FDR | Mar. 12–First Fireside Chat, 1933

FDR Delivering "Fireside Chat"

On this day in 1933, eight days after his inauguration, President Franklin D. Roosevelt gave his first national radio address or “fireside chat,” broadcast directly from the White House.

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.”

He had told his lifelong-GOP Secretary of the Treasury, Will Woodin, that he didn't want to be bothered with the details of the solution to the bank panic because he was going to concentrate on communicating the resolution to the public. This was a disappointment to Columbia Prof. Raymond Moley, who was serving as FDR's adviser on the banking crisis and wanted to consult with FDR at every point, but Woodin went right to work.

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 become President until March 4).

The scene of panic throughout the banking system was shown 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.

FDR's first act was to announce a Federal bank holiday – i.e., a presidentially ordered closing of the banks – pending examination of all the banks (largest ones first) and the reopening only of the solvent banks. 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. 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.
• Close the banks.
• Examine the banks one by one for solvency, on a priority basis.
• 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.

Meanwhile, FDR laid the public-communications groundwork for all these steps. In his Fireside Chat he explained the closure of the banks as necessary to stop a surge in withdrawals by panicked depositors. Many banks would be reopening the next day, 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 suffering the highest rate of unemployment, with between one-fourth and one-third of workers being unemployed.

The Fireside Chat got its name from radio journalist Robert (Bob) Trout, who was called "the Iron Man of Radio" for his ability to keep talking during a breaking news story. 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.

CHINA | Its Move Today vs. FDR's in 1933-34

FDR's moves to stabilize financial markets and devalue the
dollar paid off.

China's devaluing the renminbi (aka the yuan) appears to be based on the idea that by devaluing in stages, the rest of the world is less likely to care.

Actually, no.

It seems that the Chinese government had in mind loosening the effective peg of the renminbi to the dollar, allowing the currency to fluctuate within a wider band against the dollar.

But markets react fast. Once people in the marketplace think they understand what is happening, they worry about losing money every minute they delay in acting on the knowledge.

FDR and his first Treasury Secretary, Will Woodin, had the brains first to stabilize the financial markets in March-April 1933, and then to buy all private gold in May 1933. They were preparing quietly for a devaluation in order to:

• reduce the foreign (gold) equivalent of U.S. public and private debts
• encourage exports and
• discourage imports.

Gold played a role vis-a-vis the dollar then that the dollar today plays vis-a-vis the renminbi.

FDR in 1933 forced the sale to the government of private gold (other than gold coins in the hands of collectors). Then, at the beginning of 1934, FDR devalued the dollar against gold in one fell swoop, from $20.67 for an ounce of gold, where it had been for a century (except for the Civil War), to $35 an ounce.

His action was meant to be a one-time event, and so it turned out to be.

An example of what appears to be the Chinese program is conveyed by an old Irish joke. A Kerry man in the Dail urges his colleagues to change all the road signs so that vehicles drive on the right, as they do in Continental Europe. He figured that the cost could be spread out over several years. The first year they would move the trucks over to the right lane. Then they would move the buses, and the third year they would move over the private cars.

As Lady Macbeth says in Act 1, Scene 7: "If it were done when 'tis done, then 'twere well / It were done quickly." FDR understood that. The Chinese government, if we understand their moves aright,  does not.