Part IV of FDR and the Unfinished Agenda
by Chris White with AvaHome
for ePluribus Media
Editors’ Note: On September 30, 1934 FDR had his sixth fireside chat with the nation. With that anniversary coming up, and when many of us feel that our nation is on the brink of a different type of disaster, FDR’s words hold hope and inspiration for us all.
Writer Chris White and researcher Ava Home have prepared a 5-part series looking at the FDR legacy, especially in light of the current administration’s disasterous record. The entire series is on the ePluribus Media Journal in the FDR and the Unfinished Agenda feature.
Between March 8th and June 16th 1933 fifteen legislative proposals were passed into law. Never before had Executive and Legislative branches, co-operated to make such a profound impact on the country in such a short period of time. Private interests were subordinated to public policy, and the federal government took on the mission of doing what no other interest could do on its own.[1] The role of government was transformed.
The New Deal that emerged in these 100 days was a result of the powerful, chaotic forces at work in the country, of FDR’s vision for prosperity and progress, and a fair amount of guesswork. It was not at all a carefully planned process. The way FDR thought about the process comes out clearly in his twice-weekly press conferences. This one from March 15th 1933 is exemplary.
"There are two other matters that I would very much like to get started while the Congress is here—both of them constructive. The first is a definite effort to put people to work. And the way I would put it is this: Like all very big projects, it is in a sense experimental, therefore we do not want to launch it on too big a scale until we know how practical it is. Probably I will send up a message. I can’t tell you the exact date, but tomorrow if everything goes well.
"The idea is to put people to work in the national forests and on other Government and State properties on work which would not otherwise be done; in other words, work that does not conflict with existing so-called public works. I cannot give you the details of it now. All I can tell you is that I am working with the Director of the Budget now, to see if we cannot keep the appropriation for it—new money— down as low as we possibly can. We think we can pay for a large part of it out of unexpended balances—money heretofore appropriated for other purposes, which would be a very distinct help to the Treasury."
While there was no fixed plan, there were obvious steps to be taken. FDR’s Declaration of Emergency to deal with the banking crisis got Congress back into the Capitol. Without that emergency, Congress would not have returned until December of 1933. FDR had convened an Emergency Session of Congress shortly after his Inaugural address on the 4th of March. Proclamation 2038 was the instrument, which called Congress back.
Congress convened on the 9th, and passed the emergency banking legislation FDR wanted – quickly and without a lot of debate. So, FDR and company decided to go for another piece, and asked Congress to take up an Economic Policy Bill on March 10th. This bill became law as the Economy Act on March 20th.
By the end of March, Congress was considering a number of measures against unemployment. By the 7th of May FDR was able to provide the country a progress report on what had been accomplished, which he did in his second Fireside Chat.
On April 18th, the financial crisis with which the administration began threatened to rear its head again when the dollar began to sink against gold. In a meeting convened for some other reason that evening FDR announced that he was taking the dollar off the gold standard, and the Agricultural Adjustment Act would be amended to permit him to issue credit through the Treasury Department in amounts of his choosing. The next day, April 19th, he held one of his twice weekly press conferences. Given the circumstances it makes interesting reading.
Compared to the glacial speed with which bills move through congress these days, allowing for the special exceptions we all know about over the last few years, like the Patriot Act, parts I and II, and the Iraq authorization act of 2002, what happened in the 100 days after March 8th 1933 is like applying the methods of NASCAR racing to a legislative agenda. There were a lot of bumps and scrapes, but the show went on, and of what was passed, some of the programs worked really well, and others were disastrous.
Of the ones that worked well, some relics are still with us, functioning as well as ever. Out of the banking legislation of June 16th came the Federal Deposit Insurance Corporation and the commitment to insuring the deposits of those who kept their money in banks. At that time, the limit was $5,000. Other features of that legislation such as the separation of commercial from investment banking, and prohibitions against banks being involved in speculative investment, have been repealed over time, as Congress has endeavored to move the banking system back towards a pre-Roosevelt level of regulation. This deregulation quickly led to a wave of bank failures and massive taxpayer bailouts of corrupt or incompetent bankers in the S&L crisis of the eighties.
The Tennessee Valley Authority, the expression of a Federal commitment to bring prosperity to the 7 state region which bounds the Tennessee River as it runs down to Paducah in Kentucky is another well known element of FDR’s legacy. As is the regulatory ethic enshrined in the Federal Securities legislation of May 27th. FDR’s signing statement can be found here. In the statement issued when he signed the Act into law, Roosevelt declared, “[T]his measure at last translates some elementary standards of right and wrong into law. … [T]he merchandizing of securities is really traffic in the economic and social welfare of our people. Such traffic demands the utmost in good faith and fair dealing on the part of those engaged in it. … This law and its effective administration are steps in a program to restore some old-fashioned standards of rectitude. Without such an ethical foundation, economic well-being cannot be achieved.”
The legislation was an effort to incorporate that kind of intent into statute through adoption of laws about disclosure and marketing of securities. The hope was to prevent companies like Enron from robbing pensions.
Less well known by now would be the Homeowners Loan Corporation (HOLC) legislation, which was enacted on June 13th 1933. This is what FDR said about it in his signing statement. When FDR took office roughly 40% of the country’s 4 million homeowners were facing the threat of foreclosure. The HOLC was intended to deal with this threat. The agency was empowered to refinance existing mortgages, make new loans, makes cash advances to help with tax payments and repairs. The refinancing was intended to “swap” out shorter term balloon type notes, like today’s interest only adjustable rate mortgages, for longer-term, (30 year) fixed rate self-amortizing mortgages, where lower interest rates and longer terms would significantly reduce monthly payment, and eliminate, in many cases, the foreclosure threat experienced when balloon notes had to be paid off in full. The approach led to the formation of the Federal Home Administration (FHA) and the Federal National Mortgage Association (FNMA), organizer of secondary market for mortgages, and helped produce the incredible expansion in homeownership in the US, especially in the post-war period, as rates rose from the 40% level of the 1930’s up to the mid 60% level and beyond.
In agriculture things were different. There it was decided that top down methods would be used to reduce the symptom of the problem, which was taken to be over-production. US farmers produced about half of the country’s exports prior to the depression, a volume of foodstuffs that were not going to be absorbed in the country, it was argued. But people were hungry and starving, as unemployment rose toward 70% of the work force in small industrial cities like Akron, Ohio in the Midwest.
The agricultural legislation might have sounded good to folks when passed, but when six million pigs were slaughtered that September, and their meat condemned as waste, and when crops were ploughed under, as cotton was in October, and acreage under crops and livestock was reduced, and people were still starving and hungry, the idea that over-production might really be the problem seemed less and less convincing and more and more crazy.
FDR and company hoped, in a way, that unemployed people from the cities could be resettled in farm areas where they would have food and shelter. But there was no income coming in to the farm sector. The newcomers were sometimes viewed as unwanted competition by those trying to make a living. Since agriculture, and farm-based and related economic activities still made up about 50% of the economy, it was important that agriculture and farmers, and the ancillary industries be supported. It was not until the war mobilization accelerated the rate of industrialization enough to start changing the machine intensity and thus productivity of agriculture, that things began to really change. More than $300 billion went into the war effort, more than 6 times what had been spent in the New Deal.
Agriculture and farmers were helped though by the same kind of debt reorganizations provided to the homeowner, refinancing based on stretch-outs and lower rates, along with fixed amortization schedules. This was made clear in the Signing statement for the Farm Relief Act of May 12th.
Other programs which were successes on a grand scale were the Civilian Conservation Corps (CCC), the Public Works Administration (Title 2 of the National Industrial Recovery Act) and the Federal Emergency Relief Act. The appended timeline includes some detail on each of these programs, what they were enabled to do, and what they contributed to dealing with unemployment.
There had been nothing like it before, and there has certainly been nothing like it since. It is a real tribute to the power of a democracy to react with agility when pressed. FDR wanted action to deal with the Depression, which had not been dealt with adequately at all. That was what others wanted. And it was what the country demanded. It wasn’t done like these things are now, with party line votes, and time outs for pressure to be directed against the recalcitrant. And that was what everyone got, action. Where it worked, fine. Where it didn’t work, like the anti-surplus production features of the agricultural legislation, it was changed, eventually, and things moved on. And the country began to turn around.
Time-line: FDR’s 100-day Legislative Campaign
March 4th 1933 FDR Inauguration
March 6th Bank Holiday
March 9th Emergency Session of Congress. Passage of Emergency Banking Act.
March 10th Economy Act sent to Congress
March 12th First Fireside Chat
March 13th Banks begin to reopen
March 16th Farm Bill sent to congress to remedy lack of purchasing power of farmers. This includes the measures against over-production which by October result in 6 million pigs being slaughtered and the meat thrown out as waste, and cotton crops plowed under.
March 20th Economy Act Passed into Law. This Act cut Veterans benefits by 50%. Veterans benefits made up 25% of the budget. The whole budget was $3.6 billion. Therefore, pre cuts, the benefits were $900 million, afterwards $450 million.
March 21st Civilian Conservation Corps (CCC) bill sent to Congress.
March 22nd Beer-wine revenue bill sent to Congress.
March 27th Farm Credit Administration created by Executive Order merger of 9 separate agencies. Farm Mortgage Relief Act proposed. Half of farmers threatened with foreclosure. Banks foreclosing on farm mortgages at rate of 20,000 per year by February 1933.
March 31st CCC passed into law. Initially designed to create 250,000 jobs among unemployed young adults. Created more than 2 million by the end of the program in 1942. The CCC was empowered to employ these youth for flood control, reforestation, suppression of tree disease, clearing fire breaks, building fire observation towers, creating parks, protecting endangered species (Whooping Crane). Over the life of the program 4 million trees were thinned, one billion fish stocked and 30,000 wildlife shelters built.
April 3rd Farm Mortgage Relief proposal was sent to Congress and attached to the Agricultural Adjustment Act.
April 5th Farm Mortgage Relief reported out of committee and passed into law.
April 7th Beer sales were legal for the first time since Prohibition began in 1920. Tax revenues flow into government.
April 10th Congress sent legislative proposal for Tennessee Valley Authority.
April 18th US$ slumps. Treasury refuses to license more gold exports. Evening White House meeting: FDR, Moley, Bullitt, Warburg, Feis, Senator Pittman. Decision to leave gold standard announced. Credit creation features of Agricultural Adjustment Act, Thomas Amendment, accepted.
April 19th FDR takes the US$ off the gold standard. Press conference, later in the day, FDR announces intent to get the world as a whole back on the gold standard.
May 7th Second Fireside Chat. Reviews progress after 60 days.
May 12th Federal Emergency Relief Act creates FERA, with $500 million, ½ directed to the states, ½ available as matching funds for state programs in the ratio of 1:3. Harry Hopkins in charge. Intended to relieve unemployment.
Agricultural Adjustment Act and Emergency Farm Mortgage Act, to reduce $200 million worth of surplus production, through plough unders, acreage set asides and livestock and poultry slaughters.
During this April to May period Congress, through such members as Hugo Black, and LaFollette in the Senate, initiated legislation for a 30-hour work week, intended to create 6 million jobs for the 14 million unemployed, and for $6 billion funding for relief projects. FDR thought Black’s 30-hr week would result in pay cuts all round and opposed it as unconstitutional restraint of trade etc. He opposed LaFollette’s $6 billion on grounds of fiscal orthodoxy, too much money.
May 18th Passage of TVA: 650 mile navigable water way to be built from Knoxville TN to Paducah KY, with construction of dams, power plants, fertilizer production, intended for direct economic benefit on 7 state area affected, and much wider effects. The TVA was a challenge to Commonwealth and Southern, the utility which, under the leadership of Wendell Wilkie, was picking up the surviving pieces of the collapsed empire of Samuel Insull.
May 27th Federal Securities Act passed, established the Securities and Exchange Commission headed by “to catch a thief” Joseph Kennedy. Intended to “restore some old fashioned standards of rectitude” as FDR put it in his signing statement.
June 5th Senate and House by Joint Resolution abrogate the gold clause in private and public contracts, and back paper currency as legal tender.
June 6th National Employment Service created. Intended to help coordinate job searches between Federal and state governments.
June 13th Homeowners’ Loan Corporation enacted, empowered to refinance mortgages, make loans, and advance cash for tax payments and repairs.
June 16th
1) Banking Act of 1933, aka “Glass-Steagall” Act passed into law. This legislation created the Federal Deposit Insurance Corporation, and protected bank deposits up to $5,000, separated commercial from investment banking, forced banks to get out of the business of financial investment, banned the use of bank deposits in speculation.
2) Emergency Railroad Transportation Act, attempted to smooth out operating duplications and inefficiencies in then existing railroad network.
3) National Industrial Recovery Act, including Title 2 creating the Public Works Administration. This act was said to be FDR’s response to Hugo Black’s 30-hr work week proposal. The NIRA was established in 3 parts. Title I suspended the provisions of anti-trust legislation on price fixing, and a enacted a tremendous boost to industrial trade unions by promoting collective bargaining.
Title II allocated $3.3 billion for public works, to build and repair Federal buildings, roads, bridges, and dams. It gave employment to around 2 million. Buried here, in an indication of things to come, was money for the US Navy to build 2 heavy cruisers.
Title III was made up of Congressional wish-lists, proposals to end the depression, and other means employed to widen the political support the measure might enjoy.
FDR thought that between the CCC, the TVA and the WPA 4.5 million, or roughly 30% of the 14 million unemployed, might be put to work.
4) Farm Credit Act. Legislation which brought to completion the process launched with the Executive Order forming the Farm Credit Administration. This provided easier refinancing of farm mortgages, and brought foreclosures to a halt.
[1] The article and appended timeline were put together from the resources at the University of California at Santa Barbara’s “American Presidency Project”, Citation: John Woolley and Gerhard Peters, The American Presidency Project [online]. Santa Barbara, CA: University of California (hosted), Gerhard Peters (database). Available from World Wide Web: http://www.presidency.ucsb.edu/ws/. It is a whole lot of fun to click through to the site, choose the President, or year, or kind of document you want to look at, and do it! There’s more there on FDR than made it into these pieces. Well worth the effort, in terms of the picture of FDR conveyed, are the transcripts of his press conferences. There’s nothing like it today, that’s for sure!
Key Research by: AvaHome
ePluribus Media editors and fact checkers for this article: JeninRI, Aaron Barlow, Cache, standingup, cho, stoy, Roxy, Greyhawk and Vivian.
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