The New Deal Era & Now, Part One

With America mired in arguably the worst economic downturn since the Great Depression, there have been lots of discussions about what we should do (or have done) about it. There are those who have said that there should have been no bailouts of any kind; that if you can't survive, oh well. Then there are those who have pretty much advocated federal bailout of just about anything; although I think their numbers are relatively small. During and after the Great Depression, strong emotions were stirred about Roosevelt's New Deal, and with the crisis now upon us, these arguments have been renewed. There are those who have said that both Hoover and Roosevelt intervened in the economy, and that, left alone, things would have corrected themselves. Some, not all, of these folks have even argued that it was government intervention that made things worse. On the other hand, others have argued that certainly Hoover did not do enough, but that even Roosevelt's policies were lacking in sufficient "punch" to reinvigorate the distressed economy.

First, let's recap just what's been going on. "Officially," the recession began in December 2007:

In early 2008, with the many people fearful of what was then a slowing economy, President Bush proposed a program of "rebates" to Americans, and that program began in late spring and early summer of last year. Now, maybe my memory fails me on this, but while I'm sure there were some protests about the program, I don't recall any "tea parties" or calls for the rebates to be paid for by cutting other government expenses (there may have been, but they certainly weren't very loud). Nor do I recall hearing that the President was a "socialist," or that he had a secret plan to make the United States a "socialist nation!" (I do have a bright red shirt, just in case I ever need to blend in.) This was at a time when the federal deficit, having grown by trillions during the previous seven years, was growing even more. The vote for the rebates was:

House of Representatives-385 FOR and 35 AGAINST (25 Republicans-10 Democrats)

Senate-81 FOR and 16 AGAINST (all 16 being Republicans) (Source for vote totals in both houses from GOVTRACK.US)

Then we had many banks teetering on the brink of collapse, several of which were declared by the administration and the Federal Reserve to be "too big to fail." I'm not going to go into each step that took place, but suffice it to say that I guess the "powers that be" decided that "Lehman Brothers," a large investment bank, was NOT too big to fail, and down it went. With this one bank failure, the whole system shook, and I'm sure all of you remember the plunges in the stock markets at various times during 2008, both in America and internationally.*** Remember, this was just ONE bank failure. Essentially up to this point, we had been told by the Federal Reserve, and to a lesser extent, Treasury Secretary Henry Paulson, that inflation was the potential problem for the United States. Suddenly, one morning I put on the television and there were reports that Fed Chairman Ben Bernanke and Secretary Paulson had called President Bush and top congressional people from both parties to a meeting, where they were told that 700-750 billion dollars (that's billion, with a "B") were needed to buy bad assets from banks, or the country and indeed, the World, was facing "The Great Depression, Part Two." I can't say that these same folks said this, but I know it was said by someone, that "Part Two would be WORSE than the 'original.' " President Bush endorsed the plan. In Congress, a great many Republicans opposed the plan, and it was about a week or more before the bill authorizing the money passed the House and Senate.^^^ It was then signed into law by President Bush. The vote was:

House of Representatives-268 FOR-148 AGAINST (3 Democrats-145 Republicans)

Senate-74 FOR- 25 AGAINST (9 Democrats-15 Republicans-1 Independent) (Source for vote totals in both houses from GOVTRACK.US)

Not long after becoming law, I believe it was Secretary Paulson, with the support of Chairman Bernanke, who announced that there had been a change in plans, and that the money would NOT be used to buy bad assets from banks, but rather it would be directly injected into troubled banks to provide capital. To keep this simple, to the media and to the public, the whole measure became known as "a bailout for banks." There's no question that the decision to change policy AFTER Congress appropriated the money, made an already skeptical public even more hostile. Regardless, hundreds of billions of dollars were funneled into banks, and even into AIG, an insurance company deemed "too big to fail." The government took a financial interest in a number of banks, and in AIG. I believe usually about a third stake in most banks, or at least those "too big to fail," and an astounding 80% in AIG.### The "new" Congress (the 111th) that took office this past January, voted to release the second installment of the "bailout measure."

To be continued.... (A word history is below the notes)

***While I don't remember every person who advocated such, there were a number of people, both politicians and economic "commentators," who took the view that "if you can't make it in the capitalist system, bye bye!" These folks would certainly correspond to those who argued against the New Deal, during and after the Great Depression.
^^^Congress decided to allot the $700 billion in two installments of $350 billion each, with the second part needing another favorable vote before the funds could be released.

### Whether you agree, disagree, or are indifferent to the decisions that were made, essentially by Bernanke and Paulson, in the last couple of months, I've heard comments from some conservatives who act as if the "bailouts" and and "government ownership stakes in companies" all started with the Obama Administration. I just wanted to remind them, in case their memories have failed. There are antidotes to such amnesia; they're called FACTS! And that's not to say that the current administration hasn't followed a similar path as the Bush Administration, it HAS.

Word History:
Switch-Noun-It "seems" that English first acquired the noun form of this word. Apparently it goes back to the Indo Europoean root "swei," which had the notion of "bend." Old Germanic continued with a root word "swih." Old High German developed "zwec," which meant a "wooden peg" which then was used for a target. In modern German, "Zweck" has come to mean "aim, goal, reason for something," and you can still see the association with "target." Low German developed "zwukse," which meant "a long, thin, flexible stick, or twig." (That takes it back to the "bend" notion) All sources mention the Low German dialect spoken around Hannover as being a direct link with the English word, as Hannoverian has "swutsche/schwutsche." Both Flemish and Dutch had, in times past (I could not find modern forms in either language), similar words (Some linguists say Flemish is a separate Germanic language spoken in Belgium. Some linguists classify it as simply a dialect of Dutch.) Anyway, it was picked up in English in the 1500s, and it seems to have been spelled "switz" and "swits," and meant "a flexible twig, but also a thin riding whip." It also seems that English picked up from another cousin, standard German, the "peg" sense of the word. This gave English "switchboard" in the latter 1800s, where in times past an operator plugged telephone lines (like "pegs") into openings. Further, during the 1930s, "switchblade" came from the notion of pushing the switch ("peg") to open the knife blade. Interestingly, a light "switch" might have elements of both meanings, as it certainly is something of a "peg," but the "flexible twig" notion could also apply, as we flip the "switch" back and forth. From what I have seen, American English used the notion of a "switch" to redirect a train from one track onto another.

The verb form will be covered next time.