FDR's Emergency Measures—the First Hundred Days

In his Inaugural address, President Franklin D. Roosevelt identified the horror which the U.S. population faced, and pledged himself to "action, and action now." This he delivered, with an immediate, and unprecedented, array of actions—not through dictatorship, but through the Constitutional legislative process, amplified by his direct leadership role with the population through his Fireside chats.

We provide a quick overview here, as an illustration of that to which Lyndon LaRouche refers when he wrote, Sept. 1, of FDR's "sense of urgency in Spring-Summer 1933" in taking "certain sweeping actions ... to actually set the general economic recovery into motion."

1. March 5 The day after the Saturday March 4 inauguration, FDR took two Executive actions: the Proclamation of a Bank holiday to last March 6-9 under provisions of the Trading with the Enemy Act, which froze all banking activity, including the transfer of gold and silver out of the country, and the calling of a Special Session of Congress for March 9.

2. On March 9, the Emergency Banking Act was presented and passed by the Congress. The Act functioned as the first step of what the Glass-Steagall reenactment would do today, by opening all banks to Federal audit, prior to reopening of those who met the appropriate qualifications on March 13.

The Banking Act set up three categories of banks. Those that were sound could reopen without problems. As for troubled banks, they could be aided either by the Reconstruction Finance Corporation or the Federal Reserve. The RFC would now purchase capital (stock equity) and capital notes of troubled banks, thus capitalizing the troubled banks, without adding to their debts. The Act also authorized the district Federal Reserve Banks of the Federal Reserve System to discount previously ineligible assets, and to issue new Federal Reserve notes against them, thereby increasing liquidity for the economy as a whole. And it instructed the Comptroller of the Currency to name receivers for the purpose of shutting down banks that were insolvent.

3. On March 12, FDR gave his first Fireside chat, in which he explained to the American people over the radio, just what he had done, and what the process of repair of the banking system would look like.

4. On March 20, the Congress passed the Economy Act, which gave FDR the power to carry out certain budget cuts in order to, as he put it, "maintain the credit of the U.S. government."

5. On March 21, FDR issued a message to Congress on how to deal with the jobs crisis:

To the Congress:

It is essential to our recovery program that measures immediately be enacted aimed at unemployment relief. A direct attack on this problem suggests three types of legislation.

The first is the enrollment of workers now by the Federal Govenrment for such public employment as can be quickly started and will not interfere with the demand for or the proper standards of normal employment.

The second is grants to States for relief work.

The third extends to a broad public works labor-creating program.

With reference to the latter I am now studying the many projects suggested and the financial questions involved. I shall make recommendations to the Congress presently.

In regard to grants to States for relief work, I advise you that the remainder of the appropriation of last year will last until May. Therefore, and because a continuance of Federal aid is still a definite necessity for many States, a further appropriation must be made for the end of this special session.

I find a clear need for some simple Federal machinery to coordinate and check these grants of aid. I am, therefore, asking that you establish the office of Federal Relief Administrator, whose duty it will be to scan requests for grants and to check the efficiency and wisdom of their use.

The first of these measures which I have enumerated, however, can and should be immediately enacted. I propose to create a civilian conservation corps to be used in simple work, not interfering with normal employment and confining itself to forestry, the prevention of soil erosion, flood control and similar projects. I call your attention to the fact that this type of work is of definite practical value, not only through the prevention of great present financial loss, but also as a means of creating future national wealth. This is brought home by the news we are receiving today of vast damage caused by floods on the Ohio and other rivers.

Control and direction of such work can be carried on by existing machinery of the departments of Labor, Agriculture, War and Interior.

I estimate that 250,000 can be given temporary employment by early summer if you give me authority to proceed within the next two weeks.

I ask no new funds at this time. The use of unobligated funds, now appropriated for public works, will be sufficient for several months.

This enterprise is an established part of our national policy. It will conserve our precious natural resources. It will pay dividends to the present and future generations. It will make improvements in national and state domains which have been largely forgotten in the past years of industrial development.

More important, however, than the material gains will be the moral and spiritual value of such work. The overwhelming majority of unemployed Americans, who are now walking the streets and receiving private or public relief, would infinitely prefer to work. We can take a vast army of these unemployed out into healthful surroundings. We can eliminate to some extent at least the threat that enforced idleness brings to spiritual and moral stability. It is not a panacea for all the unemployment but it is an essential step in this emergency. I ask its adoption."

6. On March 31, Congress passed FDR's legislation to establish the Civilian Conservation Corps, which did put approximately 300,000 young men to work within two months, and ultimately more than 2.5 million.

7. On April 19, FDR pushed through legislation taking the U.S. off the (British) gold standard, which he explains, later, to be a means of preventing speculative looting of the country.

8. On May 7, FDR held his second Fireside chat where he explained at some length the measures which had been taken over the previous 2 months, in line with their intent to restore agriculture, industry, and transportation, and measures which he intended to take in public works, in particular.

9. On May 12, Congress passed three more emergency measures presented by the President:

* The Federal Emergency Relief Act. The FERA was devised to address the fact that local governments had literally run out of money to aid the unemployed, and the destitute. It was intended to provide a pool of money—$500 million, to be precise—that could be disbursed in relief grants to states. In addition, it gave the Federal Relief Administrator, who would be New York's Henry Hopkins, broad supervisory power over the states' use of the grants. Hopkins, operating out of a hallway at the Reconstruction Financial Corportion, spent $5 million in the first 2 hours to deal with emergencies.

The FERA funds were divided into two types. Half was to be disbursed to states as matching funds, with $1 being given out for every $3 of state money spent for relief during the preceding three months. This was a rather limited form of aid since, obviously, the poorer states would have spent less money for relief, and therefore would be eligible for less in matching funds. The other half was available to be given out wherever the states were unable to meet the requirement of $3 for $1.

FERA spent money for all kinds of necessities—food, clothing, fuel, shelter, and medicine. Administrator Hopkins, who went on to run job-creation programs later in the Roosevelt Administrations (which he greatly preferred), said: "We can only say that out of every dollar entrusted to us for lessening of distress, the maximum amount humanly possible was put into the people's hands. The money, spent honestly and with constant remembrance of its purpose, bought more of courage than it ever bought of goods."

* The Emergency Farm Mortgage Act, which provided for the refinancing of farm mortgages in order to keep farmers, then a large portion of the population, in their homes, and able to produce. It called for refinancing at 4.5% interest.

* The Agricultural Adjustment Act, with an amendment permitting monetary expansion.

May 18 — The Congress passes the Tennessee Valley Authority Act, which FDR has proposed in April, as follows:

"I, therefore, suggest to the Congress legislation to create a Tennessee Valley Authority, a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise. It should be charged with the broadest duty of planning for the proper use, conservation, and development of the natural resources of the Tennessee River drainage basin and its adjoining territory for the general social and economic welfare of the nation. This authority should also be clothed with the necessary power to carry these plans into effect. Its duty should be the rehabilitation of the Muscle Shoals development and the coordination of it with the wider plan.

"Many hard lessons have taught us the human waste that results from lack of planning. Here and there a few wise cities and counties have looked ahead and planned. But our nation has 'just grown.' It is time to extend planning to a wider field, in this instance comprehending in one great project many states directly concerned with the basin of one of our greatest rivers.

"This in a true sense is a return to the spirit and vision of the pioneer. If we are successful here we can march on, step by step, in a like development of other great natural territorial units within our borders."

May 27 — The Truth-in-Securities Act is passed, mandating transparency in the issuance of securities.

June 5 — The gold clause in public and private contracts is abandoned.

June 13 — The Home Owners' Loan Act is passed, providing for the refinancing of home mortgages.

June 16 — On this last day of the extraordinary 100 Day session, FDR signed into law the following measures:

* The National Industrial Recovery Act. This was comprised of two major sections, pursuant to a declaration of nationl emergency. The first modified the anti-trust act, in order to permit establishment of wage, price, and working conditions standards, including abolishment of child labor, through various industries. A subsidiary feature was the famous 7a, which gave unions the right to organize. The second section established the Public Works Administration (PWA), with $3.3 billion in funds.

The PWA developed a novel, but useful, way to aid cities and towns to finance the building of infrastructure. The Depression had left citizens unable to pay local property and other taxes, without which cities and towns could not maintain capital investment for infrastructure. In June 1933, even good municipal bonds were quoted at a 30-40% discount, meaning that investors were not buying them. Further, the yield on a bond for 20 "standard" cities, as reported by Bond Buyer magazine, stood at 5.7%, an interest rate far too high for a city or town to pay in a depression.

The PWA set up a financing mechanism: First, it would purchase the bonds of a city or town at full par value, disregarding the "market" discount. Second, any qualifying municipality could issue a new bond at a 4% interest rate—rather than the prevailing yield of 5.7%—and the PWA would buy it. This rejuvenated the municipal bond market, enabling municipalities to engage in infrastructure building; and, as cities recovered and paid off their bonds with interest, the PWA made money.

In addition, once a local infrastructure project was designed and approved, the PWA would pay, through grants and loans, more than 50% of its construction cost.

* The Glass-Steagall Banking Act

* The Farm Credit Act, which expanded the financing of farm mortgages, and eventually set up a system of regional banks to make mortgage, production and marketing loans and to provide credits to cooperatives. It loaned more than $100 million in its first 7 months, including driving down interest rates.

* The Railroad Coordination Act

July 24—FDR gave his third Fireside Chat, elaborating what had been accomplished in the First 100 Days, which he described as "the orderly component parts of a connected and logical whole." His major stress was the progress which had been made against unemployment and the destruction of the purchasing power of the population—through the CCC, the PWA, the Farm Act, and the Industrial Recovery Act.

Postscript: Aware that these measures were not enough to prevent massive immiseration during the coming winter months ('33-34), FDR took another emergency measures in October-November, specifically the establishment of the Civil Works Administration. The CWA, administered by Hopkins, was empowered to, and did, create 4.2 million jobs, at minimum wage (not relief), by the middle of January.

While it only existed for 3 and a half months, it built or improved about 1/2 million miles of secondary roads: built or improved 40,000 schools; employed 50,000 teachers; built or improved 1000 airports; developed parks, learned waterways, dug swimming pools and sewers. It also employed writers and artists.

Having been set up to deal with the winter emergency, the CWA had to be dismantled, but it was superceded over the longer term by the WPA, the CCC, and other programs.