Lessons From FDR’s First Ten Days?

Somewhat lost in this week’s media-created milestone of the first hundred days of the Obama Administration, and the inevitable comparisons to Pres. Franklin D. Roosevelt’s momentous First Hundred Days (so momentous that they became a proper noun) is FDR’s even more extraordinary accomplishment in his first ten days:  the resurrection of the U.S. banking system.  Such resurrection, as you may have heard, has so far eluded Pres. Obama and his predecessor.  Are there lessons from how FDR and his guys did it?

First, a quick timeline:  FDR took office on March 4, 1933 (after that, the 20th Amendment moved the inauguration date up to January).  On March 5, he declared the famous “bank holiday.”  On March 9, he got Congress to pass the Emergency Banking Act, to give his administration unprecedented powers over the banks.  On March 12, he gave his first “fireside chat,” assuring people that the banks were about to reopen and would be healthy when they did.  On March 13 (day 10), banks reopened in 12 cities.  By March 16, the administration’s massive audit and purge operation, more than 70 percent of U.S. banks had reopened, while others were closed.

Economic historians are in less-than-complete agreement about the New Deal’s overall macroeconomic impact, with a substantial minority in a recent survey agreeing with a proposition that the New Deal harmed the economy.  But there does seem to be consensus that the bank overhaul was a great success.  Even FDR advisor-turned-harsh-critic Raymond Moley described it in glowing terms.  With the president’s signing of the Emergency Banking Act, he wrote in After Seven Years (a classic among Roosevelt bashers), without sarcasm, “The sequence of bold, heart-warming action had begun.”

The personnel involved in the great bank triage operation, which involved some 15,000 banks (i.e., twice as many as we have now) were various Treasury and Federal Reserve officials, with Secretary of the Treasury William Woodin at the helm.  In Moley’s words:

‘ . . . as I look back at those frenzied days, it seems to me that the country has never quite realized the extent to which Woodin, [Hoover’s Undersecretary of the Treasury Arthur] Ballantine, and, last but no means least, [Hoover’s Acting Comptroller of the Currency F.G.] Awalt helped to restore the confidence of the country by a rapid and unprejudiced approximation of the equities — social as well as financial — involved in each case. . . .’

‘Capitalism was saved in eight days, and no other single factor in its salvation was half so important as the imagination and sturdiness and common sense of Will Woodin.’

Mister, we could use a man like William Woodin again.

(to be continued)

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