FDR AND WOODIN | Warm Springs, Georgia

Treasury Secretary Will
Woodin (L) and FDR.

John Reagan (“Tex”) McCrary, who lived from  1910 to 2003), ran a radio show for NBC from the RCA Building.

On August 12, 1949 he wrote to General Motors financial executive John J. Raskob (1879-1950) at 350 Fifth Avenue, the Empire State Building).

Tex McCrary enclosed a copy of Westbrook Pegler’s column for August 4, 1949 and a transcript of his own broadcast comments on Pegler's column. (The correspondence may be found at http://digital.hagley.org/raskob-1456.)

The correspondence is interesting from two perspectives.

Al Smith (L) and John J. Raskob (R). 

First, there is venom in Pegler's bite at Raskob for accepting a "bribe" from FDR. It was also a side-swipe at FDR himself. 

In the New York Journal American (syndicated by King Features), Pegler said:

[Al] Smith never told publicly the truth about the bribe of $250,000 which John Raskob underwrote as Roosevelt’s price for coming out of his convalescence to run for Governor in 1928. That was the year Smith ran for President.

McCrary reported on Pegler's column in a broadcast the next day:

Yesterday [Pegler] hit an all-time low in unsubstantiated slander. According to Pegler, John J. Raskob underwrote a bribe of $250,000 as the price of persuading the late Franklin D. Roosevelt to come out of his convalescence to run for Governor … According to Pegler, the $250,000 was milked from Raskob as a contribution to Warm Springs Foundation for Crippled Children. 

The other interesting aspect of the correspondence is the sweeping denial that Raskob wrote back to McCrary on August 16:

I know nothing whatever about the financing and operation of Warm Springs except that the late William Woodin, former Secretary of the Treasury, did head a drive for funds some years ago to which I contributed.

What is going on here? I have read elsewhere about Raskob's involvement with solving FDR's financial problems at Warm Springs. I consulted a new book by Kaye Lanning Minchew, A President in Our Midst: Franklin Delano Roosevelt in Georgia (Athens, Georgia: The University of Georgia Press, 2016), and on page 74, it is all spelled out:

In addition to health concerns and his fear that 1928 might not be the year for the Democrats, Roosevelt hesitated to run for governor because of his heavy financial commitments at Warm Springs. John J. Raskob, a wealthy businessman who had recently been named chair of the National Democratic Committee, talked to Roosevelt on the phone on October 2. Following their discussion of Roosevelt's obligations to Warm Springs, Raskob wrote a check for $250,000. When Roosevelt refused the check, Raskob formed a committee to raise funds while committing $50,000 to the cause. Following that conversation, Roosevelt agreed to run for governor.

What there seems to be agreement on is that Roskob recruited Will Woodin to head the committee to pay off the Warm Springs debt. Woodin also served on the board of the Warm Springs Foundation. If Minchew's story is accurate, then Raskob was being disingenuous in his letter of August 16 (in other words, he lied or had severe amnesia). His suggestion to McCrary that Woodin was the man who knew was a safe one, since Woodin was entombed in his Berwick mausoleum 14 years earlier.

Even if Pegler's facts are correct, it is hardly fair to label FDR's agreeing to run for governor in return for assistance to the Warm Springs Foundation as a "bribe". The Warm Springs debt was an obstacle to FDR's running for Governor of New York State. I have read that FDR's mother Sara Delano Roosevelt said she would not give FDR any money for his campaign unless and until he paid off the Warm Springs debt. The committee's contributions to the Foundation removed this obstacle to FDR's running for governor.

What is peculiar about all this is Raskob's denial of any knowledge about the Warm Springs finances. Doubtless he was not familiar with every detail, but he had to be aware of the large size of the Foundation deficits. In 1928 Al Smith wanted FDR to run for governor so that New York State would be safe for Democrats. It was when FDR ran for President himself four years later that Raskob decided FDR was a dangerous radical and from then on perhaps he preferred not to take any credit for having helped him become governor.

WOODINp | Ancestors, Descendants, Will Woodin, FDR's First Treasury Secretary (Update April 18, 2020)

April 18, 2020—These chapters of a book on Will Woodin have been transferred to a private blog, in anticipation of publication of a biography of Will Woodin. Woodin was Secretary of the Treasury in the depth of the Great Depression. He was highly successful. Your blogger is actively working on this bio in May 2020. To obtain access to this blog, or to contact the author for any other reason, send an email to jtmarlin at post.harvard.edu.

FDR | WW2 Spymasters–Origins of the O.S.S.

This 46-minute documentary movie discusses the raison-d'être of the O.S.S., and "Wild" Bill Donovan's contribution to the war effort.

My Dad, E. R. Marlin, worked for the Office of Strategic Services (O.S.S.) in Dublin and London during the war. He reported to Col. Francis Pickens Miller (1895-1978) of Kentucky and Virginia, who had studied at Trinity College, Oxford on a Rhodes Scholarship. (Helen Hill Miller, his wife, was the U.S. correspondent for The Economist; I met her and Col. Miller at my Dad's house in the 1960s

Miller's intelligence papers are at the George C. Marshall Library and Museum, which is between Washington and Lee University, which Miller attended, and the Virginia Military Institute in Lexington, Va.

Espionage was hardly something new for the United States. George Washington had an extensive network of spies who carried information both ways between Long Island (occupied by the Redcoats) and Connecticut, where GW's troops still held their ground.

Thanks to Tim Sullivan for sending me the link to this documentary.

The Causes of the Great Depression (Comments)

The red bars are the years of GDP
decline, i.e., recession/depression.
The Depression started August 1929.

Martin Kelly is a high school teacher who posts under about.com useful summaries about different eras in American history. Sort of, "What Every High School Graduate Should Know about American History."

It is important in a democracy that all voters understand their history.

Kelly recently posted on "The Causes of the Great Depression". Understanding the causes of the Depression is important so that we will avoid repeating the mistakes we made in the 1920s.

Since I am working on a biography of FDR's first Treasury Secretary, William H. Woodin, I was especially interested in his report. Woodin took the brunt of the initial Federal response to panic that greeted FDR's arrival in Washington. I believe the stress killed him. He resigned for health reasons at the end of 1933 and died not much more than a year after FDR took office.

I think some of Kelly's statements in his first two "Causes" about the timing of the Depression and the timing of bank failures are erroneous. I looked for a place to send him a correction but I could not find an email contact on his web site.

So I am posting my concerns here in an effort to spread truth and correct error. Americans should remember the facts about their history correctly. I'm expecting that this will in time reach him and perhaps he will make some changes. He lists other causes, but these are the first two and I will limit myself to them.

Cause #1 - The "Stock Market Crash of 1929"

Kelly considers the stock market crash of October 1929 as the first cause of the Great Depression. Here are his words:

1. Stock Market Crash of 1929 Many believe erroneously that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough and America truly entered what is called the Great Depression.

The Depression of 1929-1933 ended with FDR's
New Deal. The Recession of 1937-1938 resulted
from a weakening of the New Deal. The
run-up to World War II revived GDP in 1938.

My Comment: The Bureau of Economic Analysis at the U.S. Department of Commerce has kept track of Gross Domestic Product (GDP) since after World War II. GDP is a measure of all goods and services produced during a year.

Business cycles are dated by an independent Business Cycle Dating Committee, also known as the Wise Men although it is not restricted to men. It reports through the National Bureau of Economic Research.

The Committee dates the Great Depression by two declines in GDP.

• The first was August 1929 (or more broadly the third quarter of the year) through March 1933 (the first quarter), lasting three years and seven months. Starting with the arrival of FDR, the economy was recovering from the 26.7 percent decline in the economy.
• The second was the recession from May 1937 (second quarter) to June 1938 (second quarter), when the economic decline was a serious 18.2 percent. This was precipitated by lower profits and tight fiscal and monetary policies.  

So... the misleading statements in Cause #1 in Kelly's post I think include the following:

• The stock market crash occurred two months after the Depression started. Since the Depression started before the crash, something else was at work.
• America did not enter the Great Depression at the end of 1930, but 18 months earlier.
• The crash of the New York Stock Exchange is not a cause of anything except through the opinions of investors, of which it is simply an indicator. The cause of the Depression must be sought in the high value placed on stocks in the late 1920s, and the reason for the high level of speculation, i.e., borrowed money. The reliance of investors on debt subject to margin calls increased the riskiness of the stock market and added to the intensity of the revaluation of stock prices.
• The $40 billion loss by investors in two months doesn't sound like a lot in today's stock market. It would be more meaningful to say that the 1929 high value of all stocks on the New York Stock Exchange was $87 billion and this valuation fell to $19 billion in 1933 - a drop of 78 percent. More than three-fourths of the value of listed stocks was wiped out.

Cause #2 - Bank Failures

Part of the problem that created the Great Depression is the instability of the banking system and therefore of the stock market that depended on it and the national economy that depended on both.

2. Bank Failures Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own survival, stopped being as willing to create new loans. This exacerbated the situation leading to less and less expenditures.

Bank failures virtually ended in 1933 with passage of the
Glass-Steagall Act, which created federal insurance of bank
deposits (via the FDIC) and, as a price for that, separated
banking from more speculative financial activities.

My Comment: The problem here in making bank failures the cause of the Depression is  the timing. The Depression is dated 1929-1933, with many of the failures being imposed by the Treasury at the end of the period.

There were bank failures in 1925, but then none until 1930. The underlying problem was the belief by depositors that they should be able to convert their deposits into gold or currency without limit.

Printing greenback dollars that were not backed by gold or silver was no longer controversial. It was problematic when Lincoln did it to pay the Union Army, but by 1929 paper dollars were well established.

However, in the 1920s, depositors were still of the belief that some or all of their deposits were backed by gold or silver. Some of the dollars were marked "gold certificates" with a yellow color on a part of the bill to indicate their special status.

Some depositors still believed that if they asked for it they would be entitled to redemption of their money in gold. In fact, what started to happen in the 1920s and especially in the early 1930s is that banks could not redeem demand deposits even with paper money. They were out of cash. Some were insolvent but others were only illiquid.

The fear that a bank could fail and depositors could lose their money was a basic underlying flaw in the banking system, leading to "runs on banks".

But here in a nutshell is what is wrong with what Kelly said about bank failures as a cause of the Depression:

• Bank failures were not the cause of the Depression - they were a symptom of problems in the banking system that contributed to the Depression. As Warren Buffett has said: "Only when the tide goes out do you find out who is not wearing a bathing suit.”
• Bank failures did not occur "throughout the 1930s". They occurred mostly before FDR was inaugurated in March 1933. The banks that were closed by the Treasury's Comptroller of the Currency were already insolvent.
• Bank deposits were uninsured only until 1933. But starting in 1933, the Glass-Steagall law created the Federal Deposit Insurance Corporation, insuring most deposits and virtually ending bank closings. In 1934, only 57 banks closed, and after that the FDIC's guarantee and oversight was enough.

The year 1933 was crucial. Withdrawals of paper money and gold from banks occurred in February 1933 at three times the previous rate of $5 million per day. That month, Louisiana declared a bank holiday, and then Michigan did the same, closing the banks for eight days. By the day that FDR took office, 400 more banks closed. In the month before the inauguration, $320 million was withdrawn, and most of it $226 million, was withdrawn in the last week.

On Inauguration Eve, March 4, 1933, after meeting with outgoing Treasury Secretary Ogden Mills and staff, Will Woodin contacted New York Governor Herbert Lehman through the President of the Federal Reserve Bank of New York and persuaded him to agree to a bank holiday starting the next day. Lehman made the announcement at at 4:20 a.m.

The measures taken by FDR and Treasury Secretary Woodin, starting with, on March 5, the imposition of a three-day national bank holiday, and measures to stop the export and hoarding of gold. Woodin personally supervised printing more dollars in three shifts. The bank holiday was extended to March 13, and Woodin made it a priority that the Comptroller of the Currency performed stress tests quickly so that the healthy banks could be reopened.

These measures restored calm. Confidence returned. The public began putting their money back in the banks. The country returned to a growth in its GDP. Barnard Professor Raymond Moley, leader of FDR's brains trust and the man who recruited Will Woodin to work for FDR, said:

If ever there was a moment when things hang in the balance, it was on March 5, 1933 - when unorthodoxy would have drained the last remaining strength of the capitalist system. Capitalism was saved in eight days, and no other single factor in its salvation was half so important as the imagination and sturdiness and common sense of Will Woodin.  (Moley, After Seven Years, NY: Harper, 1939, Chapter V, p. 155.)

January 30 - FDR's Birthday (Personal Comment)

Franklin Delano Roosevelt, 32nd president of the United States, was born this day in Hyde Park, NY in 1882.  His mother, Sara, was in labor with him for more than 24 hours. The doctor gave Mrs. Roosevelt some chloroform to calm her, and 45 minutes later, young Franklin made his entrance, blue and motionless, weighing nearly 10 pounds. The doctor blew into the baby's lungs and revived him. The Roosevelts decided not to go through this again - Franklin would be their only child.

The family was comfortably well off, having made money in real estate and trade. Franklin grew up surrounded with family love and attention, but isolated by being schooled by private tutors. At 14 he was sent off to the Groton School in Massachusetts. Neither an athlete nor a rebel, FDR wasn't especially popular, but he made an effort to be appreciated by his teachers, who exhorted the children of wealthier parents to help the less fortunate.

At Harvard, FDR pursued an active social life rather than scholarship. He loved to meet new people and was eager to lead. After marrying his cousin Eleanor and graduating from law school, he entered politics in 1910 at the request of some fellow New York Democrats. He was enthusiastic and optimistic, which served him well later when he faced his own illness and then as President the challenges of the Depression and World War II.

He was diagnosed with polio in 1921. Eleanor Roosevelt said:

He had real fear when he was first taken ill, but he learned to surmount it. After that I never heard him say he was afraid of anything.

He never gave up hope of recovery, and concealed the extent of his paralysis from the public, with the cooperation of the media.

FDR liked watching cartoons (he loved Mickey Mouse), collecting stamps, playing cards and bird-watching. For his health he built a pool he swam in at the White House. He held a nightly cocktail hour for his close associates. Besides the formal state dinners, Franklin and Eleanor hosted teas, children's parties, dances, cocktail parties, and game nights. Sometimes, Roosevelt would lead a sing-along, and his birthday parties had friends and family performing comedy skits. Guest lists were often twice what had been planned for. Last-minute invitations to guests to stay overnight were extended when all the White House rooms were already full. The Roosevelts had 28,000 visitors in one year, 1936.

Once the war started, they hosted fewer events, but their scale remained large. Two thousand people attended FDR's 1945 inaugural luncheon, and consumed 200 chickens in the chicken salad, 170 dozen rolls, 100 gallons of coffee, and 165 cakes.

FDR's Scottish terrier, Fala ("Murray, the Outlaw of Falahill") accompanied the President on his travels and slept at night in his own chair at the foot of FDR's bed. He was given a bone every morning, and FDR fed him at night. He needed his own secretary to handle all the mail he received from American fans.When FDR died of a cerebral hemorrhage in 1945, the dog was inconsolable. Eleanor said that Fala spent the rest of his life waiting for his master to return. (The above is abbreviated from a biographical sketch by Garrison Keillor.)

Personal Comment

My father, Ervin Ross ("Spike") Marlin, won a place in FDR's administration through a competitive examination taken by thousands of people in 1932. He told me later - "I never felt so rich as when I had a government job in the Depression." In our house, growing up, FDR and Winston Churchill were godlike.

I have learned a lot about FDR through my research for a biography of FDR's first Treasury Secretary, William H. Woodin, whose contribution to calming the financial panic (and the cost of this effort to his health) has been under-appreciated. Woodin focused on addressing the liquidity issues by printing huge amounts of currency for the banks, while refusing to reopen the insolvent banks after the Bank Holiday. He supported the Glass-Steagall Act that put a ring around the banks in return for their deposits being insured. It was 75 years before this fine financial system collapsed, but it was undermined steadily for year before that. The Steagall portion of the Act, i.e., deposit insurance, has survived, but that was supposed to have been a favor for the banks in return for the Glass part of the bill.

Woodin worked with FDR on supporting his Warm Springs foundation to provide care for indigent people with polio. FDR's democratic instincts were revealed by his wish to have his face be on the lowly dime rather than on paper money.