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Tragic Transition Part II

© Earl Rickard

"There's something funny going on over there at the bank, George. I've never really seen one, but that's got all the marks of being a run," said cab driver Ernie Bishop to newlyweds Mr. and Mrs. George Bailey in Frank Capra's It's a Wonderful Life. Capra's art often imitated life; the scene depicting the run on the Bailey Savings and Loan reflected an oft repeated episode of the Great Depression -- bank failure. During the winter of 1932-33, bank runs erupted all across the United States. These runs overwhelmed not only broken down savings and loans, but also major American banks. Unfortunately, none of the banks had Jimmy Stewart and good script to save them.

The nationwide panic that President Hoover had so diligently avoided for almost four years, now came to torment him during his last bitter days in the White House. The question for historians: What caused the panic? The "Roosevelt" historians regard the bank runs as the death rattle of the old order. The "Hoover" historians believe the panic arose as the inevitable result of the election of FDR, who's economic beliefs were open to experimentation. And to the partisan political actions of the Democratic congress.

Until the day he died, Herbert Hoover truly believed the recovery had arrived in the summer of 1932. In his memoirs, Hoover wrote that after FDR won Maine's bellwether presidential election in September (Maine used to vote two months before the rest of the nation) the economy took a slight dip, then went into free fall after the Democratic victory in November. Hoover attributes the collapse to Roosevelt's refusal to cooperate, and to the President-elect's noncommittal silence concerning gold, government credit, and a balanced budget.

Hoover also charged the Democratic congress with sabotage, because of their publication of the Reconstruction Finance Corperation's bank loan list. The RFC list, published at the insistance of Vice President-elect John Nance Garner in his capacity as lame-duck speaker of the house, revealed the names of banks forced to borrow from the RFC. "It was the most damnable and vicious thing that was ever done," said Federal Reserve Board Vice-chairman Atlee Pomerene. Hoover biographer Eugene Lyons described Garner's deed as an act of "economic vandalism." In his bookAfter Seven Years, even "brains trust" member Raymond Moley admitted that the bank crisis "...was hastened and made more acute by the publicity...." Moley never understood why Garner took this action, especially since publication broke an earlier Garner pledge to President Hoover.

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