George Bittlingmayer and Thomas Hazlett: FDR's Conservative 100 Days

Roundup: Talking About History

[Mr. Bittlingmayer is professor of finance at the University of Kansas. Mr. Hazlett is professor of law and economics at George Mason University.]

The Obama administration's opening policy sprint -- massive deficits and bailouts, with sweeping health-care and education reform, plus cap and trade to come -- has been likened by the president himself to Franklin D. Roosevelt's famous first 100 days.

But FDR did not launch his New Deal with a program that roiled financial markets. On the contrary, his first step was to stem the banking panic with a national bank holiday (many states had already imposed their own). He closed troubled institutions, injected capital into the healthy ones, and reassured Americans that their deposits would be safe.

His approach met with quick success. The New York Stock Exchange, closed during the bank holiday, opened up 15% on March 15. By July 3, the Dow Jones Industrial Average was 93% above its close on March 3, the day before Inauguration Day in 1933. FDR's fast start, embraced by Wall Street, provided him with early, and crucial, political capital when his agenda later veered left.

As Raymond Moley, an FDR adviser intimately involved in crafting the bank holiday and other 100 days policies, wrote in his book, "After Seven Years," "It cannot be emphasized too strongly that the policies which vanquished the bank crisis were thoroughly conservative . . . Those who conceived and executed them were intent upon rallying the confidence, first, of the conservative business and banking leaders of the country and, then, through them, of the public generally."

Moley stressed that the policy relied on "conventional banking methods" and eschewed "any unusual or highly controversial measures." As FDR said in his first fireside chat, "I hope you can see from this elemental recital of what your government is doing that there is nothing complex, or radical in the process."

Roosevelt initially tacked right on fiscal issues. On March 10, he asked Congress to slash the salaries of federal government employees by $100 million, with an additional $400 million sliced from veterans' pensions. This stunning cut -- total annual federal expenditures then running at $4.6 billion -- came in a measure called "A Bill to Maintain the Credit of the United States Government."

Moley said the "psychological effect was electric. The bill [was] greeted with loud shouts of approval by all articulate conservatives. But I am confident that deep down in the consciousness of the average people of the country it found a similar response. Somehow or other . . . Hoover had always seemed to be an expensive President."...
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