|FDR Delivering a "Fireside Chat"|
In their way, they were as revolutionary as President Trump's Tweets.
FDR had told his Republican Treasury Secretary, William H. Woodin, that he didn't want to be bothered with the details of actions to solve the bank panic because he was going to concentrate on communicating the resolution to the public. FDR began his first address with the words:
“I want to talk for a few minutes with the people of the United States about banking.”Columbia Prof. Raymond Moley had been serving as FDR's adviser on the banking crisis, wanted to consult with FDR at every point. He was disappointed that FDR didn't want to be involved, but the President wanted to concentrate on honing his message.
Secretary Will Woodin had been a manager and a CEO a quarter of a century and knew exactly what he had to do. He went right to work. His contribution to calming the panic has never been adequately appreciated and remembered.
The Friday before FDR's inauguration, most banks had already been closed because so many states had initiated their own bank holidays, to give the banks some breathing room as depositors were lining up to withdraw all their money (outgoing President Hoover wouldn't act without FDR's agreement, and FDR's position was that he was not going to try to second-guess Hoover until he became President on March 4).
The local scenes of panic throughout the banking system were exemplified vividly in Frank Capra's movie It's a Wonderful Life (1947), starring Jimmy Stewart as small-town banker George Bailey, who is considering suicide as he sees his depositors destroying his bank, one depositor at a time, while others not in line were desperately worried about their deposits.
FDR's first act was to announce a Federal "bank holiday" – i.e., a presidentially ordered closing of all banks – pending examination of the banks, starting with the largest ones first. The idea was that only "sound" (solvent) banks would be reopened.
Secretary Woodin knew what to do as a top manager, because he had been Chairman of a locomotive company and President of a railway car manufacturer that in 1928 were two of the 20 companies in the Dow Jones Industrial Average. He started working around the clock as if it were a three-shift factory, pushing government staff to:
- Print $2 billion more greenbacks for the banks to have on hand.
- Publicize the printing and packing of the greenbacks with filmed news clips for the cinemas, the equivalent of today's YouTube posts.
- Ensue that all the banks in the country were closed.
- Examine the banks one by one for solvency, with priority given to the largest banks.
- Reopen the sound banks.
- Take steps to close and liquidate the unsound banks.
- Prepare new legislation to prevent a recurrence of the banking crisis–the legislation being passed within months as the Banking Act of 1933, aka the Glass-Steagall Act, named for the bank-regulatory provisions proposed by Senate Banking Chair Carter Glass (D-Va.) and the deposit-insurance plan proposed by House Banking Chair Henry B. Steagall (D-Ala.).
- Prepare new legislation to provide oversight over non-bank financial institutions, which became the Securities Exchange Act of 1933.
In his first radio Fireside Chat, FDR explained the closure of the banks as necessary to stop a surge in withdrawals by depositors afraid of losing their savings. Many banks would be reopening within days, FDR said, and he thanked Americans for their “fortitude and good temper” during the period of the bank holidays.
When FDR took office, the United States was at the low point of the Great Depression, with the unemployment rate between 25 and 33 percent (the reporting of unemployment became more precise during the next decade).
The Fireside Chat got its name from radio journalist Robert (Bob) Trout, called "the Iron Man of Radio" for his ability to keep up a patter during a breaking news story when new information arrived in dribs and drabs.
FDR's purpose was to inspire confidence in himself and in the nonfunctioning banking system. While the chats sound folksy, FDR took great pains to make them that way, using simple vocabulary and anecdotes. Presidents had previously communicated with their citizens almost exclusively through journalists. The Fireside Chats were without precedent and they were effective because radios were still magical and were owned by 90 percent of U.S. households. They were the 1933 equivalent of what Tweets are in the very different America of 2017.