Wall Street Hated FDR Too

If Wall Street hates Obama today for putting a cap on the salaries of executives taking a government bailout, he finds himself in the tradition of the president he is most compared to.

From the start of his presidency FDR stood up to Wall Street, who hated him in return. But the implosion of capitalism seemed to prove its many critics right. Herbert Hoover, FDR's predecessor, tried to say Wall Street wasn't responsible, as if the Depression was some kind of natural disaster.

Roosevelt rejected that markets are acts of nature rather than of men. At his July 1932 nominating convention he called for a "crusade to restore America to its own people." We heard similar stuff from Obama's campaign but his inaugural address two weeks ago fell short of the attack on Wall Street that permeated FDR's March 1933 inaugural. Roosevelt went so far as to attack our original national sin: the supreme love of money:

We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous moneychangers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish. The moneychangers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths.

The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit. Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

Roosevelt began this speech with the words for which he will always be remembered: "This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself--nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance."

As Obama is trying to do quickly with his stimulus bill, FDR did within eight days of his inauguration when he pushed through the first of his banking reform bills, the Emergency Banking Act. The day after being sworn in he had closed all banks for four days after nationwide panic withdrawals. The Act closed insolvent banks. After government inspection some were reopened. Roosevelt's words and this Act helped restore some confidence.

The new president went on the air little more than a week on the job to tell Americans to take their money from under the mattress and put it back in the bank. Later in 1933 FDR pushed through the second Glass-Steagall Act, which separated commercial from investment banking to keep the people's money more secure. This remained the law until Bill Clinton overturned it in 1999. He had come under the sway of Wall Street speculators, with an assist from Treasury Secretary Robert Rubin. The major beneficiary of the repeal was Citigroup, which became the much-heralded first financial supermarket. When he left government Rubin was then rewarded with Citigroup's CEO job. Nice. Ten years later Citigroup has collapsed, laissez-faire has been repudiated and re-regulation is the order of the day.

It remains to be seen how far Obama will go to change a failed economic system and how much Wall Street will hate him for it. It certainly despised FDR and he hardly instituted social democracy, just as Obama is so far stopping short. General Smedley Butler in 1934 revealed a plot by Wall Street admirers of European fascism to overthrow Roosevelt. Butler testified to Congress that they approached him to raise an army of 500,000 men to march on Washington. The plotters Butler named denied it. During his 1936 election campaign, Roosevelt made one of his best remarks: "We know now that government by organized money is just as dangerous as government by organized mob. They are unanimous in their hatred for me and I welcome their hatred."

FDR was right to claim after his 1936 re-election that he had saved capitalism from the excesses of a communist or anarchist revolt. There was great anger in the land and labor unrest then, the kind we are seeing in Europe today and possibly again in America? It is not widely understood today how popular communism and anarchism had become in the U.S. Several public buildings were bombed and businessmen and their allies in Congress genuinely feared social revolution.

From 1919 to 1921 the Justice Department, headed by Attorney General A. Mitchell Palmer, with his assistant J. Edgar Hoover, had overreacted to "Reds" by rounding up thousands of immigrants from their homes and deporting them in what came to be known as the Palmer Raids. With Woodrow Wilson's backing, Palmer went ballistic because a bomb went off near his home. In 1915, Wilson had already warned in racist tones of "hyphenated Americans who have poured the poison of disloyalty into the very arteries of our national life. Such creatures of passion, disloyalty and anarchy must be crushed out."

But communism only became something of a force in the thirties when capitalism utterly collapsed. Its popularity pushed Roosevelt to the left. It drove him to come up with reforms that at once helped Americans and staved off possible revolution. The key elements of the New Deal of course were Social Security and public works programs that put Americans to work in government jobs rebuilding the country's infrastructure. The interstate highway system and the Hoover Dam are the most visible lasting achievements on a grand scale. Thousands of neighborhood playgrounds were built closer to home. If Obama plays his cards right he'll have a similar legacy of parks and high-speed railways--and the everlasting hatred of Wall Street.

I adapted the above from A Political Odyssey: The Rise of American Militarism and One Man's Fight to Stop It by Sen. Mike Gravel and Joe Lauria. www.politicalodyssey.com