THIS IS A KEY MS FOR UNDERSTANDING Hoover's unique and manifold contributions to the Roosevelt NEW DEAL. It is a complete 95-page review, entitled "Hoover's Contributions to the New Deal," written in mid-1960's by one of Roosevelt's key economic advisor's , Columbia U econ P+prof REXFORD TUGWELL, of the "Brains Trust" group, and in 1966 submitted for publication to the editor of the American Political Science Review, who rejected it. NATIONAL RECOVERY AND THE BI-PARTISAN NEW DEAL TO BREAK THE INTELLECTUAL LOGJAM regarding what, in fact, must be the administrative orientation & operational components of a revived and effective national COMMERCIAL economy, I'm posting his otherwise unpublished paper for its potential to illustrate to what degree the NEW DEAL actually was the Bi-PARTISAN creation of the FDR administration, working on a foundation laid out by HOOVER. IN FACT, SO completely were these early Roosevelt measures modeled on Hoover administration proposals, that Tugwell reports that “Prof. Raymond Moley feared that the new administration would be seen, not for its courageous plan for re-opening the banks and helping the many poor and unemployed, but for following the very plan outlined by the pro-banking Hoover administration.” IT SHOULD ALSO BE NOTED, E.G., – as Tugwell reports -- that in 1932 Hoover had recommended that the Congress also authorize the making of direct loans through the RFC, not just to banks, but also to businesses and industries. This is remarkable, because it gives the lie to Hoover as a hands-off or laissez faire in his handling of the Depresion, and shows him not just willing to work outside his professed economic ideology, but taking the initiative against it. But the Democratic Congress refused this initiative, forcing Hoover to bargain.7 Hoover wrote of the recalcitrance of the Democratic Congress, in his Memoirs Vol III, p. 107, in a passage quoted by Tugwell, where he could be describing the New Deal: "The authority to make loans to industry for improvement of plants – one of my strongest and most urgent points – was eliminated. Certain types of loans to stimulate exports of agricultural commodities and to set up a series of agricultural banks to make loans for production purposes, were defeated. Loans to enable closed banks to distribute the cash value of their assets were also defeated. Loans to public bodies which could have been used for reproductive public works were excluded. However, I determined to make the best of it and try to get it amended later." ALL THESE ORIGINAL PROPOSALS of Hoover, were later restored to the RFC, most of them after Hoover had left office. It was later left to Roosevelt to recommend that Congress should make Hoover’s original initiative into law: initiatives that Roosevelt ran against in 1932. Tugwell concludes, at pp. 58-9: The RFC either as it was in being at Roosevelt’s inauguration, or s Hoover had recommended it to be, was almost entirely his invention"

1. THE AMERICAN POLITICAL SCIENCE REVIEW
GABRIE L A . AL M OND, Presitlenl
Ssanford Universily
ROBERT A . D AHL , Presitlenl Eisel
Yale Universily
M AN N ING J . D A UER, Vice Presidenl
Universily of Florida
W I LLIA M T . R . Fox, Vic• Presitlenl
Columbia Universily
RUPERT EMERSON, Vice Presitlenl
Harvard UnitJersily
JoH N H . KAUTS KY, Secrelery
Wasbir.giOtJ Umversi1y, Ss. Lot.is
M A X M. K A MPE LMAN, Treaiurer ana Cof>mel
WaJhinglon., D. C.
EVRON M. K IRKPATRICK, Executive Director
1726 Maiiachuseus AvetJue, N.W.
WaibitJglon, D. C. 20036
NORTH HAI.I.
THE UNIVERSITY OF WISCONSIN
M ADISON, WISCONSIN 53706
A USTIN RANNEY, M41UgitJg I!dilor
March 25, 1966
Professor Rexford Guy Tugwell
Southern Illinois University
Carbondale, Illinois 62903
Dear Professor Tugwell:
EDITORIAL BOARD AND ASSOCIATES
RoBERT E . L A NE, y,Je UniversU,
H A RV EY C . M AN SFI ELD, Columbia UniverSity
WARREN E . MILLER, The Universily of Michigan
WALTER F . M U RP HY, PrinceiOtJ Ur.iversily
J . ROLA ND PENNOCK , Swarlhmore College
JOHN E . T U R N ER, Univerrity of Mimusola
V ERN ON VAN D YKE, Ut~iv!Wsily of Iowa
MYRON W EINER.
MaJsaclmsem Jnslittae of Technology
JAMES W , PROT HRO, Book Review Bailor
T he Ut~iver.<ily of N orth Carolina
L EO B . L.oTT. News mJd N oles Edilor
216 North Oval Drive
Columbus, Ohio 43210
CoRINNE Si LVERMAN , N ew Y ork City
Please accept my apologies for our long delay in coming a decision on
what to do with your manuscript on 11Hoover's Contribution to the New Deal. 11
I can only say that it poses a oumber of special problems for us, and I
very much wanted the views of a particular reader. He, in turn, missed my
requested deadline by six weeks, and so only now am I able to tell you what
I have decidedo
For substantially the reasons given by the referee ( a copy of whose
comments is enclosed ), I think you should submit your article to a more
appropriate journal. It is, of course, a fascinating and well-written
narrative with many useful insights in it; in short, well up to your very
high standard of scholarly work. But it is also primarily a narrative and
a reminiscence more than an analytical work bearing direct and obvious
relation to current political science work in the theory and operation of
the Presidency. Accordingly, it is more appropriate for an historical
journal than for USo May I, therefore, suggest the JIMERICAN lUSTORICAL
REVIEW or the MISSISSIPPI VALLEY HISTORICAL REVIEW, either of whom, I
feel sure, would be glad to have it.
I appreciate your letting us have a look at it, I regret the delay
in coming to a decision, and I regret that the nature of our clientele
makes the article more appropriate for another journalo But I am sure
you will have no difficulty in getting it published, and I look forward
to seeing it in print.
Sincerely yours,
Austin Ranney
Sixty-second Annual Mee#ng-September 6-10, 1966- Statler Hilton Hotel, New York City

2. March 22, 1966
Professor Austin Ranney
Managing Editor
The American Political Science Review
North Hall .
The University of Wisconsin
Madison, Wisconsi~ 53708
Dear Austin:
I have read twice and pondered at some length the fascinating manuscript
you sent me, "Hoover's Contributions to the New Deal."
It is an extraordinary-piece with flashes of insight and with details
of historical interpretation which make me feel that it certainly should be pub-
lished.
The question, though, is whether the Review is the place for publication,
and on this I am not nearly so certain. Indeed, I doubt that the piece in its present
form will be favorably received by a lot of your readership or will be considered as
appropriate by many of them in the context of the Review.
The difficulty is that in its present form the piece appears always about
to raise a major question for political science and then shies away from that ques-
tion into historical narrative and personal memoir -- so that a lot of readers will
ask: "To what are these details addressed?" and "What is thei r relevance for stu-
dents of politics?"
The question I think your readership will seek in this article -~ and
not quite find -- is something like this: To what, as illustrated by this case, ·
is one administration the intel lectual and programmatic heir of its predecessor, and
why? A subsidiary question might be: Why is it so difficult psychologically as
well as politically for either side to admit the connection? Both questions are
properly addressed to a single instance, but an extremely interesting instance, ren-
dered the more so by the superficiality of the break to which historians like Arthur
Schlesinger, Jr. attest so loudly.
But while the author suggests these questions, the piece does not really
address them. Rather, it turns out to be an essay on certain aspects of Herbert
Hoover's mental set and motivations both before and after the great division in his
life, the 1932 election. This, too, could be enormously interesting and relevant
matter for the Review if it were frontally addressed and fully explored, but it is
not.
Thus I think that for readers the piece tends to fall between stools.
As a transition study its focus is partial and incomplete. As a psychological study

3. -2-
the same could be said.
I don't doubt that if you asked the author to revise it so as to make
of it either the one thing or the other he could do so. If he had the time or
the inclination I would certainly encourage him to do so. But I think he would
be justified in saying that t he piece is quite interesting enough just as it
stands and why should he bother. Frankly, I'd sympathize with him if he took that
view. In which case I'd suggest that the place for this piece is an historical
publication where the piece can be presented for what it is, a personal commentary
which includes vignettes of significance on personalities and situations of great
historical importance.
Perhaps I see your editorial problem too starkly. It may be that you
should not hesitate to let the Review be the vehicle for such a commentary, but
considering the snarly, somewhat critical and bemused state of the profession at
this moment, it is my sense of the situation that you should ask the author
either to revise substantially in one direction or the other or that you suggest
to him one of the good historical outlets.
I hope these comments are of some help and I am exceedingly sorry they
have been so long delayed, but at this moment I am short of nothing so much as
reading time.

4. HOOVERIS CONTRIBUTIONS TO THE NEW DEAL
The events of the March crisis in 1932, and the sharp
difference in atmosphere between the last day of the Hoover
regime and the first days of the Roosevelt assumption, had
such a lasting effect on contemporaries that historians have
been led by their recorded excitements to exaggerate the
contrasts. Actually the events of the Hundred Days were
less revolutionary than they seemed at the time. Comparisons
of before and after are more suitab ly psychological than actual.
That the incoming President was able to allay the fears which
damped down men's energies and anesthetized their sense of
responsibility was remarkable. It did happen. But it was at
least as much because Hoover had become a symbol of decline
and futility as because of Roosevelt's ringing challenge to the
fates. Americans were asked to recall that they had once been
masters of their economy; and that they could be again.
They responded. The response, however, could only go so
far. Beyond that the physical, institutional or conceptual difficulties
which had existed before, again got in the way. Banks had had a hard
lesson in overextension; business men could not expand without
credit; and even if credit had been found, markets were
ultimately dependent on consumers. The sickness caused

5. 2.
by mal-directicn of investment and by self- managed
prices - these together resulting in useless plant and
incapacitated consumers - could net be cured with exhort-
ations . The New Dealers were not the only cnes who knew
by 1933 that something had to be done . Hoover , Mills
and ethers cf the Pepublican group had learned scme 0f
the facts cf life the hard way . They had, hc~.;ever ,
learned them late . Their i nventiveness , also, had not
been of the first qual i tv . And , 1 hat t.;ras mc st fa tal , they
had felt t hemselves contained as 'vith iron bands within
a conceptual pattern .
The Roosevelt approach has to be contrasted with
all this. When it is considered realistically , the
differences are se ~ quite clearly to be ones cf degree
rather than of kind . The lessons had been learned -- so
far as they had been learned -- without the pressure of
responsibility. The depressicn Has not a Democratic one.
And among Democrats the conceptualit_• was considerably
looser. Abcut the first of these -- the learning cf
the lessens -- the efforts to learn them were fairly
earnest. Members cf the brains trust were encouraged
by an unprecedented receptiveness. And the attempts cf
the Hcover-~1ills group tc shift respcnsibili ty prema-
turely were uniforml, rejected. As to the second - - the
inventiveness - - it is quite fair to say that the first
few Rcosevelt years were unique in governmental annals.

6. 3.
Not all the inventions devised were used and not all that
were used turned out well. But there was never lack of
suggestions to choose among for a President who had his
politics to think of, and sc turned cautious til: many
junctures, but who had an essentially accepting and
adventurous mind. As to the third the conceptual
confines -- the New Dealers were a geed deal freer than
the Republicans; but also they were a geed deal less free
than historians were later inclined tc think. There was
less agreement and mere acrimon 7 than appeared on the
surface. And a good deal cf the confusion existed at
the center where policy was given its finish -- some of
it in the mind of the President himself.
There was nc confusion in Hoover's mind. There were
shadcwy borders where he vas not wholly certain; but they
were narrmv and had a tendency to become more narrow.
Take, for instance, one of the important areas of operation
1
-- industrial direction. Here frc;n the '1emcirs is a state-
ment sc clear as to be positively frightening, because it
1
Vclume III, The CabineL and the Presidency, 167.
is frightening to find a statesman clear about something
i~~erently cloudy and in flux:

7. 4 ,
Fixin~ the boundaries cf government a l
relati ons to business perplexed me daily ard
in innumerable ways during m~· tPelve years
as Secretary of Commerce and President .
Fundru~entally , this prcblem involved the
destiny of the American scheme of life .
Although business committed various abuses
tha-c Here only marginal in an otherwise great
pre>ductive system , t'"te mar,.,.inal urongs had
to be cured if the system was to survive
-- they t-:ere abuses of freed0m, Hhich gro 1
like a cancer . Also they were the propell-
ing texts cf the Socialists , the Communists ,
a nd the expcnents of tre net•breec Fascists.
This left- ~ing cure fer all business evil was
new offered under the lovely phrase "nati0nal
planning ••• " It was a mixture cf government
operation and government dictation of economic
life into a free economy .
This identification cf "national planning" with
the totalitarianisms developed in Eurcpe had ahvays
characterized the Hcover views. The just- nuoted passage
from the femcirs t1as written in 1952 . It is no 'TIOre than
a restatement , he ·ever, of passages from the campaign
speeches of 1932, when he v1as en the defensive, and
of others in The Challenge to Liberty in 1935 . A deeply-
felt exposition of his attitude was the address at
Xadison Square r.arden en 31 October 1932, He was genuinely
convinced that "the American s:ystem11
was at stake in the
campaign and this P~erican system was defined by t~e
conceptual boundaries he had erected:
We must go deeper than platitudes and
emoticn~l appeals ••• if we will penetrate to
the full significance of the chanpes v>hich
our opponents are attemrtin~ to float upon
the wave of distress and discontent , fro~
the difficulties we are passing throu~h .
We can find what our 0ppcnents vould de after
searching the record of their appeals to

8. 1
5 •
discontent, group and sectional interest.
We must search for them in the legislative
acts which they sponsored and passed in the
House of Representatives in the last session
of Congress. We must look into measures
for which they voted and which were defeated.
The Democrats had won control of the House in 1930
and lacked control of the Senate by only one vote.
We must inquire whether or not the Presidential
and Vice Presidential candidates have dis-
avowed these acts. If they have not, we must
conclude that they form a portion and are a
substantial indication of the profound changes
proposed ••• And we must look further than this
as to what revolutionary changes we have been
proposed by the candidates themselves •••
I may say at once that the changes proposed
from all these Democratic principles and allies
(Senators Norris, Cutting, Wheeler, Huey Long,
and the Brain Trust) are of the most profound
and penetrating character. If they are brought
about, this will not be the America which we
have known in the past •••
With this foreboding preliminary, Hoover as
candidate -- who, it must be recalled, knew that his
position had degenerated beyond recovery -- set out
eight specifications of the revolution he anticipated:
1. A proposal of our opponents which would
break down the American system is the expansion
of Government expenditures by yielding to sec-
tional and group raids on the Treasury •••
2. Another proposal of our opponents
which would destroy the American system is
that of inflation of the currency •••
3. In the last session the Congress, under
the personal leadership of the Democratic Vice
Presidential candidate, and their allies in the

9. 6.
Senate , enact ed a law tc extend the ~overnment
intc the pers~na l banking business . !his I
was compelled to veto, ~ut of fidelity tc the
whole ~erican system of life and g~verrunent •• • •
4. Another proposal cf cur opoonents which
would ·;holly alter cu1~ /merican wav of life is
to reduce the protecTive tariff to- a competitive
tariff for revenue ••••
5. Another proposal is that the r-overnment
go into the ower business •• •vith all its
additions to Federal bureaucracy, its t·rann
ever state and l ocal gcvernment , its underminine
of state and local responsibi lities and ini-
tiative ••••
6 . Recently there was circulated through
the unemployed in this country a letter frc:-1
the Democratic candidate in which he stated that
he "'.;rculd support measures for the inauguration
of self- liquidating _!:'Ublic POrks such as the
utilization of water resources , flood control ,
land reclamation , to provide employment for all
surrlus labor at all times . 11
I especially emphasize that premise to promote
"er.tployment for all surnlus labor at all times . " ••• I
pretest against such frivolous prc~ises ••• But the noint
I 'i sh to make here and now is the mental attitude and
spirit cf the Democratic par ty tc attempt it . It is
anot her mark cf the character of the new deal and the
destructive changes ·•hich mean the 1:0tal abandonment
of every princinl e en which t~is government and the
American sys t em is founded ••••
7 . Pecently I called attention to the state-
ment made b~ r.overncr Roosevelt : "After ·:arch
4 , 1929 , t]-le ~epublican partr Has in complete
control of a ll branches of the governMent --
Executive, Senat e and House , and , I may add tc
geed measure , in crder to make it complete , the
Supreme Court as well •••• "
Is the Democratic candidate really proposing his
concspticr of the relation of the Executive and the
Supreme Court? If that is his idea, he is prcpcsinr
the most revolutionary new deal , the most stupendous
breaking of ~recedent , the most destructive undermininP.
of the very safeguard cf cur form cf gcvern~ent yet pro-
posed t· a Presidential candidate .

10. 1
8, In order that we may get at the
philosophical background of the mind which
pronounces t he necessity for profound change
in our American system ••• ! call attention
to an address delivered in San Francisco:
7 0
"Our last frontier had long since been
reached, There is practically no more free
land, The mere building of more industrial
plants, the organization of more corporations
is as likely to be as much a danger as a help.
Our task now ••• is the sober, less dramatic
business of administering the resources and
plants already in hand ••• "
I challenge the whole idea that we have ended
the advance of America ••• The destinies of this
country should not be dominated by that spirit
in action. It would be the end of the American
system ••• ,1
The State Papers of Herbert Hoover, edited by William
Starr Myers, New York, 1934, II -- 408 ff.
From such statements of the Republican candidates
-- and many others might be cited -- it can be understood
what his limitations had been in combating the depression.
It had plagued him from the first autumn of his administra-
tion; but he was still resisting its lesson. His accu-
sations were all sincere enough; but some of them were
so unreal as to mark his earnest sincerity as a limi-
tation. If to advocate inflation was to be an enemy of
"the American system," that system was indentified with
a creditor interest which wantes its debts paid in dollars
of enhanced purchasing power. The debtors did not think
themselves unAmerican in advocating cheap money. It
was nothing new to have protests arising in the agri-
cultural regions during hard times. Farmers did want easier

11. 8.
money so that they could meet their debts; but the
fundamental trouble was not lm·7 but disparate prices.
In the long process of bargaining, the advantage ran
against the sell~rs of the raw products and in favor
of the buyers. Agricultural prices fell in relation
to other prices. What farmers required was parity.
But any attempt to reach it was conveniently defined as
unAmerican. How far this could go is illustrated by
Hoover's saying that Henry c. Wallace, his colleague in
Harding's cabinet, was "in truth a fascist, but did not
know it, when he proposed his price - and distribution -
fixing legislation in the McNary-Haugen bill."2 That
2
Memoirs: The Cabinet and the Presidency, II, 174.
Iowa Scot must have been amazed if such an intimation
ever reached him. He knew well enough that Hoover rep-
resented the business opposition to agricultural relief;
but that it arose from a belief that the mechanism he
proposed was Fascist he probably was not told.
The Hoover ideology became more and more definite
and he came more and more to accept his role as the
definer and defender of what was "American." This is very
poor equipment to meet a crisis with if the structure
happens not to be relevant to contemporary occurrences.
It can - - and, in Hoover's case, did - - come very quickly

12. 9 •
to the conclusion that what is happening ought not to
happen; it mus~ therefore be rejected peremptorily
rather than understood.
It can be guessed that this pattern of thought
wa s shaped by his experience as a special kind of
enterprise. He had been almost spectacularly successful
as an engineer- promoter and as a business doctcr and
consultant in the production of ra>J rnaterial s. He
believed fanatically in "~;.hat he called "freedom." This
was tc be defined as the orthodox economist's concepti on
of laissez f aire . As with so Many others among the
ort~cx , this did r.ct extend to international trade. He
was a protectionist, illogically perhaps, but patrioti-
cally . The freedom of enterprise he believed in was
something always being threatened, abo~ays having tc be
reestablished, but worth all the effort involved in its
support. The anti- trust laws and other regulatory devices,
he believed in desperately, and, as President, supported
faithfully. 3eycnd regulation, however, the government
must not gc. Tc do so was to enter that forridden area
he variously defined as unAmerican, =ascist, or Socialist.
If, to set against this, it is inquired hew
Roosevelt ' s ideolcgy differed, it is most remarkable how
far the in uiry has to proceed to discover differences.
It is obvious that there was a common acceptance cf many

13. 10.
principles and even a common feeling for what 1s and is
not allowable.
Roosevelt accepted business as a way of conduct-
ing economic affairs. He thought that there were good
and bad business men, and that there were gocd and bad
business practices. He also believed, therefore, in
regulation and in the enforcement of proper behavior.
As would turn out, however, very small disparities in
ideology could make very large differences in policy
and they would seem larger, beth in prospect and in
retrospect, to a man cf strict principle like Hoover,
than to ethers.
Roosevelt did not see llhy business should not
operate within a directional framework shaped in joint
counsels, the government participating and representing
the general interest. And he inherited, as Hoover did
not, unorthcde>x vieHs about the money question held by
successive Progressive leaders in the past. Hoover
thought, on those orounds alene, that LaFollette, for
instance, had been a "Sccialist. 11
He thouoht that also
about Norris, Cutting, and Wheeler; and his confusion
became so great that finally he could not distinguish
between Norris and Wheeler on the one hand and Elmer
Thomas on the other, merely because they had similar ideas
about cheapening money. The fact v,'as that the business
men themselves had always been divided on this issue.

14. 11.
There was, as a matter of fact, in 1932 and running en
into the Roosevelt years, a well- articulated group, calling
itself The Committe for the Nation, passionately laboring
to bring about monetary reform . Inflation was conceived
by this curious company to be the alternative to all those
immoral courses - - ~ascism , Socialist , etc .-- identified
with it in Hoover's mind .
The complaint of these people about the Roose-
veltians was that they were not easily or unanimously
persuaded to accept The Ccmmittee's panacea and that even
when they did they refused to regard it as a cure- all, but
hung on to a belief that some social management might also
be necessary .
Hoover could not be said to speak for the entire
clientele of the Renublicans when he reached his final
doctrinaire apotheosis . Lessing ~osenwald , James Rand, and
General Wood (of Sears , Roebuck and Company) were certainly
not normal Democrats . They never had been before and never
would be again . Neither were Professor George ~arren of
1
Cornell and most of the other farm leaders. So H0over found
1
These were among the names prominently associated with The
Committee for the Nation.
it somewhat difficult to make his identification of easy- money
or currency management with Socialist, etc., stick . Never-
theless he went on trying .

15. 12.
But there was a similar difficulty about a certain
degree of social management. The United States Chamber
of Commerce, whose President was Henry I. Barriman,
showed a bewildering heterodoxy. The lead in this matter
had been taken by Gerard Swope, then President of the
General Electric Company . The "Swope plan" came from
respectable enough sources; but it shocked Hccver, perhaps
mere violently because of its origin, and because presently
1
it was blessed by the Chamber of Commerce.
1
The Swcpe pamphlet was called "Stabilization of Industry;"
and it was very prominent in public discussion -- along
~vi th several ether "plans" -- in the later years of the
depression.
The original address proposing Swope's plan was
made in September, 1931, and took Hoover by surprise.
His response was tc submit it to the Attorney General
with a note cf his ow~:
This plan provides for the mobilization cf
each varietv of industry and business into trade
asscciaLions, to be legalized by the ~overnment
and authorized to "stabilize prices and control
distributicn." There is no stabilization of
prices without price fixing and control of
distribution. This feature at once becomes
the organization of gigantic trusts such as
have never been dreamed of in the historv of
the world. This is the creation of a series
of complete monopolies ever the American people.
It means the repeal cf the entire Sherman and
Clayton Acts, and all ether restrictions on
combinations and monopoly. In fact, if such a
thing were ever dcne, it means the decay of

16. 1
13.
American industry from the dav this scheme
is bern, because one cannot stabilize prices
withcut restricting production and protect-
ing. obsolete plants and inferior managements.
It is the most gigantic proposal of monopoly
ever made in histcry.
Memoirs, III, The Great Depression, 334.
q
It is perhaps not surprising that Attorney reneral Mittchell
replied that the plan was "wholly unconstitutional." It
can be imagined what would have happened if he had made
a different finding. ~hat occurred subsequently is
described in the Memoirs: 2
2
III, 334-5.
Late in December, 1931, the United States
Chamber cf Commerce had taken a step which
struck me at the time as a bit humorous, coming
as it did From that citadel of economic freedom •••
The Chamber undertook a referendum of its
members upon this scheme of "economic planning."
The referendum was favorable to the project,
many of the members having fretted greatly
under the Anti-Trust laws. Upon receiving this
favorable referendum, Henry Harriman, President
of the Chamber, called upon me and urged that
I recommend the plan to Congress. I informed
him that i£ this plan were put into practice
it would, through the creation cf monopolies,
drive the country into the Fascism of which
it was mcstly a pattern, or toward Socialism
as the result of public exasperation.
This must have surprised t1r. Swope and Mr. Harriman,
who had arrived at their proposals after much experience

17. 14.
and discussion. The depression had been their teacher,
not Mussolini. And to have Hoover discern that Italian
face locking over their shoulders may well have been
annoying.
There is a curious thing about this incident.
Mr. Swope recalls it differently from Hcover. In fact
he finds that in several places where his name was
1
mentioned "the incidents were incorrectly stated."
1
Swope to Tugwell, 18 March 1953, enclosing the memorandum
here referred to.
About this "plan" and Swope's concern with the
miseries of depression, there is a ?COd deal more to
be said, in an historical way, than is said in Hoover's
account, Earlier than this -- on 30 September 1930 --
Swope was communicating with Hccver. At least, on that
date he ~ent him a memorandum indicating some remedial
measures. The temper and responsibility felt in those
days by certain business men is very Y7ell illustrated
in these few pages, It advocated not cnly public works
but suggested a method of financinq . And this was in
1930: the incident of 1931 was a return to the attack.
There were a good many others besides Swope and
Harrlinan who felt that Hoover was annovingly immovable.
And part of the Roosevelt conclusion from conferences with

18. 15.
business leaders as well as the subsequent election
may well have been that rigidity of ideas could very
well be fatal to a man with public responsibilities.
At any rate it has to be said that the Roosevelt ,
ideology was more flexible. But even with Roosevelt
there were limits.

19. 16.
2 •
It was amply demonstrated in early campaign pro-
nouncementsthat even before nomination Roosevelt was
thinking in national terms about economic affairs.
When he thought of industries, or when he thought of
other social groups, for instance, it was evident that
he regarded them as parts of a whole,not as something
in themselves. Reading these Spring speeches, it is
easy to conclude that the Roosevelt philosophy was a
holistic one. It might have been suspected that he had
been reading General Smuts.1 It is certain, of course,
1
Holism and Evolution by Jan Christian Smuts, London, 1926,
that he had not. To the extent that he had become a
holist it was because he was forced to conclude that the
problems of the depression were general ones. It was a
time for that kind of thinking. The entire nation had
been overtaken by the same common disast~r. And the climbing
out would have to be a united effort. He saw very clearly
that all must recover together or none could recover at all,

20. Whether a holistic view of the nation brought him
to think of planning for it and of shaping policies
for its benefit, or whether the hard thinking he had
been doing about recovery had br~ught him to holism,
he had certainly arrived at an organic ccnception of
industrial society. It is impossible to think of plan-
n1ng fer an crp,anisL conceived in ato~istic terms.
This was the source of Hoover's failure . He refused,
even when combatting depress ion by one device after
another, tc allow the orP,anic notion to take charge of
his mind . This made it imoossible fer him to do or
approve certain activities even though they had remedial
prom1ses. Roosevelt had no such difficulty once he had
discovered that no state could do much, and certainly no
city, only the nation.
The overtone of the Roosevelt address at Oglethorpe
University in !1ay, made organic assumptions. This was
one of the earliest in the campaign for nomination. In
it he spoke to the students before him of the uncertain-
ties they faced as they began their adult careers and
said that the fears they must have were unnecessary ones
if social management was improved. As to the depression,
he ran ever a number of theories concerning it, paying
his respects to the do-nothing or deflation attitude
-- Hoover's. Then coming tc the ideas of those whc felt
that recovery was to be reached by monetary manipulation,

21. :lB.
he said that there were too many who were occupied with
it to the exclusion of other important phases, He said:
Of these other ohases, that which seems
most important to me in the long run is the
problem of controlling by adequate planning
the creation and distribution cf those pr~ducts
which our vast economic machine is capable of
yielding •••• In the field of industry and
business many of these whose primary solicitude
is confined to the welfare of what they call
capital have failed tc read the lessons of the
past few years and have been moved less by
calm analysis of the needs of the Naticn as
a whole than by a blind determination to ore-
serve their own special stakes in the economic
order •• T.It is well within the inventive
capacity of man , who has built up this great
social and economic machine capable cf satisfy-
ing the wants of all, to insure that all who
are willing and able to .work receive from it
at least the necessities of life .
But the last paragraphs announced a really novel approach.
Its suggestions were so frightening that they echoed
through the press not only during this campaign but on
into three others:
1
The country needs, and, unless I mistake
its temper, the country demands bold, persistent
experimentation. It is common sense to take a
method and try it; if it fails, admit it franklt
and try another . But above all, try something.
The Oglethorpe speech ~ay be found in Public Papers,
I, 639ff.
This last ~ay seem inconsistent with the planning
he had spoken of just before. Actually it was not.
Planning does not preclude experiment. The essence of
planning is that looking forward is done in the interest

22. 19 I
cf the whole organism-- in this case the nation -- and
that arrangements are worked out for its welfare. These
arrangements may be various. They may be tentatively
entered on and prcvisionally pursued. There may be
alternatives to be turned to if experience should make
that seem desirable.
It was made clear that the planning spoken of was
net to be understood as the making of a fixed, · lue-
printed and budgeted strait-jacket for the economy.
The blue-prints and budgets involved were to be thought
of as precision instruments available to the experimenter.
They would assist but net hamper. And the exper~~entaticn
vas not to be thought of as comparable to physical ex-
perimentation. There can be, in a laboratory, controlled
conditions, and controlled comparisons. In a society
there can be nothing sc precise and satisfactory. But
a
that does not mean that there cannot be/tr ing and
measurement of results, or that something unsatisfactory
cannot be abandoned for something else.
A considerable furor would be aroused by the
suggestion of experiment in social and economic affairs,
This was to use people as "guinea pigs," it was said,
thus establishing the false analog , of the laboratory
in people's minds. But even as President, Roosevelt
would net rely on any specific undertaking. He would
always judge what it was proposed to do by its reasonable-
ness. It might be worth ~rying; but if it did not give

23. 20·.
good results there would always be alternatives. People
seemed to accept this with at least as much confidence
as they had Hoover's uncompromising cleavage to principle.
A typical example of the Roosevelt approach was
the message to the Congress accompanying the Agricultural
Adjustment Act. Its third paragraph read thus:
1
Deep ~ study and the joint counsel of
many points of view have produced a measure
which offers promise of good results . I
tell you frankly that it is a new and untrod
path, but I tell you with equal frankness
tAat our unprecedented condition calls for
new means to rescue agriculture. If a fair
administrative trial of it is made and it
does not produce the hoped-for results, I
shall be the first to acknowledge it and
advise you.1
Public Papers, II, 74.
Congressmen were as attached to laissez faire as Hoover.
The pronouncementsof his campaign were more congenial
to their ears than the departures of Roosevelt, slight
though these were. And from the very first the un-
easiness they felt foreshadowed coalition with like-
minded Republicans.
The attitude of his Democratic colleagues made
it expedient for the President to accept, so far as
he could, the unassailably orthodox instruments devised
by Hoover. These might be extended and expanded. The
innovations during the Hundred Days, the only period

24. 21.
when the Roosevelt prestige was really effective -- for
the sordid reason that he absolutely refused to enter
on the distribution of patronage until the Special
Session was over - - were few of them startling. A relief
bill Hoover would not have approved was passed. The
Federal responsibility Hoover had spent three years
fighting against was by implication accepted. And the
public works provided for would not necessarily be self-
liquidating. But these were thought,even by most
Republicans, after all the arguing, to be reduced to
quibbling differences. The American system was not
actually threatened by the spending involved.
The monetary measures were radical in the sense
that potential inflation was a threat to creditors; but
here again, after all the arguing, it could be seen that
no change in the enterprise system was implied. It was,
indeed, strongly argued by otherwise reactionary legis-
lators, that only inflation could save the. system of free
enterprise. Further than this there was no threat
unless it might be the projected Tennessee Valley Authority.
And an examination of even Hoover's views revealed the
admission that power production (but not distribution)
was an allowable Federal function.
Only in two instances were there serious departures.
And, curiously enough, both of these came from, or were
sponsored by, business men. Not all favored them; but

25. all of any group never agrees in a democracy. The
business men who favored the provision for "marketing
agreements" in the Agricultural Adjustment Act and the
"codes" in the National Industrial Recovery Act were,
however, some of the most prominent and powerful in the
land. As has been noted they included the membership
of the United States Chamber of Commerce - - to Hoover's
consternation.
Hoover was right about this; it was beyond com-
promise. And it is the support or rejection of these
devices that shows the difference between the Roosevelt
and Hoover approaches. And here there is the curious
fact that the trade-associations which were the operat-
ing heart of both the marketing agreement and the code
procedures had been nurtured in Hoover's own Department
of Commerce - - and while he had been Secretary.

26. 23.
3.
The trade association was not an exclusively
American device. It could be said, however, to be a
typically capitalist one. It is not novel to suggest
that it is part of the nature of competition that
those who exist under its compulsions are driven to
find ways of escaping its consequences. Business men
do not easily tolerate the pressures of conflict. They
create insecurity, anq insecurity threatens profits
and positions. If, any day, a competitor may discover
ways to cut costs , may adopt novel methods, or come out
with cheaper substitutes, there are risks involved that
ought to be minimized. It would be a betrayal of stock-
holders not to do so. Such policies can very easily
be masked under a quite legitimate heading: escape from
unfair competition. Since the abuses of the industrial
system first began to be brought under control this has
been a category of regulation. The state first had to
set minimum standards for competitors. In this way long
hours for women, the labor of children, unsafe and
unsanitary working conditions, and other similar abuses

27. 24.
had been attacked. And progress had been made. There
were always some ethical manufacturers who saw that
these regulations were a protection for themselves as
well as for society.
But government regulation was always a dangerous
device. It reduced certain risks of competition but
not others. In fact, the greatest risk of all was not
touched by it. This might generally be defined as
progress -- meaning the way in which the most enterprising
firms found it possible to cut costs, to enhance quality,
or to improve services. These ensured their own markets
but endangered those of their competitors. It was to
reduce this kind of threat that the trade-association
was formed. This was, of course, not acknowledged. It
was, indeed, one of the most elaborately camouflaged
developments of industrial history. The face competitive
cooperation turned to society was an entirely innocent
one. I t was not to limit progress but to enhance it
that the interchange of information was organized and
common policies adopted. This was the claim and it was
elaborately and expensively maintained.
The Anti- trust laws, in effect in the United States
from the eighteen-nineties, forbade monopolies -- that
is,conspiracies to regulate prices. They could not pre-
vent businesses from growing big, but they could often
prevent the absorption of competitors and, specifically,

28. 25.
they had the power to prohibit the "restraining of trade."
This very elaborate, costly and clumsy policy of regu-
lation was persisted in determinedly and from time to
time strengthened. There were those who thought, after
several decades, that it was not a success and that
other methods of industrial organization might be better.
But there was a very powerful sentiment attaching to
regulation never really challenged with any seriousness
until the New Deal offered an alternative. This, of
course, was the NRA.
As Raymond Moley has pointed out, the policy of
"concentration and control" was a minority view but
1
it was neither new nor novel. Those individuals who
1
In After Seven Years; the phrase is taken from the
title of C.R. VanHise's famous volume.
joined to make NRA possible were divergent in other
ways, perhaps, but they were alike in regarding them-
selves as realists. They thought the Anti-trust acts
had failed and that a change was long overdue. They
proposed to recognize that there were technical reasons
for concentration; and they felt that public policy
ought to be so arranged that large scale organization
could go on to its natural apotheosis. Their idea was
that control had been exercised at the wrong level. It
had sought to prevent the development of large scale

29. 26.
industries. If combinations, consolidations or associ-
ations were recognized, then it would be possible to
secure the public interest in reduced costs and prices,
and progre~ could be encouraged rather than suppressed.
The framework on which NRA would be built was the
trade association which was already a pervasive device.
Every industry had on~and most of them centered in
Washington. A considerable part of their activities had
been ones not regarded as overly respectable. Their
r epresentatives were the lobbyists who swarmed over
Capit~ Hill and maint~ined intL~ate, sometimes sinister,
relations throughout the executive departments. They
also served as information exchanges,also, and were
well enough known to be the medium through which price
controls were implemented.
Under the old approach, trade associations, like
the business they represented, were divided into three
moral categories. Hoover, as Secretary of Commerce had
put the governmental problem succinctly thus:
1
The problem ••• could be divided into
three parts: first, competition which
could be abridged without violation of
law; second, competition which could be
destructive; and third, recurrent abuses
of the moral code by evil men.l
Memoirs, II , 168 .

30. 27.
He had been in a difficult position. He be-
lieved implicity in the system of free enterprise and
competition. He had no question about the anti-trust
policy: "With marginal lapses in individual conduct,
the Anti-Trust Acts had preserved fairly well competition
and thus the restless pillow of progress."1
1
Op. cit., 168
But early in his term as Secretary of Commerce he found
a device "which could be made an instrumentality for
all these three categories of action against the marginal
faults." It existed throughout the working world. It
was sometimes called a "trade association," sometimes a
"chamber of commerce," sometimes a "union" or an "associ-
ation," sometimes a "cooperative." All had headquarters,
paid staffs and frequent meetings.
To recognize and to try to utilize this ubiqui-
tous device was a novel idea. The general impression
was that it was sinister, against the public interest.
This is certainly what was believed by the Department of
Justice. In fact in 1922, when Hoover resolved to
rescue them, the Department was engaged in a determined
attempt to stretch the anti-trust acts "to prohi:Oit
what should be a constructive cooperation ••• and it looked
as though this perversion of justice would become the

31. 28.
law of the land."1
1
Op., cit., 169
Economists in the Department of Commerce under
Julius Klein made "an exhaustive study of a host of these
business associations." It was concluded that they
"could be made instrumental wholly for national benefit
if they were given constructive things to do." With
this in mind Hoover "submitted an informal memorandum
to the Department of Justice and ~he Federal Trade Com•
mission." Not long afterward the Supreme Court decided
against the Department of Justice and left Hoover free
to make what he could of the associations. 2
2
Full discussion and the text of the memorandum will be
found in the Report of the Secretary of Commerce for 1924.
There followed a government-sponsored development
of cooperation among businesses; and it lasted through-
out the succeeding decade. By 1933, the spread and
influence of these associations was enormous. There was
a temporary attenuation traceable to the depression; but
this was because all activity slowed and congealed. 3
3
The Supreme Court case referred to here -- and by Hoover
in the Memoirs - - was Maple Flooring Manufacturers'
Association v. United States, 268 US 563 (1925). This
Association had a statistical service reporting costs

32. and a freight rate booklet; also it distributed sum-
maries of sales, prices, and inventories. Regular
meetings were held; but, on advice of counsel, future
prices were not discussed.
29.
The court held that these activities did not lead
to concerted action on prices or production. They might
lead indirectly to price stabilization or to regulation
or production "through better understanding of economic
laws and a more general ability to conform to them" but
this was within the law.
And the court might have been quoting Hoover when
it said that the emphasis now was on the desirability
of dissemenating information, which "tends to stabilize
trade and industry, to produce fairer price levels, and to
avoid the waste which inevitably attends the unintel-
ligent conduct of economic enterprise."
There was a really vigorous effort involved in
this campaign. Hoover was committed as Secretary of Com-
merce, and later as President, to the guidance of these
associations into ways that were "moral". This he intended
to do without legal interference, by emphasizing "con-
structive" possibilities and by urging avoidance of the
others. Considering the origin and intent of these
organizations, this was a task a less devoted man might
well have thought impossible.
He believed that he had succeeded. And the emer-
gence of the association system into the NRA code author-
ities seemed to him a perversion. But to others it seemed
a natural - almost inevitable - evolution. How it was
done at first, Hoover says, was to enlist:
•••The different trade associations in
creations of codes of business practice and
ethics that would eliminate abuses and make
for higher standards •••After agreement with
each association on a "code" we submitted it

33. 1
30.
to the Department of Justice and the Federal
Trade Commission; and, to establish confidence
in the "code," the Trade Commission pro-
mulgated it as a standard of fair practice.
No force was attempted or implied. They were
solely voluntary.1
Op. cit. , 173
But he would not agree that the sequence, emerg-
ing in NRA, was a valid one:
The New Deal subsequently declared that the NRA
was merely an expansion of my ideas. That is, they made
this assertion after the NRA went sour. The fact of
the matter is that they were the exact contrary. We
were seeking to eliminate combinations in restraint
of trade . There was no relation between these ideas
except a common use of the word "code'" The New Deal
set up committees of trade associations to fix prices
and to limit production in each trade. It gave sanction
to wholesale violations of the Anti- Trust laws. This
was a long step away from free competition and into
sheer economic fascism with all its implications.2
2
Op. cit. , 173 .
This disclaimer cannot be allowed. There was a much more
intimate relationship between his trade association
program and the NRA than Hoover admits. One of the
supporting stems of its authorship rose directly out of
the system; and the most active of those who operated
its mechanisms were the same individuals who had created
the associations in their respective industries.

34. 31.
There is truth in the stricture that prices were
fixed and that production was limited in the course of
NRA operations. His finger here is fixed on a very
sore spot. For there is no doubt that, under General
Johnson's lax administration, the trade association offices
seized the opportunities offered by the legalized codes.
They did insert price fixing and production- lLmiting
clauses. And these were, moreover,approved by President
Roosevelt. But this perversion did not come about without
a hot fight within the administration; and the reasons for
it were not so simple as an outsider might think.
There were those who knew that a vast and catas-
trophic mistake was being made. The story of some of
the protest may be read in the TranscriEts of the National
Recovery Board. So fierce was the dissention that the
President caused the Board to be dissolved. He judged
that what was being conceded in the bargaining process
then going on was worth the compromises made on price
fixing. The abolition of child labor, and the firm
establishment of collective bargaining.seemed to him
precious gains. And he was not perhaps convinced that an
institution for conjuncture could be made permanent in
any case. If he had refused price fixing and production-
limiting clauses in favor of a mixed Board - Government
and Business with power over these matters - he might
have outrun acceptance, especially by the Progressives,
The point of importance here is that the complex

35. 32.
decisions carried out in 1933-34 are wholly inexplicable
except they are set against the background of trade
association structure built by Secretary Hoover. And
a necessary note to this observation must be that if
Hoover as Secretary and President did not know that the
trade associations were, by various and often ingenious
means, fixing prices and arranging production quotas, he
must have been the only individual in the United States
who was thus ignorant. One of the reasons it was impossible
in New Deal days to turn these practices into a series
of conjunctural decisions with government participation,
was that they were so rooted in tradition that the implied
limitation was fought alike by business and by those most
suspicious of business. 1
1
It ought to be noted that the increase of trade association
activity to a really formidable momentum had begun during
the first World War. The government at that time had given
the associations positive assistance in the effort to reduce
competition and enlarge production. It is estimated that
there were something like 2000 of them. Fainsod and Gordon
(in Government and the American Economy, New York, 1948,
528, Revised editio~descrl.bed what followed: "The move-
ment was strongly encouraged by the Department of Commerce
during the early nineteen-twenties, and later by the FTC
as well. It soon encountered legal difficulties, however,
which dampened the enthusiasm of many business men. A slow
but perceptible decline set in until 1933. In that year,
suddenly converted into quasi-public agencies for the ad-
ministration of NRA, trade associations became almost a
sine oua non for every American industry. The number shot
up in~the high thousands •••• "
The idea of government-business association had an
interesting mutual lodgment in both the Roosevelt and Hoover

36. 33.
minds. In 1922 Franklin D. Roosevelt was made president of
a Construction Council which proceeded to produce a
"code" -- a full decade before the NRA was conceived.
This was part of the Hoover system, a carefully non-
governmental, yet recognized part. The two even had a
correspondence about it.
In the files of the library at Hyde Park there is
a letter from Roosevelt to C.F. Abbott, Executive Director
of the American Institute of Steel Construction, who
had asked him to speak at an annual convention. (Other
speakers were to be Hoover, Senator Moses of New Hampshire,
and Channing Cox, ex-Governor of Massachusetts.) It reads
in part:
I very much regret that it is impossible for
me to attend ••• but must send this message instead.
After three years' association with the
American Construction Council, which was organized
by Secretary Hoover and myself, I am more and more
convinced of the need for cooperation in the whole
construction industry ••••
The association of the two names may have repre-
sented a somewhat exaggerated emphasis by the one on his
acceptance by the other. Probably a hundred other as-
sociations were organized by others and Secretary Hoover.
But that Hoover participated there is no doubt. And in
the same letter cautious but inclusive definition is made
of the objectives sought by the association:

37. 34.
The American Construction Council seeks
to bring together ••• component parts of a
great whole at its meetings held twice every
year, and to bring about cooperation toward
ends which will serve the industry as a whole •••
In the files for June, 1923, there are also two
interesting and relevant documents - - one on the 12th
and one on the 20th. The first is a transcript of
the meeting of the Council at which Roosevelt was made
President, the second is a letter from Hoover to Roose-
velt.
An excerpt from the transcript:
Mr. Cranford: ••• I cannot help but repeat a little expe-
rience that I was one of a party to. As I said before,
we went on a trip around the United States last fall in
the interests of construction. Mr. Garber, Mr. W. 0.
Winston and myself visited some 23 cities west of the
Mississippi River, and on our return had luncheon here
in Washington wi th Herbert Hoover. In the course of our
talk with him we told him that it was our judgment that
the prices of materials in construction and of labor had
not gone down in relation to the high peak prices of 1919
as much as other commodities and that the general opinion
of the industry was that those prices were artificially
maintained; that in labor rates the peak of 1919 had not
been cut down in any of our bigger cities to any consider-
able extent; and that we were fearful that with the return
of more normal conditions and reasonable activity in
construction we would have again a return of the boom of
1919.
Mr. Hoover states that that coincided exactly with his own
opinion and he went on to say that he believed the con-
struction material problem in the United States was one
of our greatest national problems and one that was affect-
ing nearly our entire citizenship, either directly or
indirectly. He further states that if this problem was
not handled by the industry and corrective measures were not
instituted and made effective, that we were going to see
the greatest flood of restrictive legislation that this
country has ever seen. He went a little further than
that and stated that we were either drifting toward social-
ism in the United States or we had to control our industrial
problems within business, that he had no hope that govern-
mental regulation was going to be effective •••• 1

38. 35.
1
Excerpt from discussion at initial meeting of American
Construction Council -- Hotel Washington, 20 June 1922
-- at which Roosevelt was elected President. Hyde Park
Library, Group 14, papers relating the American Con-
struction Council.
Also another excerpt from a meeting of the Board
of Governors a year later - - in May, 1923 -- has an
interest:
MR. ROOSEVELT: Gentlemen, as many of you were here last
year when the American ~onstruction Council was first
talked about, and afterwards at the first organization
meeting, and others of you know about what took place
at that time and the thought that we all had in mind,
that there was a real need for some central body which
could represent all the industries in construction work
-- capital, labor and the general public - - as broad an
organization as we could possibly get -~ I think most of
you are acquainted with the aims and objects of the
Council.
The American Construction Council was organized, but,
frankly, it has not done one darned thing from that time
to this except collect dues from some 115 different organ-
izations, I think.
Now, the question is, first of all, whether the Construction
Council is worth while going on with or not? The Officers
have received no pay, -- do not expect to receive any,
but they do not want to remain officers in name only.
Since the meeting last spring, just before the summer, a
situation has developed in the building industry generally
affecting construction throughout the United States, from
the raw materials down to the finished building. We fore-
saw that last year, I think, all of us were here, -- that
there were going to be peaks and valleys in construction
work, and one of the principal objects of the formation
of the Construction Council was to prevent peaks and valleys.
Well, we surely have hit a peak, and we have not prevented
it •••
Now, frankly, we have struck a situation in this country,
and we are right in the middle of it, today. I will put
it this way -- in the form of two questions:

39. 3 6.
Can the Construction Council or should the Construction
Council at this time function in some way, either to
ameliorate and better the present situation, or to prevent
a recurrence of the present situation in the future?
If that is answered in the affirmative, that we should
take action, then we come to the second. question, as
to what kind of action we should take.
About two weeks ago I appointed a small committee to make
recommendations to this meeting. They have reported here
today, and I purpose, first of all to read their report
aloud ••••
Now, there ~s no reason why the Construction Council should
not speak eventually with such authority that the daily
papers of the United States would carry our reports of
conditions in the construction industry in exactly the same
way that today they carry the prices of stocks and bonds,
of cattle and of wheat.
I do not believe, quite frankly, that the Department of
Commerce will accept the beau jest -- the beautiful gesture
which we make in this resolution in asking them to go ahead
and do this work. I do not think they have the money, and
I do not think that our very good friend, Mr. Hoover, wants
to go in too much for that kind of official reporting. He
believes, as most of us do, that it is primarily a function
of private organizations . We have put in that suggestion,
however, because, after all, it is our government, we want
their cooperation, and we make the gesture, if you would
like to call it that, of saying, "Mr. Secretary of Commerce,
here is what we believe should be done; will you and your
Department undertake it for the good of the United States?"
And when he says, "Thank you very much, I would like to
undertake it, but circumst ances prevent," then we have the
field open to do it ourselves, and we are assured of the
very hearty cooperation of the Government itself in the
gathering of the statistics and in the actual work of
distributing th~~ to the general public ••••1
Excerpt from discussion at meeting of Board of Governors
of the American Construction Council held in home of
Roosevelt, 49 East 65 Street, New York, 16 May 1923.
(Hyde Park Library, Group 14, papers relating to American
Construction Council.)

40. 37.
Some of the leading cases during and after the period
when Roosevelt was interested in the Construction Council,
besides the Maple flooring case mentioned above, were:
Federal Trade Commission vs. Pacific States Paper Trade
Association, 273 u.s. 52 (1927)
U.S. vs. Trenton Potteries Company, 273 U.S. 392 (1927)
Live Poultry Dealers. Protective Association v. u.s.,
4F (2nd) 840, 842 (1924)
National Association of Window Glass Manufacturers v.u.s.,
263 u.s. 403 (1923)
Binderup v. Pathe Exchange, 263 u.s. 291 (1923)
American Column and Lumber Company v. U.S., 257 U.S. 377
(1921)
u.s. v. American Linseed Oil Company, 262 u.s. 371 (1923)
Cement Manufacturers Association v. u.s., 268 u.s. 588
(1925)
DEPARTMENT OF COMMERCE
Office of the Secretary
Washington
Franklin D. Roosevelt, Vice. Pres.
Fidelity and Deposit Company of Maryland
120 Broadway
New York City
My dear Roosevelt:
June 12, 1923
I am in somewhat of a quandary about your telegram
of June 7th . I had hoped that the Construction Council
would be solely originated from the industries without
pressure from the Administration. Otherwise it will soon
take on the same opposition that all Gove~nment touches
to this problem immediately accrue.
The vast sentiment of the business community against
Government interference tends to destroy even a voluntary
effort if it is thought to be carried on at Government
inspirat ion.
Yours faithfully,
Herbert Hoover

41. 38.
4.
It is my conclusion, from some study and consider-
ation, that no American President has been so genuinely
moved by the miseries of mankind as Herbert Hoover. It
was this which led him to abandom business in 1914 and
undertake successive tasks of relief and rehabilita.ti6n
and to become Food Administrator in Wilson's administration
instead of partner in the vast Guggenheim enterprises.
When he became Secretary of Commerce in 1921, his first
thought -- and probably the reason for his acceptance --
was that the Secretaryship was a stretegic headquarters
for o~ganizing a grand attack on the problems of recon-
struction and national development. His intention was
to end once for all the poverty, ill-health, starvation
and slum-living so prevalent but so anachronistic in
America. The solution of these problems, he must have
felt, awaited a leader of energy, of administrative com-
petence and of dedication. He was such a man. 1
1
There is a
in the 1928
eight years
II,
significant note of pride in the speech he made
campaign summing up the progress of the previous
(speech of 11 August 1928, quote in Memoirs,
183-4). This speech was often used against

42. 39.
him in the 1932 campaign because of the contrast between
its optimism and the actual miseries of contemporary
folk. But he never retracted. The depression came
from Europe; the prosperity was American -- under Re-
publican management. In one passage he spoke of poverty
with genuine emotion:
One of the oldest and perhaps the noblest
of human aspirations has been the abolition
of poverty. By poverty I mean the grinding by
undernourishment, cold, ignorance, and fear of
old age by those who have the will to work.
We in America today are nearer to the final
triumph over poverty than ever before in the
history of any land. We have not yet reached
the goal, but, given a chan9e to go forward
with policies of the last eight years, we shall
soon with the help of God be in sight of the
day when poverty will be banished from this
nation •••••
Before going on to some account of the bold attack
it is necessary to note that in the end it failed. The
reason for this failure and for the discrediting and
retirement of this great man is, I venture to suggest,
that he was governed by principles which fatally limited
his decision making. This limitation was something as
deep in his nature as his perception of the need for govern-
mental effort and his urge to organize it. He believed
that government could do much, but that it must not do
too much. And the definition of what would be too much
kept him from succeeding. A good deal of care is necessary
in stating this. It would be easy to exaggerate his fear
of going too far. In fact, within the limits he set
for himself, he was at once careful, experimental, bold

43. 40.
and aggressive. The tragedy of failure is immensely
enlarged by the promise of accomplishment.
A perceptive watcher, if there had been such,
could have forese~n what would happen. And certainly
it is not too difficult to spot the early lightening of
the chains that bound him. They are spoken of sometimes
in concealing language -- that is, what would turn out
to be constrictions were described as unexceptionable
virtues. Nevertheless their real meaning, with the
afterlight of experience, can be seen. For instance, when
Hoover spoke first, as Secretary of Commerce, to his
Departmental advisory committee, it was in these terms:
1
The great economic difficulties that we
inherit from the war ••• emphasize the necessity
of better governmental machinery to assist in
their solutions. Their final remedy must
rest on the initiative of our own people but
the rate of recovery can be expedited by
greater cooperation in the community and with
the community by the government.!
Memoirs, II, 41.
This is to be understood, in view of later occur-
rences, not as a positive approach to reconstruction, but
as an affirmation that the final remedy rested in private
initiative. This, of course, fell kindly on the ears
of the businessmen who heard it. To them it had a comfort-
able connotation. This admirable new administrator was
going to de something; but it was not something they need

44. 41.
have any concern about. It might have frightened a social
psychologist or an abnormal psychologist who, listening
to it, knew that it was individual and local initiatives
clashing, creating confusion, and final'ly ending in
paralysis, which was the basic trouble in America. But
such opservations are made only in retrospect . There
were none to make them in 1921.
Yet the conception Hoover had of the post-war
problem was clear and correct:
1
We have many idle men walking the streets,
and at the same time we are short more than a
million homes; our railways are far below their
need in equipment; our power plants, wat erways,
and highways are all far behind our national
needs in normal commerce. To apply this idle
labor to our capital equipment is one of the
first problems of th~ country.1
2£• cit . 42.
Another man, in another place or time, or, perhaps,
another man in the United States in 1921 - - though this
begins to seem unreal - - might have asked: how can these
idle men be put to the task of creating these necessary
national products? What Hoover was asking was this:
how can business men be persuaded to use these idle men
for doing these things? And that was quite a different
question. The differences involved showed up starkly
by 1932. No one thought of them in 1922.
They did not even emerge from the exhaustive studies
of background and behavior that Hoover would at once, with

45. '+2.
admirable efficiency, proceed to organize. When they
had been made the self-kno,wledge of capitalist society
would be much more complete. But the vital choices for
a President --Hdover would become President in 1929
would be no clearer. This was, of course, because
those choices did not emerge from fact, but from much
more mysterious sources. Others would use the facts to
move on into the disputed territory Hoover could not invade.
The first series of studies was the result of the
depression (if it could .be called that) of 1921. The
President's Conference on Unemployment reported in 1921;
and two committee studies followed in 1923 and 192'+,
the
one accompanied by a fact-finding monograph from/National
Bureau of Economic Research. More important was the
survey of Recent Economic Changes begun in January 1928
and completed in February 1929. The Committee whose report
this was had been directed "to make a critical appraisal
of the factors of stability and instability in the
American economy as a whole, suggesting rather than
developing recommendations."1
1
Recent Economic Changes, New York, 1929, "Foreword."
It was issued at a fortunate time. Together with
all that had gone before, it added immensely to the self-
knowledge of Americans. And it is relevant to point out
three words in the terms of reference: "as a tvhole."

46. 43.
The nation was taking stock of itself in conscious
fashion to see what could be done to stop the upward
and downward swings of industrial activity, now recog-
nized as cyclical. It is not possible to say to what
extent Hoover, who was Chairman of this Committee in
the beginning, and the others, realized the implications
of the phrase "as a whole."
From all that happened afterward it is perhaps
justifiable to say that as Secretary and as President,
Hoover, recognized the nation as a political entity but
.,
not, in any genuine sense, as an economic one. When
depression struck, his philosophy would be defined under
stress. Something was happening, then, to the entire
economy; and there were actions that government could
tace for the entire economy. But government was not
completely responsible or representative. There were
remedies it might not resort to even in emergency. This
was because industries, for instance, were, in a sense,
co-sovereign. The government did not contain them. It
recognized them; it could even, within limits, regulate
them. It could not, however, supervise them, nor could
it require common action among them, nor even supply
initiatives. It could only persuade; perhaps even urge;
but that was all. Industries did not exist for national
purposes, and they could not be required to perform services
foreign to their private objectives. It would be more

47. 44.
accurate to say that, in Hoover's view, the government
existed to perform services for industry -- including
the guarding, if possible, of its "stability."
This was a sort of public health concept. The
population ought to be guarded from epidemics; industries
ought to be guarded from insecurity. So foreign trade
should be promoted, wastes should be avoided, standard-
izations should be suggested and market information
circulated. Because government guarded people's health
it might impose regulations clearly needed to avert
threatened d ngers. So with industry. Stabilization
was good for all industries. Certain actions threatening
it might be restricted;but this~opped a good way short
of a requirement to undertake -- or even to modify --
a production schedule. If modification seemed desirable
the government's limits were defined by the word "sug-
gestion." So in the Committee's terms of reference, if
one key phrase was "as a whole," the other was, "sug-
gesting rather than developing recommendations." Industry
was to stabilize itself by recognizing and acting on
common knowledge.
It is not intended to imply that the body of
philosphy as wel l as fact which came into existence
I
during the decade preceding the depression was something
the New Deal owed to Hoover. It ~muld be inaccurate to
imply, even, that the body of fact was wholly owed to him.

48. 45.
The organization of the National Bureau of Economic
Research in 1920, a most important event in this con-
nection, was really an extension of an eminent scholar's
person. Weslev c. ~itchell was becoming the foremost
authority on business cycles, and the ~ational Bureau's
studies would be the most important source of knowledge
about them. But the ~ational Bureau was a fact-finding
organization. It was interested in behavior ·-- presumably
because knowledge of behavior was necessary to the attain-
ing of stability. But this last was purely presumption.
Its efforts were" "pure," as hardly any previous efforts
in social science ever had been.
Mitchell himself was not in this sense pure. He
had definite ethical notions; but not as a research
worker. Exploration wculd have shown that he did not
share Hoover's public health conception of the economy;
but it was not his philosoph that was wanted. His National
Bureau of Economic Research made or supervised the central
researches of the decade, including those published in
Recent Economic Changes. But the philosophy governing
the use made of these was not to be found in the reports.
It existed in t~e Hoover mind. The debt of the New Deal
to Hoover was for his enlargement of knowledge, for his
encouragement to scholars, for his organization of research.
Without Hoover, there could have been a New Deal but not
so informed a one. It is no doubt a horrid suggestion,

49. 46.
to Hoover's way of thinking, but the members of the
brains trust got most of their material from the Hoover
committees or from the work done under their auspices.
Their education had taken place in the Hoover decade.
They o~ed Mitchell an enormous philosophical debt that
Hoover would have rejected -- did reject -- for himself.
If ethers came to different conclusions about
what must be done in crisis, and if tPe knowledge on
which it acted came from the same source as Hoover's,
how is the difference to be accounted for? In the first
place it ought to be said that the differences in conclusion
were much narrower than the exaggerations of political
exposition later seemed to imply. Where Hoover stopped
was only a little way -- not a long wa -- short of where
Roosevelt woul d stop. The Roosevelt terminal point might
not be the one he would have chosen. He might actually
have been a good deal more of a collectivist than the
New Deal program seems to indicate. About that there is
likely to be long argument, since his real redilections
are so masked by public attitude. This is not true of
Hoover. We knew how far Hoover would go, because he
was pressed to go much further than he did and was stopped
by something inside himself. The opposite was true of
his successor. Roosevelt went as far as he could persuade
supporting opinion to tolerate.

50. 47.
The increase of American self- knowledge during
the Hoover decade is not to be measured only by the
Reports . ~o qne can say how much of a stimulus he was.
But at the least his influence was consideratle, a l though
it might not always be traceable. Seeing what he wanted,
many f unds sup orted, and many scholars were encouraged
to explore extensively, the health of the economy, The
ramification of Hoover's influence can be understood
merely by glancing at the "acknowledgements" in Recent
Economic Changes.1
1
They o ccupy mere than four pages. They include foundations,
univers ities , all sorts of associations, government de art-
ments , and many individuals.
There was a change later on. The anti- intellectu-
alism studied b_ Professor Hofstadter and e ther s was
already visible in 1932, It centered very largely in the
brains trust, And Hoover made the same exaggerated
estimate of its influence as many others -- for the same
reason . Intellectuals were distrusted~ and anyone convicted
of associating with them could be put on the defensive.
This was to become a kind of stock piece with conserv-
atives , 2 They graduall came closer and closer to identify-
ing intellectuals with subversion.
2
From this generalization Senator obert A. Taft has to
be given honorable exemption.

51. 48.
Thev were dangerous to "tl)e American way ." By 1952,
thinking at all was pictured as leading directlv to
communism. In Hoover's time "liberalism," "collectivism,"
and " lanned economy" were assumed bv him ta be fear-
arousing words. Even in his later years, he was still
. . 1 . '1... • 1ident1fy1ng the Nev Dea w1tl' commun1sm.
1
It is my belief, from internal evidence, that Hoover
borrowed a good deal -- ideas if not actually words --
from ~ark Sullivan and David Lawrence, two of the New
Deal 's most vocal critics. For instance in his Stumbling
Into Sociatism ( Tew York, 1935, pp. 19ff), David Lawrence
~ a tabular device to show hew close the Socialist
Party Platform's demands correlated with "New Deal Ful-
fillments." Almost the same language, and certainly
the same illustration appears in the Memoirs (III, 389):
"Students who wish to arrive at the sub-currents around
Roosevelt would do well to examine the platform of the
Socialist Party of 193-2 and observe the uncanny fulfill-
ment of its recommendations by Roosevelt's first admin-
istration."
Lawrence, Sullivan and Frank Kent (of the Baltimore
Sun) might, I should think, be called the Hoover brains
trust. They suppliea, at least, the rationale of
Hooverism and did it persistently day by day over the
years. Cf. Frank Kent's Without Gloves and David Lawrence's
Beyond the ~ Deal. But the1r most e~fective contributions
were the da1ly thrusts at New Dealers 1n commentary on
contemporary events. Some, but by no means all, of these
were gathered into books,
People had been fooled in 1932, he would say in
his Memoirs; but it was not permanent. He looked on at
his successor's "inconsistency of ideological policies
and confusions in administration" and finally made an
analysis:

52. 1
49.
No student will understand the vagaries
and interplay of forces in the Roosevelt
administration without first exploring the
widely different character of the groups
around him . He had been supported by the
Democratic combination which had its origin
in the Bryan campaign of 1 B96. Bryan had
brought together old-line conservative
Democrats (mostly Southern), Northern radicals,
and corrupt city machines . The binding tie
of these groups over thirty years was one
central theme - - to get into office. But,
in addition, Roosevelt had the support of
a frustrated suffering people who did not have
the patience to fight through the inevitable
economic penalties of a great war. This
discontented group found a large leadership
in the Intellectuals with a capital I, who
had embraced some form or part s of collec-
tivism •••
Among the intellectuals who interpreted
liberalism as a sort of collectivism were
such representative minds as Madam Frances
Perkins, Dean Acheson, Henry Morgenthau, Jr.,
Harold Ickes, Francis Biddle, Hugh Johnson,
Frank Murphy, Henry A. Wallace, and Felix
Frankfurter.
In their reinforcement in the march on
Washington came a host of dangerous men and
women. Congressional committees later exposed
several hundreds of them as fellow travellers
or members of communist-front organizations.!
Memoirs, III, 352-3.
It will be noticed that the juxtaposition of
"liberal," "intellectual," "collectivist," and finally
"communist" is here used without apology or further
explanation. It will also be noticed by anyone who
knows anything of New Deal history that the names from
Perkins to Frankfurter are a list of those whom Hoover

53. so.
disliked, and that they have little else in common. No
more diverse philosophies could be assembled in one group
without a great deal of care. Did Hoover know this
when he made his list? I think not; for the one label
all these persons might conceivably wear is "intellectual."
And to Hoover's mind -- and to minds like his every-
where -- the other labels may quite reliably be supposed
to fit.
This is not by any means an isolated instance. My
own name was omitted from this particular list. But
elsewhere I had my due. In one instance I was linked
with several quite dissimilar contemp0raries:
1
All through the 1932 campaign, something
was in the air far more sinister than even
the miasmic climate of depression or a political
campaign. I was convinced that Roosevelt and
some members of his Brain Trust were proposing
t o introduce parts of the collectivism of
Europe into the United States under their
oft-repeated phrase "planned economy ••• "
Their purposes were stated in various
disguises of new meanings, hidden in old and
well understood words and in terms of glorious
objectives. They involved the pouring of a
mixture of socialism and fascism into the
American System.
The first evidence of these collectivist
ideas appeared in the character and beliefs of
Roosevelt's advisers and speech-writers --
Tugwell, Frankfurter, Wallace, Senators Norris
of Nebraska, Thomas of Oklahoma, and others --
whose long-standing declarations for years had
been of the collectivist type.1
Memoirs, III, 329. Notice Hoover says some members of
the Brain Trust. This is to exempt Moley who is listed

54. 51.
as a moderate old-line Democrat. It is clear that Hoover
regarded Moley's later apostasy as evidence of good
sense and moral sensitivity. His After Seven Years
is quoted with approval something like a dozen times
in the Memoirs, and he is spoken of as "an honest and
convinc1ng wr1t er of speeches. " They evidently had
some mutually congratulatory correspondence as well.
He quotes one letter in which Mol ey said: "I feel when
you asked him on February 18th to cooperate in the
banking situation that he either did not realize how
serious the situation was or that he preferred to have
conditions deteriorate and gain for himself the entire
credit for the rescue operation ••• " This, and some of
Moley's other statements about what happened in 1933,
and why, represent a view of those events a good deal
changed from the view he had at the time. In the case
of the banking situation Ray knew as well as the others
that no desire to discredit Hoover governed refusal to
cooperate. It was a legitimate desire not to be com-
mitted to discredited policies; and Ray himself was
involved in the refusal.
Hoover seems to have allowed himself to be
convinced about this largely on the evidence of a
report to him of James H. Rand -- afterward backer of
The Committee for the Nation, instigator of the Wirt
incident and general inflationist busybody. I had lunch
with Rand shortly before inauguration -- we both came
from the same up-state county. He tried to pump me about
likely Roosevelt policies. I put him off with generalities.
Nevertheless ~ediatelv after I left he called the
President and reported that I had said we were fully aware
of the bank situation and that it would undoubtedly
collapse in a few days, which would place the responsibility
in Hoover's lap. And that was what we wanted.
There is a short version of this in the Memoirs
(III , 214-15). There is a longer one in Newton and
Myers' The Hoover Administration, Op. c·i t. 356. In
this one -- a letter to Rand, repeating the telephone
ccnversation -- in a final paragraph, he really let him-
self go. "When I consider this statement of Professor
Tugwell's in connection with the recommendations we have
made to the i ncoming administration, I can say emphatically
that he breathes with infamous politics devoid of every
atom of patriotism. Mr. Tugwell would project millions
of people into hideous losses for a Roman holidav."
His anger was uselessly vented on me, I neither
told Rand anything about the future nor gave him my own
views. Dozens of Rands suddenly discovered after the

55. 52.
election of 1932 that I was a very nice fellow. He
pretended to be a hot Roosevelt supporter. His
immediate reporting to Hoover imaginary facts but ones
congenial to h~ar, was quite typical of the moral
attitude so thoroughly discredited during the depres-
sion years. I of course reported the Rand attempt
to pump me to my principal. What he said was that
busybodies were at him continually too and that his
ingenuity in getting rid of them was becoming exhausted.
Would anyone not wholly ignorant of intellectual
affiliations during those years have put Thomas of
Oklahoma and Frankfurter of Harvard in the same category?
Or Wallace and Senator Norris? Or myself and Frankfurter?
To do so is to invoke hopeless chaos. No two people in
all the Roosevelt entourage struggled more fiercely for
the President's mind than Frankfurter and I. I honored
my antagonist; but I never agreed with him about any issue
so far as I am aware, or with his lieutenants Corcoran
and Cohen, as Hoover might have learned from reading
Moley's After Seven Years. That he did not, leads to
the suspicion that he looked into that book for the confirm-
ation of his presuppositions but not for enlightenment.
Hoover left us -- the collectivists -- and me,
specifically, with this dark comment:
Students who wish to arrive at the sub-
currents around Roosevelt would do well to
examine the platform of the Socialist party ••••
A student should also examine the many para-
llels of argument in Roosevelt's speeches of
January 3, 1936, and June 27, 1936, with the
program of the Communist International,
September 1, 1928 •••••••

56. 53.
If it seems incongruous to credit Hoover with
originating the studies and speculations on which the
New Deal programs was founded, it is nevertheless true.
Members of the Brains Trust were grounded in Recent
Economic Changes and in its cousinly Recent Social
Changes1 and had gone to school to Mitchell, Ogburn and
1
Printed each year from 1928 through the relevant period
as suppl ements to The American Journal of Sociology.
They were edited by W. F. Ogburn and written by unexcep-
tionable contemporary authorities.
others of Hoover's experts. Indeed Mitchell and Ogburn
were themselves elders in the New Deal "apparatus."

57. I 54.
s.
No operating agency of the New Deal was more
active, and perhaps none was more important, than the
Reconstruction Finance Corporation. In its 1932 form
it was Hoover's project; it represents, therefore,
another of his contributions to the Roosevelt program.
For, under the new President's guidance, instead of
being scrapped as a Republican device, it was enlarged
and extended. The original Act was, as matter of fact,
amended on numerous occas~ons, the first of them only
five days after the Roosevelt inauguration.1
1
This was the amendment authorizing the RFC to invest
in the preferred stocks cr capital notes of commercial
banks and trust companies. It was passed in a matter
of hours on the day o·f the assembling and organizing
of the new Congress. The Bank Conservation Act was
passed on the same day. This, in effect, permitted
the Comptroller of ·the Currency to appoint receivers
for closed banks.
It was not until 1934 (in June) that the RFC was
authorized to make loans to business and industry. This
was the step beyond loans to banks which Hoover, in his
time, had recommended but which had not been authorized by

58. 55.
the Congress. This recommendation seems to have been
a clear violation of his principle of not supporting
business directly and so usurping the function of the
commercial banks. It was this very point that he was
afterward so certain marked the New Deal as "socialistic."
His request was not allowed by the lame duck Congress;
but this was more for political than for ideological
reasons, it was necessary and his asking for it now
seems more creditable than his condemnation of the
Congress for later action on his earlier advice.
In the summer of 1932 another Hoover measure had
a better reception. The Emergency Relief and Construction
Act. was passed. This authorized the RFC to distribute
up to $300,000~000 for relief purposes to the states
and territories. After that, loans to business could
hardly seem revolutionary, yet nothing was done to
authorize them at that session.
Of this Act, Jesse Jones remarked (in Fifth Billion
Dollars, New York, 1951): "That was the opening wedge
for the siphon through which,later on, the New Deal
poured billions in grants, gifts, and doles •• ,"
The decision to accept responsibility for relief
on behalf of the Federal government was really a much
more significant departure than loans to business would
have been. These at least had the precedent of the ~ar
Finance Corporation set up for expansion purposes in 1917.

59. 56.
Hoover was reluctant to accept the necessity for any of
the RFC rescue operations. His first idea had been
that the bankers should save themselves, and the
businesses for which they were responsible, by cooper-
ative action. In October of 1931 he had called a group
of them to the White House and persuaded them to form
the National Credit Corporation with assets of $500,000,000
made available by the stronger banks; but this sufficed
for no more than a few weeks. Loans on frozen securities
exhausted the sum available almost before operations had
begun. In December, he was recommending to the Congress
that it create the RFC. Federal funds simply had to
be resorted to.
When, in February, 1932, the RFC began operations
the situation had become terrifying. Repeated selling
waves had depressed stock and bond prices so far that
banks, insurance companies and other institutions, which
held them as collateral, could no longer be regarded as
solvent. Also foreign holdings had been dumped on American
exchanges ; and as fast as they were sold they were converted
into gold for export. Because the United States was
on the gold standard, when export reached fifteen percent
of the total reserve, disaster seemed to impend, and
everyone who could began to hoard currency. As a result
of these drains, the combined reserves of the Federal
Reserve member banks dropped to within fifty millions of

60. 57.
the legal minimum. During the last half of 1931 bank
deposits had fallen twelve percent (six billions) and
hoarding was accelerating daily.
By midsummer of 1932 the situation was somewhat
improved. RFC was pouring funds into
1
distressed banks, insurance companies,
mor tgage loan companies, building and loan
associations, railroads, and the pockets of
a million farmers - - some of whom had got out
shotguns to prevent foreclosure sales.
For the first time since the 1929 crash,
new and resumed deposits began to exceed in
the weekly reports the sum of the deposits
tied up by bank suspensions.1
Jones, op. cit. 16.
on
This was the evidence Hoover relied / for his belief then,
and his later argument, that his policies had stopped
the recession in July. Jones describes what happened
subsequently.
In the autumn farm prices and securities started
to slip downward again, New bank troubles broke out,
like fires,in many spots. We took to employing fire-
house similies in discussing our work in the RFC. Like
a fire department we were on call all around the clock ••••
By 25 August 1932 we had approved loans aggregat-
ing $1,331,740,000 to 5,520 financial institutions. Of
these, 4,865 were banks and trust companies. We had
helped reorganize or liquidate 386 other banks which
either had sunk or seemed about to go under ••••
It was not, however, until the nation-wide collapse
of 1933 made drastic measures necessary that Congress
became convinced that a new, sound foundation should be
put under America's credit structure.

61. 58.
This was when the RFC was authorized to buy the
banks' preferred stocks and so to become part-owners.
Hoover had a controversy with the Congress about this
in which he came off second best. 1 Several changes
1
It has to be recalled that after 1930 the House had a
Democratic majority and that Hoover was forced to
bargain with the Democratic leaders from then on for
all his measures, something he was understandably
bitter about in his Memoirs.
were made in the original bill. 2 They had later to be
restored, but mostly that was not done until Hoover had
left office. Nevertheless the RFC either as it was
2
In the Memoirs, III, 107, Hoover says of this: "The
security and ether conditions for loans made were
unnecessarily stringent. The securities required took
no account of the fact that values were depressed below
their true worth. (In the crisis in Detroit later on,
this contributed to disaster). The authority to make
loans to industry for improvement of plants -- one of
my strongest and most urgent points -- was eliminated.
Certain types of loans to stimulate exports of agri-
cultural commodities and to set up a series of agri-
cultural banks to make loans for production purposes,
were deleted. Loans to enable closed banks to distribute
the cash value of their assets were also deleted. Loans
to public bodies which could have been used for repro-
ductive public works were excluded. However, I deter-
mined to make the best of it and try to get it amended
later."
in being at Roosevelt's inauguration, or as Hoover had
recommended it to be, was almost entirely his invention.
Nothing of any importance, nothing novel, was added at

62. 59.
any time during the depression.1
1
A variety of subsidiaries or new divisions were added
from time to time but they are not to be rated as new
inventions or ideas. They were merely devices to carry out
functions Hoover had said must be carried out.
It ought to be noted that Hoover was quite aware
of weaknesses in the banking system. He spoke of them
at the time: and in his Memoirs2 at least one paragraph
shows an understanding beyond that of most of his
2
Op. cit. III, 5.
contemporaPies and certainly beyond that of those who were
at the time in charge of fiscal policy. He noted the "wave
of optimism," resulting from technical progress, "which
the Federal Reserve Board transformed into the stock-
exchange Mississippi Bubble. 11
This is a direct accusation.
And it does have to be remembered that the Reserve Board
was autonomous and that Hoover's cautionary advice was
rejected. But also in this same paragraph he said that
there 11
was a need for readjustment of commodity prices
within groups." And this comes very close to a realistic
explanation of what was happening. For the inability
of some to buy the products of ot hers did, in the opinion
of many later analysts, caused the original paralysis.
Of course, the reasons for the disparity and the remedies
for it are net obvious from stating it. But that Hoover

63. 60.
recognized disparity at all is surprising; no such
comprehension was translated into action. Perhaps it
could not have been.This very weakness was seized on
by myself and others who were Roosevelt assistants,
and used in the early attack on Hoover's position.1
1
Cf., for instance, the passages of Roosevelt's acceptance
speech emphasizing the inability of consumers to buy
because monopolized prices had not fallen along ~-~i th
costs, and the disparities among groups -- especially
agriculture and industry. It might be noted, also,
that this was another holistic speech; "Never," the
candidate said, "have the interests of all the people
been so united in a single economic problem." Public
Papers, I, 650ff.
A psychologist would see at once the reason for
this vulnerability of Hoover. The actions logically
called for did not conform to his conceptual system or
to the policy commitments of his party. In all fairness
it ought to be noted that although Roosevelt's under-
stand~ng of the basic trouble was more forthrightly
expressed, he, no more than Hoover, could proceed to
the indicated remedies. They involved the control of
prices, or, at least, the setting up of an agency for
conjuncture which would insist on being guided by general
as against individual interests. This was the expected
function of NRA; but it broke down at once when its
implications were seen and administration had to be planned.
Roosevelt could be a holist, and could convict
Hoover of not being one, so long as he maintained the role

64. 61.
of critic. But holism was no more congenial to Democrats
than to Republicans when special interests began
their attacks an• when laisses faire believers
ineicate• their cold and implacable opposition. He
gradually gave up; and the New Deal in the end would
have a residue of institutions conservatives might
not like but would not reject after their public accept-
ance. Roosevelt, during the campaign, used all of his
talents for ridicule on Hoover's attributions of
responsibility for the depression to "shocks from
abroad." He was, said Roosevelt, trying to escape
responsibility. The depression had originated right
here at home. But this left Roosevelt in his turn
vulnerable. Hoover could afterward say that the depres-
sion had never been worsted by the Democrats. He would
not say that this was because they had not dared do
what he had not dared do either; but he could cite the
fact of failure. And it was fact. Prosperity would
only return with the gross inflation of war.
In lesser matters having to do with finance - apart
from "tampering with the currency," Hocver saw that reforms
were needed. And about dealing in securities, object
of the New Deal!s most ardent reformism, Hoover can
very well be said to have passed on a real contribution.
He was not able to do much about holding companies,

65. 62.
mixing investment with commercial banking .and so on,
but he said a great deal, much of it very pointedly.
I believe he had intimations that the association of
all the doubtful practices and characters of the
depression years with his Administration might well
ruin him politically, as in fact it did.
In one chapter of the Memoirsl Hoover tells how
he laboured "to stop the orgy of speculation." It is
1
Volume III, Chapter 2
a sad account; and anyone- reading it must share his
frustration. There are crowded into a few pages the
disappointments of a statesman who presided over a
holocaust he could not control and who even felt forced
allay the fears he knew to be justified. This chapter
is followed by another devoted to the banking system.
No more severe criticism came out of all the subsequent
New Deal investigations. His recommendations -- not
acted on -- could be taken as recommendations for the
reforms of the next few years.
But Hoover, like Roosevel~much overrated bank-
ing weaknesses as a cause of depression, and banking
reform as a remedy. The record is in his public papers;
Roosevelt's was written into law in succeeding years.
What was done had to be done; it was necessary reform

66. I
I 63.
of obvious abuses; but it was not central to recovery
because it had not been central to collapse -- that is,
economic collapse.
There are hints of this in a succeeding chapter
. 1
of the Memo1.rs •
1
The one titled "Federal Government Responsibilities and
Functions in Economic Crises, " I II, Chapter 4.
It is curious that in this reminiscent account
he does not mention the vast body of knowledge by then
available about business cycles, and, specifically,
what to do in time of depression. It leads to wonder
whether all the studies made under his sponsorship
(some of them for Committees of which he was chairman)
had actually become part of his working knowledge. His
was an administrative intelligence. It is certain that
he understood the utility -- and the limitations -- of
works programs to relieve unemployment. But this was
only one of the remedies available to be tried. None
was, of course, more than a suggestion; there had not
been a chance to make trials between 1921 and 1929.
The researchers knew well enough that this was a boom
period and that a bust period would follow. But it is
quite apparent that Hoover had not dwelt on the possibility
that his Presidency might have as its most important

67. 64.
problem the meeting of such a crisis. So, very possibly,
he had not studied the voluminous information he had
caused to be gathered.
The RFC was an improvisation, but a brilliant
one; all kinds of responsibilites of a rescue sort
could be assigned to it trom the bolstering up of in-
solvent banks to the making of loans for public works.
Actually it loaned a billion and a half dollars in
1931-32 for "reproductive" public works -- those that
would return the funds loaned. But the effect was very
slow. It did Hoover no good in a political way, either,
because there were those in the Congress, led by Senators
Wagner and LaFollette who wanted much larger sums used,
and argued that the "reproductive" limitation was
responsible for continued ineffectiveness. For two
years Hoover was consequently on the defensive. This
tended to obscure the fact that actually RFC did support
loans to building associations, Federal Farm Loan
Banks, the Intermediate Credit Banks, insurance companies,
and railways; that it made loans to encourage agri-
cultural exports; and that it created Agricultural
Production Banks to fill a gap between the existing
agricultural credit institutions. Actually, the Roosevelt
reform of the agricultural credit system was little more
than the necessary consolidation into one overall agency