortgages possible. The Public Works Administraion (PWA) was established to create jobs for needed public construction projects. The Securities and Exchange Commission (SEC) was created to regulate the stock market. Wall Street strenuously resisted the bill creating the SEC. Other New Deal agencies were created to assist business and labor, insure bank deposits, subsidize home and farm mortgage payments, and assist the unemployed.
First Fire-side Address (March 12)
President Roosevelt delivered his first Fire Side Address (March 12). They would become a national institution.
Important Figures
President Roosevelt of course dominated public attention during the First 100 Days. Other individuls, however played key roles. Lewis Douglas was Roosevelt's first Budget Director. Govenor Roosevelt during the campaign had stressed the importance of ballancing the budget. Douglas was determined to slash Federal spending and was deply disturbed when the President decided to take the United States off the gold standard.
Roosevelt drafted Joe Kennedy to create new securities regulations. The fight over securities regulations was led by the imperious President of the New York Stock Exchange, Richard Whitney. A few years later, Whitney was arresed when his investment company collapsed. He was found to have been looting the accounts of clients and convocted of embezzlement, receiving a prison sentence.
David Lilienthan was a passoniate promoter of a program in the Tennesse Valley to dam the river and generate inexpensive power for the poor which could aid in the region's develoment. President's Coolidge and Hoover had vetoed Congressional bills to build dams and generate public power. Nebraska Republican George Norris supported the New Deal efforts in this area. An Indiana corportate lawyer, Wndle Wilkie, would rise to prominance in legal battles with TVA. Henry Wallace proved to be a dynamo at the Deoartment of Agriculture in devising ways if increasing farm income. The President would later turn to him as his vice-presidentisl choice. Key to the New Deal were two conservative Texas Democrats, Sam Rayburn and Wright Patman. While both were conservative, they were also extremely suspious of Eastern bankers. They strongly supported the President;s program of reforming the countries banking nd securities inustry--something that would have been unthinkable before the Wall Street Crash.
Notably absent from the figures that helped orchestrate the First 100 Days was orgnized labor. [Badger]
Also absent in his perment New Deal post was Henry Morgenthau Jr. a personal friend and perhaps the President's closest personl adviser. Morgenthau wanted to be Secretary of Agriculture, but the farm comminity did not want a Jew in tht post. The cloesesrt e ould get was thecFederal Farm Board. Thus he did not come on board as Treasury Secretary until 1934. He was not a popular choice, even among Jewish activists. One wag quipped that the presidentbhad mnaged to find the only Jew in America who knew nothing about finance. Moregenthau provedamong the most important Treaury Secretaries in history, financing both the New Deal and America's World War II effort to save Western Civilization.
Sources
Ahamed, Liaquat. Lords of Finance: The Bankers Who Broke the World (2009).
Badger, Anothy J. FDR: The First Hundred Days (2008).
