F DR WAS HARDLY THE ONLY ONE TRYING to rearrange his world. In the winter of 1933, the big craze was jigsaw puzzles, with more than 6 million selling in just a few months. The underlying appeal went unexplained at the time but seemed obvious later. Puzzles, unlike the economy or the frightening future, can be mastered with a little perseverance. The pieces fit together.
With Roosevelt in the White House, Americans were feeling a little better than the week before but still confused, with the puzzle pieces of their institutions spread on the table before them. The Inaugural Address prepared people for the shock of the bank holiday but not for the reality of it. The country, as W. A. Sheaffer of the Sheaffer Pen Co. cabled his friend Ray Moley over the weekend, had come to a “standstill.” Sheaffer’s checks had already been refused and returned from twenty-four states, with the other twenty-four doing the same starting Monday, March 6. The magnate was not sure he could hold out a week or ten days. His business needed legislation now. The crisis upended the personal lives of everyone, even the Roosevelts. Eleanor fretted that the family had no cash to settle the large tab at the Mayflower Hotel. Franklin told her not to worry about it.
Woodin advised FDR that it was essential to get Congress back in special session by Thursday, March 9. He believed the necessary legislative package could be put together by then, allowing the reopening of banks the following week. This was decided upon at the emergency cabinet meeting on Sunday, March 5. But that left five or six business days for the public to fend for itself, without any means of exchange.
What most people remember from that week was that instead of bickering, a spirit of cooperation developed. A “holiday” mood set in. The new president, wrote The New York Times, which had often been critical of him, was now a “strong tower of hope” in Washington. “Instead of alarming the country, [the Banking Proclamation] seemed to cheer it up.” The holiday worked “like a sharp slap in the face for a person gripped by unreasoning hysteria,” wrote Charles Beard, the renowned economic historian who later became a New Deal critic. “It gave people the time to collect themselves.”
For those who hadn’t lost their money in bankrupt banks, the big practical problem was getting change. Many Americans were in the habit of carrying their wads with them, but they couldn’t buy anything, because merchants quickly refused to offer big change for small purchases. Parents raided their children’s piggy banks and Alaska gold miners swept up gold dust. Pesos, Canadian coins, and subway slugs were all used, but the shortage remained acute. When a New York man tried to purchase $3.52 in shaving supplies, he was told to grow a beard.
“Automats,” like the one FDR had once invested in during the 1920s, found themselves besieged by well-to-do people with no intention of eating out of vending machines. They simply wanted to change a dollar for twenty nickels. New York’s Hotel Commodore dispatched a bellhop to a neighboring church to exchange bills for silver from the collection plate. John D. Rockefeller, still the richest man in the country, was famous for handing out dimes to children but he didn’t have any handy that week. So he splurged and gave his caddy a whole dollar.
A Baltimore man, Walter Sondheim, remembers the bank president of one of the biggest banks in town having to borrow money for lunch from a clerk, which caused smiles around the office. Although the banks didn’t have any cash on hand, department stores fared better, and some people were able to get their checks cashed there. In New York, Macy’s announced that it would offer credit for the first time in its history and Lord & Taylor saw a chance to expand its charge account business. Sluggish business activity slumped further, but many retail establishments seemed to manage. “Do not declare a moratorium on your appetite!” ran an ad for the Hollywood Cabaret Restaurant.
The famous radio stars “Amos ’n’ Andy” (Freeman Gosden and Charles Correll) wrote to Roosevelt offering to devote their broadcast to explaining the holiday. One Salt Lake City man paid for a ride on a trolley with a pair of pants (not the ones he was wearing at the time). Reno, Nevada, suspended divorces because people couldn’t pay the fees. “A bank holiday is no time to hang a man,” the governor of California announced, as he stayed an execution. The only politician who seemed to have any cash on him was Huey Long. When Arthur Krock of the Times ran into him in the Senate antechamber, Long asked, “Do you need any money?” and pulled out a large wallet stuffed with high-denomination bills. Krock demurred.
Personal checks—soon to be a permanent way of life—got a big boost from the holiday, and informal IOUs sprung up everywhere. One barter system that worked well took place outside the Golden Gloves boxing semifinals at St. Nick’s Arena on West Sixty-sixth street in New York. The New York Daily News, sponsor of the tournament, announced that the admission price for balcony seats was being lowered to fifty cents, payable in any household goods of that value, plus a nickel to pay the tax. Neckties, spark plugs, a ham, sweaters, Bibles, “step-in” shoes, and packages of hot dogs were offered and accepted, with the police sometimes acting as good-natured appraisers. Nearby, the famous Roseland Ballroom featured “taxi dancers” (“Ten Cents a Dance!”) who accepted the IOUs of customers able to show them their bank passbooks. Variety reported a box office slump but added cheerfully that hens, fruits, and other edibles were being traded for admission.
The “funny money” alternatives weren’t always so amusing. In Chicago, teachers who had gone unpaid for ten months finally began to be compensated in city-backed scrip, which didn’t offer full value. The local currency situation was complicated by Colonel Robert McCormick, owner of the Chicago Tribune and an FDR acquaintance at Groton, who issued his own “dollars” with a picture of Theodore Roosevelt.
In Midland, Michigan, the Dow Chemical Company minted “Dow-Metal Money” out of magnesium, with a value of twenty cents a coin, which was less than workers were charged for it. In Detroit, now in its fourth week of “holiday,” more than one thousand city laborers found their paychecks useless. After several fainted from hunger, they were issued emergency food cards.
Almost everyone was touched. The previous week, W. R. Hearst had gone secretly to a Los Angeles bank for a loan to save his tottering empire, putting up his palace at San Simeon as security. Because of the confusion with the holiday, Harry Chandler, publisher of the Los Angeles Times and a member of the board of the bank, had to come up with the money personally, which he shifted into the bank. Hearst never found out that his rival now had a mortgage on him. At the other end of the income scale, James “Scotty” Reston, soon to be perhaps the best-known New York Times man of the century, was in the middle of his senior year at the University of Illinois when his hundred-dollar tuition check bounced because the Ohio bank on which it was drawn had failed. He barely avoided expulsion.
Man-in-the-street interviews turned into competitions over who was keeping the stiffer upper lip, with no one wanting to be seen as unduly troubled by events. But the pages of newspapers were full of encomiums for Roosevelt. “Now is the time for all of us to fall in behind this man and march toward wherever he is leading, whether it be toward Socialism, Fascism, Bryanism or simply old-fashioned Jeffersonism,” wrote one man to the New York Daily News, signing himself “PATRIOT.”
A more refined version of the same spirit greeted the president on Monday, when thirteen of the nation’s most illustrious citizens—including Al Smith, Walter Lippmann, Newton Baker, and Nicholas Murray Butler—signed a letter to the conference of governors about to convene at the White House. After praising Roosevelt for building confidence, the letter argued that the ordinary operations of government “may be too slow” to meet the emergency.
With cash scarce, scrip now had its moment, as it had during the Panic of 1907. The New York state Assembly quickly gave Governor Lehman authority to issue scrip certificates, and he appointed Al Smith to run one of the clearinghouses issuing them. However, critics of scrip made the convincing point that it would quickly drive currency out of circulation, and people would start hoarding it the way they did gold and silver.
It wasn’t as if Roosevelt had any better ideas yet. On Monday, March 6, after learning of Mayor Cermak’s death in Miami and attending Senator Walsh’s funeral, FDR hosted the governors’ conference at the White House. He told the governors he couldn’t be specific about how he would ease the crisis because it wouldn’t be prudent. In fact, he couldn’t be specific because he had nothing to say. The advisers who had met on Sunday were at sea, bereft of consensus on anything beyond reopening the banks. Woodin came to the Oval Office to tell Roosevelt that the group had no fresh ideas to offer.
The biographer Kenneth Davis compares FDR in this period to Kutuzov in Leo Tolstoy’s War and Peace. He understood that there was “something stronger than his own will” and that his responsibility was “not to bring in any plan of his own” or to “devise or undertake anything” but to “hear everything, remember everything…put everything in its proper place.”
But if FDR was mostly a sifter of the ideas of others, he occasionally threw out a wacky one of his own. Recalling his days selling bonds, he now suggested that all $21 billion in government bonds be immediately redeemable for cash, no matter what the maturity date. When word of this filtered back to the bankers and government officials, they were horrified. The resulting inflation would be so cataclysmic it would destroy the credit of the United States. Woodin explained this to Roosevelt and the “brainstorm”—like so many others over the years—was abandoned. FDR was always willing to listen to someone smarter tell him why his idea was no good.
The more immediate problem was the currency. There wasn’t enough of it, but just printing more would kick off inflation. On Monday evening, Woodin and Moley agreed that the whole question of solvency depended on “make-believe,” or public confidence. To bring that back, they decided to exclude from their deliberations all of the radical and visionary types who were everywhere that week. Some were old William Jennings Bryanites, dedicated to silver coinage as a magic elixir; others were college professors with intriguing but unproven new theories. But the new team’s plan contained no radical or even unorthodox ideas. The only new thing was how boldly and quickly they moved. All of the frenzied motion masked the essentially conservative nature of the rescue operation.
As part of staying fiscally conservative, Moley and Woodin agreed that night that the first big bill to be introduced after the banking rescue should be what they called the “economy” bill. This would slash the budget, as Roosevelt had promised and his aggressive young budget director, Lewis Douglas, thought essential. The one thing they didn’t resolve was the question of scrip.
The next morning at breakfast, Woodin told Moley that he had spent the rest of the night playing his guitar to clear his mind, read a novel for an hour or so and dozed, then come to a decision about what he would recommend to FDR.
“We don’t have to issue scrip,” Woodin told Moley. They would just print more money, as allowed by the 1913 Federal Reserve Act, but with a clever twist. Instead of Federal Reserve Notes (the line printed to this day at the top of every dollar bill), the Treasury would issue Federal Reserve Bank Notes, which looked the same but would be backed by the collateral of Fed-associated banks, not by gold. Over breakfast the next morning, he told Moley that unlike scrip, “It won’t frighten people. It won’t look like stage money. It will be money that looks like money.”
By this time, Woodin was drawing close to the press, offering impromptu mandolin recitals and ready quips. He had to be dissuaded by Charlie Michelson from putting a big refrigerator stocked with beer in his Carlton Hotel room. Even so, the reporters looked out for him in ways that would be unimaginable today, piping up to warn that something sensitive Woodin said should be “off the record.”
The bankers’ deliberations were going badly, with Melvin Traylor almost dissolving into tears at one point. The financial types grew annoyed at Michelson’s insistence that if he, a journalist, couldn’t understand their proposals, neither would the public. Finally, at 11:00 p.m. on Tuesday, March 7, the Hoover holdovers at Treasury, Arthur Ballantine and Walter Wyatt, began to draft the Emergency Banking Act, which was to be submitted to Congress on Thursday. The bill offered the president unprecedented control over the financial system, ratifying not only what he had done in the previous days but what he might do “hereinafter.” It reopened the banks Friday, gave authority to the Treasury to reorganize insolvent banks, authorized the Federal Reserve to issue more money (with Woodin’s twist), and cracked down on gold hoarding.
Not that Congress cared about the specifics. Shortly after the bill was finished in the wee hours of March 9, Chairman Henry Steagall of the House Banking and Currency Committee was given a copy, one of only three or four in existence. (One story had it that he had only a napkin with a few provisions scrawled on it.) Steagall strode onto the floor of the House shouting, “Here’s the bill. Let’s pass it!” and his colleagues did so on a voice vote, without reading a word of it, as Eleanor sat watching placidly from the gallery, knitting. Bertrand H. Snell, the House Republican leader, who suffered under a 302–110 Democratic majority, admitted that it was “entirely out of the ordinary” that the bill had not even been printed and distributed before it was voted upon. But the urgency of the moment trumped any interest in reading the legislation, much less debating it.
Senate passage was a little more complicated, with Huey Long—defender of small banks—opposed to the bill and Carter Glass attacking Long’s “ignorance.” As the debate ended, Glass whirled on Long, who had been attacking him personally all day. “You damn sonofabitch!” Glass shouted. Long used the same expletive in reply and the two Democrats were about to exchange blows when Joe Robinson, the new majority leader, intervened. The bill passed 73–7 and was sent to the president and signed a mere seven hours after it was introduced, the first New Deal legislation written, though the public didn’t know it, by Hoover’s men. “The President drove the money-changers out of the Capitol on March 4th—and they were all back on the 9th,” one congressman commented.
Franklin Roosevelt now had close to total authority over credit, foreign exchange, and gold purchases, arguably the largest peacetime grant of authority in American history. ROOSEVELT GETS POWERS OF DICTATOR READ the headline in the March 11, 1933, New York Times. But he was given those powers by Congress; he did not assume them on his own based on some imperial reading of the Constitution. At the very moment when he could have pressed further, Roosevelt chose the path of restraint. Armed with new authority, his strategy for reviving confidence in the financial world nonetheless consisted mostly of not fulfilling the worst fears about him, at least not immediately. And of course he never assumed the worst aspects of dictatorship. “It is one of the great humanitarian qualities of the New Deal that it does not guillotine, imprison or exile the Public Enemies,” the journalist John Franklin Carter wrote, without meaning it as a backhanded comment.
Contrary to myth, the initial surge of confidence in the banks that winter had nothing to do with bank deposit insurance, which had not yet been enacted. Ironically, this key to restoring long-term confidence in the banks was adamantly opposed by FDR at the time. “It won’t work, John. You had it in Texas and it was a failure,” he had told Garner before the Inauguration. “The weak banks will pull down the strong.” Throughout the spring, Roosevelt argued that the insurance premiums forced on the healthy banks would cripple them. He repeatedly told Congress and the press that he would veto any bill with deposit insurance. The sincerity of that threat became one of the great guessing games of the Hundred Days.
More often than not, the new president made the right moves, especially when they involved the press and public. On March 8, he hit on a way to retrieve most of the gold that had seeped out of the banks in the previous weeks. At his direction, the Fed announced that it would publish a list of those who had withdrawn gold coins or bullion since February 1 and not returned the gold as of Monday, March 13. Suddenly, sheepish investors began to form lines at banks, determined to avoid having their names printed in the newspapers as unpatriotic hoarders. By Friday, March 10, an estimated four thousand people had passed through bank lines in New York City alone, bringing back $300 million in gold and gold certificates. With the Emergency Banking Bill completed and the fiscally conservative budget bill on the way, investor confidence was beginning to stir again.
Moley wrote in 1939 that the key moment of the Hundred Days was the rescue of the banks. “Capitalism,” he concluded, “had been saved in eight days.”