In Feb of 1932 the Glass-Steagall Act attempted to redefine mortgage debt into collateral for further loans, and then expanded creation of liquidity. An attempt was made to do the same through Federal Home Loan Banks. We do a similar thing now. The experts call them collateralized mortgage obligations. Individuals’ mortgages are packaged and passed on to others, and become one of the components of a derivatives market, where one person’s liabilities added to others, become another person’s assets, and supposedly provide ‘hedges’ against financial Armageddon from which we are all thought to benefit by way of guaranteed financial stability.

It is amazing today to contemplate the views espoused by those who argue that what Roosevelt accomplished in these first few weeks of his presidency was like a charming exercise in making people feel happy, a mood change. It is true that the mood of the country changed. In the wake of his Inaugural speech, and the actions begun in its aftermath that first weekend in March, the White House received nearly half a million letters from individual Americans. No president before Roosevelt had received more than 200 letters per day, including Herbert Hoover. Seventy work places were created in the White house to handle the increased volume. It was clear that over the first weekend of his Presidency Roosevelt had done much more than change the mood; he had struck a powerful chord in the hearts of those who he took to be his constituency, as he provided leadership against Hoover’s cronyism and failures. And they would be prepared to follow him as he organized their support.⁵

Post Election Timeline

November 8^th 1932: Hoover FDR exchange telegrams

November 9^th: Hoover FDR exchange telegrams Mid November Hoover letter on debt, telling FDR of a British government
review, threatened British Dec 15^th default

November 22^nd: WH Meeting, Hoover and Ogden Mills, Treasury Secretary, FDR and Moley. Hoover lectures for an hour on debt. Asks Roosevelt to support formation of a commission which has already been killed in Congress. British pay what Hoover said they weren’t going to.

December 17^th: Hoover telegram to FDR proposing “machinery” be created to deal with French default. Hoover wants to combine debt and disarmament negotiations. Would advise Congress. Does Roosevelt agree?

December 18^th: Hoover advises Congress

December 19^th: FDR replies: he doubts the wisdom of combining debt and disarmament, asks Hoover not to tie incoming administration

December 20^th: Asserting that the international crisis requires cooperation between him and FDR Hoover asks FDR to name a representative to coordinate with his administration.

December 22: Hoover releases the correspondence to the public, before FDR can reply. FDR happy to cooperate as much as possible in exploratory discussions.
Late December FDR opposes Hoover’s proposed tax increases for the next year’s budget, and floats idea of parallel “investment” budget.

Jan 9^th: 1933 FDR lunches with Hoover’s Secretary of State Henry Stimson at Hyde Park.

Jan 10^th: FDR meets French Ambassador Claudel, tells story of the non-payment history of France’s 1777 loan to the US. Says word “default” must never be used among friends.

Jan 18^th: FDR meets Tugwell and Moley in New York to discuss international crisis.

January 20^th: FDR and Hoover at the White House to discuss debt and disarmament again.

January 30^th: Hindenburg clears way for Hitler

Early February Huey Long closes Louisiana banks. (Anniversary of WWI break with Germany?)

February 3: FDR leaves Palm Springs for Florida cruise.

February 14^th: Governor William Comstock of Michigan closes state banks for 8 days after Henry Ford refuses to agree to RFC terms for aid.

February 15^th: FDR arrives in Miami. Zangara assassination attempt. Cermak, Mayor of Chicago fatally shot, others wounded in incident in front of 20,000.  Zangara had article about McKinley assassination in his pocket.

After the assassination attempt, but before the end of the month, Tugwell contacts Feis at State to tell him FDR wants research done on legal basis for Woodrow Wilson’s blocking of gold exports in 1917. Feis got the Trading with the Enemy Act of 1917 out of Treasury, which tells people in Congress, gave the results to Tugwell, who took them to FDR at Hyde Park.

February 17^th: Hoover sends 10 page, handwritten letter to FDR via the secret service. Tells FDR a “state of alarm” threatens the economic recovery. Says FDR needs to commit a balanced budget and defense of the gold standard. FDR ignores the letter.

February 20^th: Hoover tells Senator David Reid of national concerns about what FDR might do for stability. Says Roosevelt must endorse Hoover policies.

February 23: George L. Harrison, President of the Federal Reserve Bank of New York reports to fellow members that withdrawals of gold are heavier than in any period. “Our own people were beginning to act badly to gold exports and the declining value of the dollar.”

March 1^st: FDR replies to another letter, and says his secretary neglected to send the draft of the reply to the February 17^th letter

March 2^nd: By this date more than half the states had closed their banks, and $200 million dollars worth of gold had been pulled out of the banking system.

March 3^rd: $110 million worth of gold paid out to foreign banks in New York and Chicago. $40 million worth paid out by other banks. New York Stock Exchange and Chicago Board of Trade closed. Roosevelt travels to DC. Afternoon tea at the White House, Hoover brings in Mills and Eugene Meyer from the Federal Reserve for another round of arm-twisting. Roosevelt says “it is your problem till midday tomorrow.” That evening Hoover phoned twice to get Roosevelt to agree to restrict bank withdrawals and gold exports. Woodin and Moley went over to Treasury to begin work on the FDR bank holiday initiative. By the end of the day 32 states had closed all banks. In 10 more and the Federal District withdrawals had been limited to 5% of deposits.

The Trading With the Enemy Act Revived. “The President may investigate, regulate or prohibit, under such rules and regulations as he may proscribe by means of licensure or otherwise, any transaction in foreign exchange and the export, hoarding, melting, or ear-marking of gold or silver bullion or currency.

Mar 4^th: At dawn, the governors of New York State, Pennsylvania and Illinois sign orders closing banks indefinitely. Space booked on the French liner Paris to ship $9 million in gold out of the country. $6 million frozen by Governor Lehman’s moratorium. $3 million had been loaded over night. According to Barrons of March 13^th “Arrangements for further shipments of even greater quantities were said to be underway when Governor Lehman’s edict halted the outflow of the metal.”

34 out of 48 states have closed their banks. The country had no economic pulse.

Woodin and Moley meet FDR at the Mayflower to discuss measures and recommend he use the Trading with the Enemy Act used by Wilson in 1917 to stop gold exports, call Emergency Session of Congress for the 9^th, Roosevelt wanted enabling legislation drawn up and ready for signature when he returned from the Inauguration. Calls in bankers from east coast and as far west as Chicago for meeting on Sunday 5^th to discuss the legislation.

March 5^th: Proclamation 2038 calling on Congress to convene in Special Session beginning March 9^th. Meeting between FDR and tem ad bankers. Radio broadcast to American Legion relayed nationally by networks. Proclaim banks closed till 10^th. Prohibit gold export and foreign exchange transactions.

March 6^th: Proclamation 2039 indicating what kind of emergency powers FDR thought he needed.

March 7^th: Secretary of the Treasury authorized clearing banks to issue demand certificates against sound assets, effective March 10^th.

March 8^th: Roosevelt’s plan to get the gold back launched. The Federal Reserve announced it would publish the names of all those individuals who had withdrawn gold after February 1^st and not re-deposited by March 13^th.

First of FDR’s 998 press conferences at the White House. Two per week to start with.

March 9^th: Passage of Emergency Banking Act, by voice vote in the House, 73–7 in the Senate.  Gives Executive branch power to extend credit against deposit of Treasury debt. “[A]ny Federal Reserve Bank making such deposit in the manner prescribed by the Secretary of the Treasury shall be entitled to receive from the Comptroller of the Currency circulating notes in blank, duly registered and countersigned.” Forbids member banks of the Federal Reserve System from transacting banking business except under regulations of the Secretary of the Treasury, during an emergency proclaimed by the President. (!2 USC 95)

March 10^th: 4,000 have brought back $300 million worth of gold to NY banks.

March 12^th: FDR’s first Fireside chat, on measures to bring the banking crisis under control.

March 13^th: The 12 Federal Reserve district cities re-open.

March 14^th: All banks found sound in cities where there are clearing banks reopen.

By the end of March banks holding 90% of all deposits were doing business.

March 15^th: New York Stock Exchange reopened. Largest one day rise ever, 15%.

¹ This was reported in the March 13, 1933 issue of Barrons. Scroll down to the summary at this link.
² FDR Inaugural March 4, 1933

³ The time line is primarily drawn from Conrad Black “Franklin Delano Roosevelt: Champion of Freedom” NY 2003 pp 253-274. Herbert Feis “1933 Characters in Crisis” Boston 1966 provides supplementary information in Chapter 10 ‘The Defeated Depart’ p87, and Chapter 11 ‘The New Group’ p 95.

⁴ David M. Kennedy “Freedom From Fear. The American People in Depression and War 1929-1945” NY 1999. See Chapter 3, ‘The Ordeal of Herbert Hoover’ pp. 80-103. (Trickle-Down p. 80) and Black op.cit. Chapters 6 and 7.

⁵ First Fireside Chat, March 121933, On the measures adopted to deal with the banking emergency.

Next, Part III: FDR's Brain Trust

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