Roosevelt's inauguration and the New Deal

At noon on an overcast Saturday, 4 March 1933, Franklin Delano Roosevelt took the oath of office as the 32nd President of the United States on the steps of the east portico of the Capitol. The oath was administered by Chief Justice Charles Evans Hughes, and Roosevelt rested his hand on his family’s Dutch-language Bible of 1686. In a twenty-minute address heard on the radio by tens of millions of Americans, he declared that “the only thing we have to fear is fear itself”. That day the banks in almost every state were either closed or restricting withdrawals. Over the next hundred days the new president and Congress carried through an unprecedented series of reforms that became known as the New Deal.

A country without money

Roosevelt had won the election on 8 November 1932, but the constitution made him wait four months to take office. In that time the Depression hit bottom. There were some 12–13 million unemployed, one worker in four, and even more in the industrial cities. On 14 February 1933, after the collapse of the big Detroit banks, the governor of Michigan closed every bank in the state for eight days. The panic spread across the country. People queued to withdraw their savings and hoarded cash and gold at home, while gold drained abroad from the reserves. State after state, governors declared “bank holidays”. On the morning of 4 March the banks in New York and Illinois closed, and the New York Stock Exchange suspended trading. The financial system of the world’s largest economy had practically ceased to function.

The interregnum also had a dramatic episode. On 15 February in Miami an unemployed bricklayer, Giuseppe Zangara, fired at the president-elect as he spoke from an open car. He missed, but fatally wounded the mayor of Chicago, Anton Cermak. The calm with which Roosevelt took the attempt on his life added to his authority. The outgoing president, Herbert Hoover, tried until the last moment to persuade his successor to join him in declaring that the new administration would maintain the gold standard and a balanced budget. Roosevelt refused, unwilling to tie his hands. When the two men drove together to the Capitol on 4 March, they barely spoke to each other.

Across the ocean, meanwhile, the Depression was having quite different consequences. Five weeks before Roosevelt’s inauguration Adolf Hitler had become Chancellor of Germany, and after the Reichstag fire the decree of 28 February had suspended basic civil rights in Germany. The day after Roosevelt was sworn in, Germans went to the polls in the last Reichstag election, held in an atmosphere of terror.

“Fear itself”

The inaugural address, prepared with the help of his adviser Raymond Moley, was short and combative. Roosevelt promised to tell the nation “the whole truth, frankly and boldly”. The only thing to be feared, he said, was fear itself – a “nameless, unreasoning, unjustified terror” that paralysed the efforts needed to turn retreat into advance. He indicted the bankers, the “money changers” who had fled from their high seats in the temple of civilisation. He called giving people work the greatest task of all. He announced supervision of banking and credit that would put an end to speculation with other people’s money.

The ending struck the strongest note. Roosevelt declared that if Congress did not adopt his proposals, he would ask it for “broad Executive power to wage a war against the emergency”, as great as the power he would be given if the country were in fact invaded by a foreign foe. These words drew the loudest applause. On foreign policy he devoted a single sentence to announcing the policy of the “good neighbor”, who respects himself and the rights of others. In the evening his cabinet was sworn in at the White House. It included Frances Perkins as Secretary of Labor, the first woman in a cabinet in the history of the United States; Cordell Hull became Secretary of State and Harold Ickes Secretary of the Interior.

It was the last inauguration held on 4 March. In January 1933 the ratification of the Twentieth Amendment to the constitution had been completed, moving the start of the presidential term to 20 January. Roosevelt’s first term was consequently 43 days shorter.

The Hundred Days

On Sunday 5 March Roosevelt called Congress into special session, and on the night of 5–6 March, invoking the Trading with the Enemy Act of 1917, he proclaimed the closure of every bank in the country and a ban on the export of gold. On 9 March Congress passed in a single day – in the House of Representatives almost without reading it – the Emergency Banking Act, drafted largely by officials left over from the Hoover administration. It allowed banks found solvent after inspection to reopen, and the Federal Reserve undertook to supply them with cash. On the evening of 12 March, in his first radio “fireside chat”, Roosevelt explained in simple words why money was safer in a reopened bank than under the mattress. When the banks began to reopen from 13 March, people paid their money back in. Within two weeks more than half of the cash withdrawn during the panic had returned to the banks, and on 15 March the Dow Jones index rose by more than 15 per cent, which remains its largest one-day percentage gain. Some of the weakest banks stayed closed, many of them for good.

Congress sat until mid-June and in that time passed fifteen major laws. From April the sale of weak beer was permitted, and in December 1933 Prohibition was repealed. The Civilian Conservation Corps employed young unemployed men in forestry and conservation work in camps run by the army. Federal relief for the unemployed, directed by Harry Hopkins, was channelled to the states. The farm act paid farmers to cut production in order to raise prices. The Tennessee Valley Authority began building dams and power stations in one of the poorest regions of the country. A new law placed the issue of securities under supervision, and the Glass–Steagall Act separated deposit banking from investment banking and introduced federal deposit insurance. On 16 June Roosevelt signed the industrial recovery act, which set up an agency to draw up codes of fair competition, minimum wages and working hours, together with a large public works programme. In April the president banned the private hoarding of gold and took the country off the gold standard, allowing the dollar to fall.

Significance

The New Deal did not abolish unemployment. It fell markedly until 1937, but rose again in the next recession and disappeared only with wartime rearmament. The Supreme Court later struck down some of the laws as unconstitutional. What mattered most, however, was something else. At a time when in Germany the Depression had handed power to Hitler, who less than three weeks after Roosevelt’s inauguration received from the Reichstag the right to make laws without parliament, the United States emerged from the deepest crisis in its history without abandoning democracy. Roosevelt asked for emergency powers, but he acted through Congress, under the scrutiny of the courts and a free press, and in 1936 he submitted himself to the judgement of the voters. Many Europeans, disillusioned with liberal democracy, saw the future at that time in fascism or communism. The New Deal showed that there was a third way.

Roosevelt’s first years were nevertheless a time of American withdrawal into itself. In the summer of 1933 the president torpedoed the London Economic Conference by rejecting currency stabilisation, because recovery at home mattered more to him. At the end of the year he established diplomatic relations with the USSR, but towards Japan, which had set up a puppet state in Manchuria, and towards Germany he confined himself to words. Yet the New Deal also had a dimension that proved important for the coming war. In June 1933 the president, a former Assistant Secretary of the Navy, allocated some 238 million dollars from public works funds to the construction of 32 warships, among them the aircraft carriers Yorktown and Enterprise, which fought at Midway in June 1942. And a state that in the 1930s had learned to plan, finance and organise the economy on a grand scale turned it a few years later into the “arsenal of democracy”.