Banking in Early 1933

8 Items to Learn About Banks and Bailouts #4

Years after he left office, Herbert Hoover would say that the baking system was "the weakest link in our whole economic system." As President during the early years of the Great Depression, he never sounded like he was anything less than confident in the banking system. He would tout "the strong position of the banks." Even when he soured on banking late in his term, he would still not propose major reforms. He was negligent and the people paid the price.

In the first three years of the Great Depression, five thousand banks went out of business. People, tired of watching, turned on the banking system. The level of mistrust in the nation's banks had never been higher. The secrets uncovered by the Pecora Commission  deepened that mistrust. There would continue to be runs on the banks.

Hoover was desperate to find a way to stop the runs and restore confidence in the system. He convinced himself that if he could convince FDR to disavow his proposed New Deal and commit to a "sound fiscal policy", confidence would be restored. Roosevelt refused to make any public proclamations before he assumed office on March 4th. Hoover was furious with FDR, but FDR would not budge. (When you think of the capacity of Republicans to delude themselves, remember that Hoover, soundly thrashed at the polls in November 1932, believed that FDR needed to disavow his own reforms and support the Republican agenda. Hey, Hoover thought he had beat the depression in 1932 too.)

Hoover could not be convinced that the government needed to play a larger role in solving the crisis. He believed to the end that was all just a matter of confidence. He was a tragic figure.

On the eve of Roosevelt's inauguration, Hoover made one last attempt to get FDR to make a public proclamation in support of Hoover's policies. Predictably, he refused again. Various officials in the Hoover administration would then press Hoover to call for a national bank holiday, but he wouldn't hear of it. He did not believe it was necessary. 

Late into the evening of March 3rd (or rather, early in the morning of March 4th), the governor of New York was convinced to shut down all banks on Saturday by Hoover treasury officials. Illinois would respond in kind. As Arthur M. Schlesinger Jr said, "the banks of the nation seemed in rigor mortis". The banking situation was a stand still.

None the less, time had run out on the Hoover administration. It was Roosevelt's problem now.

Source - The Crisis of the Old Order by Arthur M. Schlessinger Jr.

It is Not the Time for Caution

8 Commentaries for Week Ending 3/13/2009 #1

You would think that with the worst economic crisis since the Great Depression, Democrats at least would get that we need to make big, transformative changes as soon as possible.

And most of them do. Certainly President Barack Obama's economic recovery bill and budget -- as well as calls for fundamental reform of health care, education and energy policy -- show that he does. Certainly House Speaker Nancy Pelosi does: On Tuesday, she said in a meeting I attended that the House would pass Obama's major reform legislation in 2009. Most Democrats in the House and Senate understand that the moment for big change has arrived.

Not so much for a small minority of Democrats in the Senate.

Mike Lux at Huffington Post

One of the problems with membership in a "Big Tent" party is that a small group of disaffected Senators or Congressmen can railroad the ambitious plans of the more liberal wing of the party. I think in the long term that this check on liberal power works out OK. However, these are not normal times. We are in the midst of a crisis that continues to worsen. We are at moment to learn. Americans are primed to learn.

I think that every Senator in Evan Bayh's group needs to be given a copy of Jonathan Alter's The Defining Moment. FDR succeeded because he acted. He wasn't timid. He knew that the failure to act would worsen the crisis and would prevent help from reaching those who need it. The amount of suffering in our country is unfortunately high in the best of times. With a rising unemployment rate over 8%, the level of suffering will soon reach dramatic levels. It is our moral imperative that we do everything we can.

This isn't just realizing long held liberal ideas; it just so happens that these ideas (such as economic stimulus, investment in green energy, and national health care insurance) are the right ideas to alleviate suffering and to allow the country to begin the long process of climbing out of the economic mess born out of conservative ideology. If these Senators want to be on the right side of history, they will not stand in the way of the Obama agenda. They will be called out. They will face opponents in their next primary. If they still choose to play the role of obstructionist, I would imagine that their electoral future will be one of peril in the not so distant future.

More Please!

8 Thoughts About the Stimulus for 2/9/2009 #4

When FDR took office in the midst of the Great Depression, he went on offense and he stayed there. He used his enormous personal popularity to ram every idea that he and his people had down the throat of Congress. Without that personal popularity, the New Deal could not have been accomplished. 

It's good to see President Obama and his staff tapping into his popularity to promote the stimulus. As for the attacks on the press, I love it. Unlike conservatives, they are doing it without sounding like major league champion whiners. 

The best part of "working the refs"? It works.

Rush Limbaugh says ...

Words of Stupidity for 1/30/2009 #7

His stimulus plan, likewise, is political. It is aimed at re-establishing eternal power for the Democrat Party, just as FDR did, rather than stimulating the economy. Folks, anybody with a brain knows that his stimulus plan is not how you stimulate the economy. And if he can make me a distraction, then there'd be all that much less time to debate this.

- Rush Limbaugh as reported by Media Matters

When he says "anybody with a brain", Rush Limbaugh appears to be excluding the vast majority of prominent economists.

Mitch McConnell: Bag of Scum

8 Random Items for 1/27/2009 #2

The debate over the evils of partisanship doesn't interest me. Hell, I think this country could use a healthy does of partisanship from the Democratic party. I am interested, however, by Senate minority leader Mitch McConnell's comments about social security.

The entire point of the conservative movement is the destruction of the New Deal. This is as true of so-called "principled conservatives" as Barry Goldwater and John McCain as it is of the truly disgusting types such as Richard Nixon, Ronald Reagan, George Bush, Karl Rove, Tom DeLay, Brit Hume, Rush Limbaugh, Bill O'Reilly, Sean Hannity, Dick Cheney, Sarah Palin, etc, etc, etc.

A little reminder to my fellow Americans: the New Deal saved capitalism in America. The only point in our history where true socialism (or for that matter, fascism) had a chance to grab hold in this country was during the depths of the Great Depression. FDR, for the record, rejected both socialism and dictatorship and chose instead to strengthen our capitalist system, retaining all of its freedoms, while providing some measure of protection for the average American from the effects of a major economic down turn.

If we allow the Republicans to rewrite our history, we've lost for good. The world would suffer.

Taking the Case to the People

8 Random Items for 1/15/2009 #2

Matt Compton and the Democratic Strategist has a great piece posted comparing FDR's use of the radio to Barack Obama's use of the internet. Like FDR, Barack Obama is a master communicator who can take his case straight to the people, without the impediment of the media filter.

I hope in a few years this isn't the only way Obama reminds us of FDR.

Stupid Conservative

8 Random Items for 1/8/2009 #7

Fox News moron Brit Hume says ...

(T)he New Deal -- everybody agrees, I think, on both sides of the spectrum now, that the New Deal failed. The debate is over why it failed.

Funny, but I don't think that is the case. History shows that the New Deal ensured the very survival of millions of Americans during the depression, and, if not for the very conservative attempt to balance the budget in 1937, might very well have pulled us out of the depression. As for what did pull us out of the depression, that would be World War II, or more specifically, the largest government spending project ever undertaken by our nation.

I apologize for the redundancy in the headline.