We heard today that President-elect Barack Obama’s advisors are scouring the records for examples of the crises events that faced President-elect Franklin Delano Roosevelt 75 years ago, when FDR took the oath of office. Some of the events and conditions of that era, which seems so far away, in fact seem eerily familiar in late-2008. Scary.
President Roosevelt had been the governor of New York State, elected in 1928 to his first term (and re-elected two years later). As chief executive of the nation’s most populous state, he had dealt with the spiraling down of the US and state economies following the dramatic October 1929 stock market crash.
President-elect Roosevelt brought a portfolio of government service to the White House: He was an assistant secretary of the Navy during WWI; he was elected to the state senate; and then to the governorship. From all the voluminous records compiled about the Roosevelt years, he didn’t come to Washington with a complete, well thought out plan about dealing with the desperate years of the Great Depression. He did bring a cadre of trusted aides – the famed “Brain Trust” – from New York.
Following WWI, the American nation embarked an era of good times and plenty (of everything); the Florida land boom created a frenzy of margin buying (of real estate) and speculation, which ended badly with two devastating hurricanes. A series of Republican presidents had the good fortune to serve in what popular columnist Westbrook Pegler called “The Wonderful Era of Nonsense” – created in large part by media hype, mass advertising, movies, and characterized by often irrational exuberancein sports, business, finance, government – sound vaguely familiar yet?
It was the misfortune of an esteemed personality – Herbert Hoover, a mining engineer who helped save millions of souls from starvation in war-ravaged Europe and then served as secretary of commerce – to be elected president in November 1928. Speculation in the stock market was nearing its frenzied peak. Millions of Americans from all walks of life were going nuts over stocks, and too many were buying on margin, only 10% down. Shoe shine men were famously giving stock market advice to customers on Wall Street. Thousands of people came to gawk at the New York Stock Exchange and the Morgan Bank across the street. Hundreds of millions of dollars’ were wagered by the Common Man (and a good number of women) on stocks.
In a burst of collective irresponsibility, Wall Street served up a smorgasbord of financial offerings for unwary, overeager buyers — including “trusts” (investment pools) similar in ways to the collateralized debt instruments of 2007-2008. And then…it began to seriously unravel. Even heroic measures by Wall Street bankers could not stop the sickening downward spiral of the stock markets. CRASH! – October 29, 1929. Margins were called, customer accounts cashed in by brokers, and fortunes (on paper) wiped out — and it would take decades for the market to recover. So ended the “New Era of Prosperity.” It would take many years for investor trust to be rebuilt.
Enter FDR: We view him as the Accountable President. Elected in November 1932, he offered the American people…Hope! As he said in his inaugural address… “This great nation will endure as it has endured, will revive and will prosper…let me assert my firm belief that the only thing we have to fear is fear itself…” And with these words he began his mission of hope that would lift the United States out of the Great Depression and into the world’s stage as the leader of nations.
President-elect Obama could be well-served by some elements of the Roosevelt Model of Governance and National Resuscitation. FDR spoke directly and candidly (well, most of the time) about the conditions in the country, about the economy, about threats the US faced from overseas fascist enemies, and the need for sacrifice, and the common good, and what needed to be done to revive the people’s hopes and finances. While often politically manipulative, he viewed the presidency as an important trust, and himself as a servant of the people.
In the beginning, contrary to right-wing claims of his envisioning a socialist agenda, President Roosevelt mostly used existing federal dollars to put people to work. He adopted Keynesian economics (named for economist John Maynard Keynes), which despite being criticized in later decades by opponents, remains part of the financial and monetary framework of this country. (See the federal stimulus checks distributed earlier this year; see the flow of money to leading banks from the Treasury, etc.).
A note on the famous “100 days” of 1933: In those years the US Congress was sworn in right after January 1st; the president, in March. The congress had met, diddled around with the financial calamity and went home. FDR called them back, and promised they could go home before the muggy heat of summer engulfed the capital city. So was birthed the 100-day rush to adopt strong measures. It doesn’t look like our new president will be following that example, based on his election night address. This recovery will take some time, he advised.
There is much more to say about the heroic (and often controversial) policies of President Franklin Roosevelt. This much we know: He saved capitalism as we know it; he created a much bigger government than the nation had ever known; and later, he led the Allies’ effort in WWII to save the world from fascism – and to spread democracy to many nations. The world as we have known it was in large measure created by the forces put in play by President Roosevelt.
On balance, a pretty good model. Especially if some of the conditions our 32nd president faced in the grim economy days of the 1930s will be present in 2009. Read on, Obama advisors!
