The Days Of Boom And Bust


Outside of Washington in the twenties, the business and banking community, or at least the articulate part of it, was overwhelmingly opposed to any public intervention. The tentative and ineffective steps which the Federal Reserve did take were strongly criticized. In the spring of 1929 when the Reserve system seemed to be on the verge of taking more decisive action, there was an anticipatory tightening of money rates and a sharp drop in the market. On his own initiative Charles E. Mitchell, the head of the National City Bank, poured in new funds. He had an obligation, he said, that was “paramount to any Federal Reserve warning, or anything else” to avert a crisis in the money market. In brief, he was determined, whatever the government thought, to keep the boom going. In that same spring Paul M. Warburg, a distinguished and respected Wall Street leader, warned of the dangers of the boom and called for action to restrain it. He was deluged with criticism and even abuse and later said that the subsequent days were the most difficult of his life. There were some businessmen and bankers—like Mitchell and Albert Wiggin of the Chase National Bank—who may have vaguely sensed that the end of the boom would mean their own business demise. Many more had persuaded themselves that the dream would last. But we should not complicate things. Many others were making money and took a short-run view—or no view—either of their own survival or of the system of which they were a part. They merely wanted to be left alone to get a few more dollars.

And the opposition to government intervention would have been nonpartisan. In 1929 one of the very largest of the Wall Street operators was John J. Raskob. Raskob was also chairman of the Democratic National Committee. So far from calling for preventive measures, Raskob in 1929 was explaining how, through stock market speculation, literally anyone could be a millionaire. Nor would the press have been enthusiastic about, say, legislation to control holding companies and investment trusts or to give authority to regulate margin trading. The financial pages of many of the papers were riding the boom. And even from the speculating public, which was dreaming dreams of riches and had yet to learn that it had been fleeced, there would have been no thanks. Perhaps a President of phenomenal power and determination might have overcome the Coolidge-Hoover environment. But it is easier to argue that this context made inaction inevitable for almost any President. There were too many people who, given a choice between disaster and the measures that would have prevented it, opted for disaster without either a second or even a first thought.

On the other hand, in a different context a strong President might have taken effective preventive action. Congress in these years was becoming increasingly critical of the Wall Street speculation and corporate piggery-pokery. The liberal Republicans—the men whom Senator George H. Moses called the Sons of the Wild Jackass—were especially vehement. But conservatives like Carter Glass were also critical. These men correctly sensed that things were going wrong. A President such as Wilson or either of the Roosevelts (the case of Theodore is perhaps less certain than that of Franklin) who was surrounded in his Cabinet by such men would have been sensitive to this criticism. As a leader he could both have reinforced and drawn strength from the contemporary criticism. Thus he might have been able to arrest the destructive madness as it became recognizable. The American government works far better—perhaps it only works—when the Executive, the business power, and the press are in some degree at odds. Only then can we be sure that abuse or neglect, either private or public, will be given the notoriety that is needed.

Perhaps it is too much to hope that by effective and timely criticism and action the Great Depression might have been avoided. A lot was required in those days to make the United States in any degree depression-proof. But perhaps by preventive action the ensuing depression might have been made less severe. And certainly in the ensuing years the travail of bankers and businessmen before congressional committees, in the courts, and before the bar of public opinion would have been less severe. Here is the paradox. In the full perspective of history, American businessmen never had enemies as damaging as the men who grouped themselves around Calvin Coolidge and supported and applauded him in what William Allen White called “that masterly inactivity for which he was so splendidly equipped.”