AS THE ROOSEVELT INAUGURAL SPECIAL made its way south through the chill air to Washington on the evening of March 2, the atmosphere aboard the train was less celebratory than funereal. Earlier in the day, word came from Miami that Mayor Cermak’s condition had worsened, an unnerving reminder of why more than 2,700 uniformed and plainclothes police now secured the crowds along the Baltimore & Ohio rail line. Then came a shocking report. Attorney General-designate Thomas J. Walsh, easily the most respected member of FDR’s new Cabinet, had died of a heart attack under titillating circumstances. The seventy-two-year-old Walsh was found on the floor of a Pullman car while returning on the Florida Limited from his honeymoon with his wife of one week, the beautiful young widow of a rich Cuban banker. His body was expected to arrive at Union Station in the sleet shortly after the Roosevelt party.
Midway, Jim Farley was invited back to chat with the president-elect in the last car. FDR told Farley that only Lincoln had faced such a challenge on assuming office, then talked quietly about religion, even recalling his own religious training as a child in Hyde Park. He assured him that the spiritual sense of the American people would see them through. The piety seemed genuine to the Catholic Farley. Roosevelt said simply that he believed that the salvation of all peoples depended on a proper attitude toward God. He told Farley that the measures he would adopt—whether legislative or executive—were far less significant than restoring shattered public confidence.
Eleanor later attributed her husband’s own confidence in part to that simple faith. “He felt that human beings were given tasks to perform and with those tasks the ability and strength to put them through,” she wrote. But if the faith was simple, the “ability” and “strength” were a complicated tangle.
Franklin Roosevelt was a rare mix. He somehow combined instinct with calculation, exasperating improvisations with what some of his contemporaries called “longheadedness”—a way of peering forward, fixing a point far away on the horizon, then tacking toward it without much worry about the day-to-day choppiness en route. This long-range thinking was not the same as long-term planning; he didn’t waste a lot of time detailing it. But his focus on the bigger picture would serve him well.
In accounts of 1933, the causes of the final panic are myriad. Mass hysteria is one explanation. Herbert Hoover’s failure to take decisive action is another. The underlying structural weakness of the banking system a third. But no explanation is complete without accounting for fear of Franklin Roosevelt, whose election and pre-Inaugural posture sent wealthy people to their banks to withdraw and hoard their currency and gold. Mostly Hoover voters, they were wrong about the gold standard and wrong about how Roosevelt would ruin them; as events would prove, he saved what was left of their fortunes. But their fears were genuine. The bank panic was not just the product of free-floating Depression anxiety. When FDR would soon proclaim, “The only thing we have to fear is fear itself,” he was trying to calm not just the general public but the rich, by saying: You don’t have to fear me.
The banking crisis peaked just before his Inauguration. With the upper Midwest in turmoil, Cleveland banks began to fold, threatening the Ohio banking structure. New Jersey passed an emergency law limiting withdrawals, causing a spread of panicky behavior in the East. In a three-day period starting February 23, Indiana, Arkansas, and Maryland declared holidays, kicking off a round of more closures the following week. By Saturday, February 25, the Hoover White House received word to expect rioting on Monday in Detroit, where the banks had been closed for nearly two weeks. People couldn’t buy gasoline, milk, or bread. Railroad cars sat on sidings. Thousands of automobiles were abandoned, out of gas, in the middle of the road. The only good news was that this lack of transportation made starting a riot harder.
In the space of a few days, the whole system began to implode. “These bankers haven’t any more notion of public psychology than a chicken,” Roosevelt complained. On February 28, Nevada, which four months earlier had been the first state to declare a holiday, suspended banking operations for a second time, along with Alabama, Kentucky, and Tennessee. Most symbolically devastating, two Washington, D.C., banks, just a block from the Treasury, shut their doors. WASHINGTON BANK SUSPENDS! read tabloid headlines as far away as San Francisco. By the early evening of Friday, March 3, banks in thirty-two of forty-eight states were closed, with several more to come. Depositors had transferred more than $1.3 billion in gold and gold certificates to foreign accounts or just taken it home. The New York Fed said it didn’t have enough gold left to open for morning business on Saturday, March 4—Inauguration Day.
Hoover makes no sense of these last, dizzying days of his administration in his memoirs. He argues at the same time that there was a severe crisis (caused by Roosevelt) and that the crisis was not severe enough to close the rest of the banks. When Ray Lyman Wilbur, the secretary of the interior, came calling at the White House, he told Hoover that everything humanly possible had been undertaken to avert disaster, but the Inauguration was only forty-eight hours away and little more could be done. Hoover exploded: “We will fight until 10:49 a.m. March 4, when I leave for the Capitol! We must try everything, not once but a dozen times!”
That suggests an instinct to act, but his own high command was frustrated at his inaction. The Treasury Department and the Fed both urged the president to approve deposit insurance and move forward with a national bank holiday. Because Hoover had no explicit power to close banks, the plan was to use the 1917 Trading with the Enemy Act, an obscure wartime provision that was intended to prevent gold transfers that could help the Germans. The original wartime measure was temporary and had long since expired. But when economic conditions worsened in 1932, a clever legislative draftsman at the Hoover Treasury had dusted off the bill and taken the legally questionable step of changing the “implementation language” to make the 1917 act permanent. This was probably illegal, but the Hoover men were frightened and not in the mood for legal niceties. They feared that if the president didn’t act quickly, the whole system might vaporize. Treasury Secretary Ogden Mills told a banker planning to visit Bermuda: “If you go, don’t get a roundtrip ticket—when you’re ready to return, there’ll be nothing worth returning to.”
At the worst possible moment, Hoover got some bad advice. His attorney general, William D. Mitchell, at first decided that the Trading with the Enemy Act was fine to use as the basis for issuing an emergency proclamation. But before he advised Hoover of that, Mitchell backed off. If President-elect Roosevelt would not request the action, Mitchell reasoned, it didn’t meet the test of an emergency. FDR demurred—no responsibility without authority. But he sent word through aides that he wouldn’t object if Hoover acted alone. Hoover, spooked, felt that if he did move to shut the banks, the Democratic Congress would rebuke him after he left office for taking precipitous action on the way out the door, though there was no sign of any Democrats planning to do so.
As the board of governors of the Fed stayed in continuous seventeen-and-a-half-hour session from 10:00 a.m. Thursday, March 2, to 3:30 a.m., Friday morning, March 3, tempers began to fray. Up in New York, the New York Fed had thirteen teller windows paying out gold, with long lines at each one. In the Bronx, lines at banks were so long that a mother rented out her baby for twenty-five cents a trip to women who used the sympathy to move to the head of the line. By 3:00 p.m. on March 3, the Bowery Savings Bank across from Manhattan’s Grand Central Station closed its doors with huge throngs still waiting outside.
Eight blocks north at Radio City Music Hall, the movie King Kong had recently opened. Across the nation, a giant hairy hand was closing around more than Fay Wray’s throat.