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The Days Of Boom And Bust
As the twenties roared on, a market crash became inevitable. Why? And who should have stopped it?
August 1958 | Volume 9, Issue 5
For one thing, Hoover was no newcomer to Washington. He had been secretary of commerce under Harding and Coolidge. He had also been the strongest ligure (not entirely excluding the President) in both Administration and party for almost eight years. He had a clear view of what was going on. As early as 1922, in a letter to Hughes, he expressed grave concern over the quality of the foreign loans that were being floated in New York. He returned several times to the subject. He knew about the corporate excesses. In the latter twenties he wrote to his colleagues and fellow officials (including Crissinger) expressing his grave concern over the Wall Street orgy. Yet he was content to express himself—to write letters and memoranda, or at most, as in the case of the foreign loans, to make an occasional speech. He could with propriety have presented his views of the stock market more strongly to the Congress and the public. He could also have maintained a more vigorous and persistent agitation within the Administration. He did neither. His views of the market were so little known that it celebrated his election and inauguration with a great upsurge. Hoover was in the boat and, as he himself tells, he knew where it was headed. But, having warned the man at the tiller, he rode along into the reef.
And even though trouble was inevitable, by March, 1929, a truly committed leader would still have wanted to do something. Nothing else was so important. The resources of the Executive, one might expect, would have been mobilized in a search for some formula to mitigate the current frenzy and to temper the coming crash. The assistance of the bankers, congressional leaders, and the Exchange authorities would have been sought. Nothing of the sort was done. As secretary of commerce, as he subsequently explained, he had thought himself frustrated by Mellon. But he continued Mellon in office. Henry M. Robinson, a sympathetic Los Angeles banker, was commissioned to go to New York to see his colleagues there and report. He returned to say that the New York bankers regarded things as sound. Richard Whitney, the vice-president of the Stock Exchange, was summoned to the White House for a conference on how to curb speculation. Nothing came of this either. Whitney also thought things were sound.
Both Mr. Hoover and his official biographers carefully explained that the primary responsibility for the goings on in New York City rested not with Washington but with the governor of New York State. That was Franklin D. Roosevelt. It was he who failed to rise to his responsibilities. The explanation is far too formal. The future of the whole country was involved. Mr. Hoover was the President of the whole country. If he lacked authority commensurate with this responsibility, he could have requested it. This, at a later date, President Roosevelt did not hesitate to do.
Finally, while by March of 1929 the stock market collapse was inevitable, something could still be done about the other accumulating disorders. The balance of payments is an obvious case. In 1931 Mr. Hoover did request a one-year moratorium on the inter-Allied (war) debts. This was a courageous and constructive step which came directly to grips with the problem. But the year before, Mr. Hoover, though not without reluctance, had signed the Hawley-Smoot tariff. “I shall approve the Tariff Bill.…It was undertaken as the result of pledges given by the Republican Party at Kansas City. … Platform promises must not be empty gestures.” Hundreds of people—from Albert H. Wiggin, the head of the Chase National Bank, to Oswald Garrison Villard, the editor of the Nation —felt that no step could have been more directly designed to make things worse. Countries would have even more trouble earning the dollars of which they were so desperately short. But Mr. Hoover signed the bill.
Anyone familiar with this particular race of men knows that a dour, flinty, inscrutable visage such as that of Calvin Coolidge can be the mask for a calm and acutely perceptive intellect. And he knows equally that it can conceal a mind of singular aridity. The difficulty, given the inscrutability, is in knowing which. However, in the case of Coolidge the evidence is in favor of the second. In some sense, he certainly knew what was going on. He would not have been unaware of what was called the Coolidge market. But he connected developments neither with the well-being of the country nor with his own responsibilities. In his memoirs Hoover goes to great lengths to show how closely he was in touch with events and how clearly he foresaw their consequences. In his Autobiography , a notably barren document, Coolidge did not refer to the accumulating troubles. He confines himself to such unequivocal truths as “Every day of Presidential life is crowded with activities” (which in his case, indeed, was not true); and “The Congress makes the laws, but it is the President who causes them to be executed.”