As President-elect Obama and British Prime Minister Brown study Franklin Roosevelt’s famous Hundred Days and look to him for inspiration, it is salutary to remember how unprepared FDR was for the financial crisis that faced him, and how improvisational his response was. The Hundred Days were to a large extent an accident. Roosevelt had to deal with the immediate crisis that had closed most of the nation’s banks, but he took advantage of it by asking Congress to stay in session to pass unprecedented recovery and reform legislation.
Inauguration day, March 4, 1933, was a Saturday. New York and Illinois shut their banks that morning, the climax of months of relentless pressure that brought the entire banking system to a halt. Roosevelt’s advisers, who had no plans of their own, turned to holdover Treasury and Federal Reserve officials for help. Those advisers resurrected proposals that had been drafted and set aside during the outgoing Hoover administration. Roosevelt proclaimed a national bank holiday on March 5 and summoned Congress into special session for the following Thursday. On Tuesday, March 7, Federal Reserve official Walter Wyatt was summoned to the White House to draft a banking bill. He asked what the administration wanted. The White House reply was spare, to say the least. “Ratify the Bank Holiday, preferred stock in the national banks…. The Bank Conservation Act, and a few things like that,” Wyatt said in an oral history decades later. “I had a little slip of paper in my hand about that big, and I wrote one line on each subject. That’s all I had to go by.” In the days to come, neither bankers nor Roosevelt’s administration team nor Congressional leaders had much to add to what Wyatt and his team proposed.
Wyatt was amazed at how unprepared Roosevelt’s people were. “There wasn’t anybody in that entire Brains Trust, apparently, that had given any thought–they certainly had no plans–or any real study to the problem created by this banking situation,” he said. Wyatt worked feverishly in the next twenty-four hours to draft a bill. When he finished, he told the White House, “In the few hours we’ve got, you can’t improve this thing. And you might ruin it.” The House passed Wyatt’s bill, the Emergency Banking Act, on March 9, after only forty-three minutes of debate, even though House leaders had been given just one copy of it. The Senate was slightly more leisurely, passing the bill later the same day.
Over the next three days Treasury officials and bankers tried to work out which banks would be safe to reopen. They erred on the side of optimism, but ultimately success would depend on a “man-to-man appeal for public confidence” by the president, as a memo from his advisers put it. When he addressed the nation in the first of his fireside chats, on March 12, it was a tremendous gamble. Roosevelt told Americans that it was safer to put their money back in the banks, which were scheduled to reopen the next day, than to leave it under the mattress. They believed him, and sure enough, money flowed back into the system. There was no Plan B–if people had continued to keep their money out, absolute disaster would have followed. The difference between success and failure was extraordinarily narrow.