Herbert Hoover: March Toward Reactionary, Part Two

During his lifetime, Herbert Hoover marched from moderate progressive toward a position on the solid political right; that is, he became something of a reactionary. I say "something of," because it is difficult to actually tell what Hoover truly believed at times, as in my opinion, he lived in a bit of a dream world where his words were often in denial of the actions he had taken. That dream world consisted of the American system which he had come to idealize; the system he had lived in and prospered in for his life up to the point of the Great Depression. It was a system of neighborliness, of voluntarism, of cooperation to help others, and it was a system where private business ruled, but where private business also needed a bit of government regulation to keep a check on ruthless exploiters (Hoover had been a supporter of progressive reformer Teddy Roosevelt). Hoover had been overseas a good part of his adult life, so he had seen many other parts of the world, including Europe during and after World War One. He had seen powerful rulers suppress their people and he had seen the absolute horrific results of  (then) modern warfare. He returned to the United States to serve in Woodrow Wilson's administration during America's time in the war, only to leave for Europe after the war to help feed starving Europeans and to sit in on the peace conference that officially ended the war. He came back home and took a position in Warren Harding's administration as Secretary of Commerce, which then led to his own successful run for the presidency. Wherever he served he had been known for his tremendous energy and his organizational abilities. Now to continue with some of the actions he took during the Great Depression, especially with the Reconstruction Finance Corporation from "Part One." (For those who need a refresher about the first part, or for new visitors, click here for "Part One:" http://pontificating-randy.blogspot.com/2013/06/herbert-hoover-march-toward-reactionary_15.html

Hoover's Reconstruction Finance Corporation (RFC) had some success in 1932, and the economy actually saw a mild tick upwards and confidence improved a great deal as the number of bank failures dropped dramatically, but confidence could not put food on the table nor money into empty pockets, and the economy continued in its depressed condition, with high unemployment. Franklin Roosevelt used the RFC much more than Hoover, as FDR wasn't as dogmatic in his approach to getting money into the economy as the methodical Hoover, and parts of the RFC were made into separate agencies under Roosevelt, like the Public Works Administration (PWA), for instance. Hoover and Congress expanded the RFC in mid 1932 to include aid to strapped states to help the unemployed and poor, an idea finally embraced by Hoover, as he belatedly admitted that private charities and state and local governments could not cope with the extent of the increasing poverty. The expanded RFC, besides its original purpose primarily to shore  up struggling banks, was also to provide loans for state and local public works projects and loans to agricultural entities, with the ultimate goal that all of this would generate employment to give the economy a boost toward recovery. The public works projects had to have some means of raising money on their own to help guarantee the repayment of the loans, as well as provide for continued operation and maintenance after they were built, so this was not a program where people were to be put to work digging ditches without purpose. Two of the problems with the program were, Hoover and his administration put limitations on the RFC by having the government charge higher interest rates than private loan institutions, so as not to compete with them, but the whole point was, the loans were NOT being provided by private lending institutions anyway, as they were generally holding onto their cash, and the main economic problem was not the lack of loans for businesses to expand, but a lack of demand by strapped consumers, the solving, or partial solving, of which would have created demand, which then would have led to a true demand for loans by businesses to expand production and to hire more workers. Second, the administration set the terms requiring loans to be repaid within the atypically short period of ten years. Hoover would not agree to use any of the money as "grants," only as "loans," and that mentality had the RFC giving close scrutiny to applications, fearful that the money could not be paid back. This meant that applicants faced almost the same requirements from the RFC as they faced from private bankers, but at a higher interest rate! Needless to say, applications were often sparse for many things and the process of approving the applications that were made took a good deal of time. Further, as the Obama administration found out early on, getting most projects mapped out, applied for, engineered and tweaked, took time, thus few projects were even approved or underway by the time Hoover left office in March 1933, with the "glory" then going to FDR as the projects finally started.*

Much the same happened with the relief expansion part of the RFC, as Hoover's administration made each state go through a pretty rigid approval process to show that the state had indeed exhausted its funds and had done all it could to help its own unemployed and poor. Even after jumping through the hoops, some states were given paltry sums compared to their actual needs. This all left many Americans embittered and angry at Hoover, but again, this was typical Hoover, where method was something of a result in itself.** In fairness, this was all new to America and Hoover deserves credit for making the changes, limitations or not, as without his having done all of this beforehand, FDR would likely have had a more difficult time, as Hoover's term showed that past policies didn't work, and that Hoover's new policies were too limited or too cumbersome to effectively halt the decline or bring about recovery, but that these new policies had promise, if they weren't hamstrung by the administration. The Roosevelt administration used the RFC to far better service right up through World War Two than did Hoover, even though it was Hoover's creation.

While a large number of banks had collapsed throughout the 1920s, with far higher numbers during the Great Depression, one of the enduring legacies of the Great Depression was the national panic during the waning days of Hoover's term in office. In 1932 the RFC had bolstered a number of banks, and while some banks still failed, including some that had received aid, the banking system appeared to have stabilized. Most of the failed banks came from generally rural areas, but failures in smaller cities had increased. The appearance of stabilization was all an illusion, as general business conditions were very depressed and, as unemployment remained high, many Americans had little or no money to become the consumers American businesses needed to prosper. Farming communities were very hard pressed, as were urban industrial centers. All of this was bound to have dire consequences for the American banking system.

Receiving loans from the RFC turned out to be a double-edged sword, as Congress mandated that the RFC turn over periodic lists of recipient banks to them. The names of the banks were at first to remain out of the public domain. The idea was, if you heard that your bank had received RFC money, you might very reasonably assume that your bank had been in trouble, and might still be in trouble. This could then prompt you and other depositors to run to the bank to withdraw deposits and this would then bring about a possible failure of that bank. Well Congress, unhappy with some loans, wanted the names of the banks made public, and while it didn't exactly cause a panic, it made many a depositor of these banks nervous. At first though, with the banks seeming to have stabilized, it didn't cause much of a stir, but that would change. Further, some banks in need of help "may" have forgone seeking RFC help for the fear of their public image.

Franklin Roosevelt convincingly defeated Hoover in the 1932 election, but the very fact that a change in administrations was coming made some uneasy, as FDR had tried to steer clear of a commitment to any specific policies during the campaign. In those times, presidents were sworn into office on March 4, not January 20, as today, and during such an economic meltdown this extra period of time just served for even more calamity, with a politically defeated outgoing administration still in power, and a politically victorious new administration waiting to take the reins of power. In the interim period, Hoover tried to get Roosevelt to commit to certain economic policies, essentially Hoover's policies, something FDR would not do (correctly, as the country had just overwhelmingly rejected Hoover). This likely contributed to the uncertainty and shakiness of early 1933, but it was also not the primary cause of the banking crisis, as Hoover conveniently later said. Hoover was the last president to take office in March, as the amendment (the 20th Amendment)  to change the inauguration of presidents to January 20 was ratified in early 1933.
   
One of the industrial powerhouses of the nation was Detroit, where the auto industry had taken a major hit from the Great Depression, with a large percentage of production shut down. With prolonged high unemployment the Detroit banks suffered accordingly. In early 1933, a couple of large Detroit banks were on the verge of collapse and the RFC stepped in to to help, also seeking assurances from none other than large depositor Henry Ford that he would remain a depositor of the banks, something to which he would not commit. The fear that Ford would withdraw his money from the banks prompted the governor of the state to declare a bank holiday to head off the collapse. The news shook the country and other states began to follow suit in closing their banks for a time. The whole situation caused panic, as Americans, terrified they would lose their money (remember, no deposit insurance back then) or not have access to needed funds, raced to their banks before they were shut out. With many banks closed by their states and Americans so fearful of losing their money, spending dried up even more, sending the economy into another plunge.

There will be one more part ....       
 
* The "stimulus bill" passed very early in the Obama administration was to provide funding for many "shovel ready projects." The President later lamented there weren't many such projects available, as again, states and local governments had basic plans they wanted to develop, if and when they got the money, but then actually preparing those plans to go forward with firm architectural and engineering designs, public hearings (many cites and states require public hearings on such plans), modified zoning (if needed), any new roads or other infrastructure needed to support the project and the proper contracts, took much more time than "shovel ready." Someone didn't read or know their history, because Hoover's administration suffered from the same problem in 1932, with many projects terribly delayed and a demanding public furious that everything took so long.

** When Hoover was administering food programs in Europe during and after World War One, the overhead for such programs was astoundingly small and his vaunted "efficiency" was seen as an example of how to help people, but with almost all of the funds going directly to those in need and not to administrative costs, but Hoover also was dealing with many volunteers and charitable contributions back then, including from governments, a fact he did not publicly talk about, which did put a somewhat deceiving gloss to the process, and there's no question in my mind that all of this colored his thinking about the efficiency and voluntary cooperation efforts he tried later as president. Hoover's omission of telling about the large contributions of governments, including that of the United States, was part of that dream world he lived in, where he wanted so much to believe that people would voluntarily help other human beings that he was in denial about how far such help would go. Like today's conservatives, to admit government helps anyone is to admit failure of your own philosophy.

WORD HISTORY:
Rear (2)-English has a couple of words spelled "rear," this is the word meaning "hind part, back of, last part." The ultimate origin of this word is unknown. It goes back to Latin "retro," which meant "back, behind," a form of which was inherited by Old French as "riere" and then used in the compound "rerewarde," used in military terminology for "the rear guard." Another form, Latin "adretro," which meant "to the rear," was inherited by Old French as "ariere" (which was borrowed by English and became English "arrear"). It is unclear if English got "rear" by using a short form of French "rerewarde" or from a shortened form of "arrear." It is common to call the military units behind the front the "rear" or simply "the rear," so that might well be the source.  

Herbert Hoover-March Toward Reactionary

I've written a good bit about Herbert Hoover, including the recent, "Herbert Hoover: Good or Bad?" To view any of the articles where Hoover is more than just mentioned, go to the bottom of this article and click on "Herbert Hoover" in the "labels" section. This will take you to all of the other articles. In my opinion, Hoover, while not a successful president, was a very important president, because he was a transitional figure who tried using many of the old ways to combat the nation's most severe economic downturn, but who then turned to new ways, albeit with many self imposed limitations. Herbert Hoover lived more than three decades after he left the presidency and I remember his funeral in 1964, which was carried on television back then. He was the first former president to die in my lifetime and I took great interest in the events surrounding the death of the 90 year old Hoover and he was discussed in my school classes too. With his death coming only a year after the assassination of President Kennedy, I'm sure that focused a lot of attention too, as prior to that, the last president to die was Franklin Roosevelt in 1945.

As I noted, Hoover was something of a transitional president, finally willing to abandon tradition in favor of new ideas and programs, although often grudgingly doing so. The interesting thing is, Franklin Roosevelt, his successor, became renowned for his efforts to combat the Great Depression with his "New Deal," but Hoover was scorned by much of the American public and even out and out hated by some. Why the difference? For one thing, being in the "broad middle" of the American political spectrum at certain times can be a very dangerous place to be. The Great Depression tried the nation's patience with Hoover, as his methodical, often doctrinaire approach ignited strong animosity from a large part of an American public stricken by poverty or the fear of falling into poverty. On the other hand, arch conservatives felt he did too much. Hoover had come out of the progressive wing of the Republican Party (progressives were a fairly substantial element of the GOP in those times), but he wasn't a "true believer," he had limits to his progressivism, although he later abandoned some of those limits. Some saw him as a conservative as president, but he wasn't a "true believer" on that side either. With Americans split between those demanding bold, decisive action and those fearful of breaking new ground, Hoover was sort of trapped in between, although, as I mentioned, many saw him as a more conservative president. The reason is likely that "Hoover the conservative" was always trying to down play "Hoover the progressive." He never really jumped onto the bandwagon of change, even when he initiated it, as he preferred to try to link his change programs to some sort of continuity with the past, as if there were no real breaks in policy. FDR had no such reluctance about embracing change, although he and Hoover shared much the same basic philosophy (Hoover would later change, as I will note later on). Roosevelt publicly embraced change, but privately worried about some of the potential consequences of that change.

With Hoover so reluctant to admit to having changed anything, FDR and his advisers took some of Hoover's ideas and programs, tweaked and expanded them, and then claimed them as their own, leaving Hoover with no credit whatsoever. Hoover's personality made him a bit of an odd guy to be president, although that isn't quite fair. In an age when radio was a great means of communication with the public, and sound movies had replaced silent films, Hoover was shy and very serious. He was not a great communicator, especially when compared to FDR's jovial, inspirational personality. On the other hand, Hoover might look downright dashing compared to his predecessor Calvin Coolidge. When the dour Coolidge died and someone told one reporter who had covered him that the former president was dead, the reporter asked, "How can you tell?"

Hoover's really big change idea came with the Reconstruction Finance Corporation, known by its initials "RFC." First, a little background. Why were banks in trouble? You go to a bank for a loan and they want collateral. You give them property, jewelry, or some other valuable items sufficient to secure the loan. The problem was, the depression brought a big decline in the value of everything, leaving banks (and other financial institutions) exposed to losses. Further, financial institutions had loaned money for companies and individuals to buy stocks, with the stock used as collateral. When the stock market imploded the value of stocks dropped leaving the institutions with losses. Also, financial institutions and insurance companies invested in stocks and bonds, with the same resulting losses. Many banks were located in rural agricultural areas. With American agriculture already in dismal condition throughout much of the 1920s, many rural banks collapsed even prior to what is generally seen as the start of the Great Depression in 1929, an event that sent more rural banks into closure. In those times, there was no system of insurance for bank deposits, so when Americans got rattled, they headed to their bank and demanded their deposits in cash, fearful they otherwise would lose their money. With banks already strapped by losses for many of the above noted reasons, coming up with large cash sums to pay depositors off was difficult. Some assets they possessed could be turned into cash fairly quickly (this is called "liquidity"), but other items took longer to sell, if they could even be sold at the depressed prices then prevalent. In order to get help from the Federal Reserve, a bank had to belong to the Fed's system. In those times, many banks didn't belong and other financial institutions couldn't belong, so there was nowhere for them to turn for help.

A couple of years into the Great Depression, Hoover tried one of his voluntary cooperative programs, this one to shore up the banking system. Hoover called together a number of the country's bank executives and got them to pool some money to loan to other banks that were experiencing difficulty. The bankers were reluctant to do so and really seem to have preferred government intervention, but they gave a lukewarm effort to satisfy the President. The thing was, they were so fearful of losing their money to the troubled banks, they set tough criteria for borrowing banks to meet and more banks failed. It wasn't long before Hoover saw that voluntary cooperation doesn't always work and he got Congress to approve the RFC. Hoover had been a businessman, he had appealed to business people for humanitarian aid during and after World War I, he was involved with business as Secretary of Commerce, so he had a strong connection to business giving him a business point of view, which coupled with his engineering mindset, gave him a zealousness for "efficiency," which then hampered the success of the RFC program. The RFC took government directly into economic matters. It was set up to loan government money directly to troubled banks and other financial institutions and to railroads and to farm boards for seed loans. The idea was, if financial institutions were stabilized, the public would gain confidence, the run on banks by depositors would cease and such institutions would then lend money to business people and the economy would recover. The problem was, many in the public were broke, so lack of demand stood in the way of any strong recovery, plus, banks took the RFC loans to stabilize themselves, but NOT to then loan money out in the troubled economy.* One of the problems was, that the Hoover mindset, and it seems even more so the mindset of the business people running the RFC, made qualifying for a loan a bit difficult, when the program was set up to make loans that were intended to be a bit risky and that would not be made by private business. Further, by making loans to banks and railroads, but NOT to states and local entities to feed and help the masses of unemployed and destitute families, Hoover was seen, correctly, as being for "trickle down" economics. During the period leading up to this point, Hoover had fretted and lectured Americans about maintaining their individualism and their commitment to self help, a sense he noted that would be damaged if Americans took government money. As the bank and railroad loans were handed out, many Americans took notice that their president had no such worries that bankers and railroad execs would have their individualism and sense of self help damaged, only the poor and unemployed, as well as many small banks and financial institutions. Money provided to the lower end likely would have helped the economy much more, as it would have created demand for goods, as the recipients were going to spend that money, not hoard much of it. 

More in "Part Two" ...

* This should sound somewhat familiar, as the bank bailouts a few years ago helped banks recover, but the banks then maintained very high credit standards so that few companies or people qualified for loans, which  left the economy to very slowly recover.

WORD HISTORY:
Lust (List)-This word, closely related to the "list" of "listless" (see below), goes back to Indo European "las," which had the notion of "be eager, want to do, desire." This gave its Old Germanic offspring "lustuz," with the same general meanings, but also "pleasure," likely from the notion that "things you are eager to do give you pleasure." This gave Old English (Anglo-Saxon) "lust," with the same meanings. Later, as religious writings began to be translated into English, "lust" took on the foremost meaning of "sexual desire," which remains its primary meaning to this day. The verb later developed from the noun. The same Old Germanic source also produced a verb "lustijanan," a verb which meant "to please, to bring pleasure, to cause desire." This then gave Old English "lystan," with those same meanings. This later became "liste" and then "list" (not related to "list," as in grocery list), an archaic word by itself now, but still used as the first part of the compound "listless;" that is, "lacking in desire or pleasure." The other Germanic languages have: German has various forms of "lust/list," some of which are, "Lust," a noun meaning "desire/have an inclination to do something," used frequently like, "Hast du Lust Karten zu spielen?" (literally, "Do you have the desire to play cards?"), and it also means "take pleasure in doing something; enjoy doing," but it can also have the "sexual desire" meaning. German also has "lustig," which, like its close English relative "lusty," doesn't necessarily carry the sexual connotation, but rather generally means "happy, merry," as in "Die Lustige Witwe," "The Merry Widow." The German verb "gelüsten" means "to crave, to covet;" that is, "have strong desire for." The German noun "Lüstling," however, carries the sexual appetite idea and means "lecher." Low German Saxon has both "Lust," meaning "desire," and the noun "Lüst" ("appetite;" that is, of course, "desire for food") and the verb "lüsten" ("to have an appetite, or craving") Dutch has "lust," which means "be inclined to do something, desire, like/relish doing." West Frisian once had "lust," but apparently it is now little used, if not outright archaic. Danish and Norwegian have "lyst" (desire, inclination, strong desire, pleasure). Icelandic has "losta," which seems to carry both the general meaning "desire," but also of the sexual type. Swedish has "lust" (desire, yearning).

The Great Depression, Part Eleven/A

Political leaders are always important, but even more so in times of crisis. Hoover’s personality seemed unable to instill confidence or to inspire hope in a nation struggling with a terrible economic collapse. He was not a commanding public speaker, nor was he very good at articulating what he was actually trying to accomplish at times, nor in rallying the public to support his programs, and his shyness made him appear less than “warm and cuddly” to the public. Throughout his life, first in the mining business and then in public service, Hoover was used to being involved with relatively small groups of people dedicated to achieving certain goals. In helping the starving and dislocated in Europe, he was surrounded by many volunteers, most not prone to bickering and sniping. In the Wilson, Harding, and Coolidge administrations, he was a Cabinet Secretary, and while politics are always in play in such an office, it was on a much smaller scale than when he occupied the White House. Hoover was also a chronic “worrier,” and no doubt this showed through to the public.

Hoover misjudged the overall problems with the Depression and its severity, but he wasn’t alone. It became so severe; no one really knew what to do, including Democrats. Often Democrats in Congress went along with Hoover’s basic legislative proposals, sometimes even strongly supporting them, with many Democrats supporting the bill to raise taxes. On a public relations level though, Hoover was president, and he suffered the consequences, not the Democrats in Congress, when his programs couldn’t turn the economy around. He had a knack for choosing the wrong side of an issue, especially when he needed a “win,” if you get my drift, and when he needed to get the public onto his side. He approached many issues with “nuance;” that is, he favored or opposed certain things, but with qualifiers. With the attention span of many Americans less than the size of a centipede, trying to explain details of legislation can be difficult, even in the best of times, but with the economy in shambles, Americans just wanted some action that would right the listing ship, not explanations of why certain parts of legislation were considered to be good or bad by the President. Hoover was principled. (“Nuance” is a word now quite familiar to one John Kerry. Remember “I voted for it, before I voted against it?”) With a severe drought affecting a large part of the farm belt and adding to the economic misery, Hoover and Congress developed a relief package of many millions of dollars to help farmers buy seed and feed their animals. Hoover insisted that the money be given as a “loan,” and not an outright grant. Further, when some in Congress wanted to offer the farmers direct help to feed themselves and their families, Hoover insisted the Red Cross could take care of that. He maintained that if the government gave farmers money directly, it would be demoralizing to them. Farmers and others in the American public had a difficult time figuring out why accepting government money was “demoralizing,” but accepting money from the Red Cross was not. Later, it was much the same with government loans to banks and certain other financial entities. Troubled banks got money, but when one community asked for an RFC loan to pay some employees, it was rejected. Again, Hoover was seen as championing banks, but not people.

The public definitely had a problem with Hoover’s hairsplitting, and his inability to fully articulate his ideas compounded the problem. (Note: Like after 9/11, Congress voted to help out the airlines with billions of dollars, going against many members' own basic political convictions, but they saw this as the only way to keep many airlines in business and preserve competition. It was much the same with the banks during the Depression. If the government had allowed the banks to falter, the whole system would have come crashing down, along with everyone's savings, making a terrible situation even worse. Hoover's administration had little choice, but to loan money to banks and financial institutions, regardless of how bad it looked to the public.) Hoover had some tough issues to grapple with for those times; as the Depression was an unprecedented collapse of the American economy. America was founded on a basic skepticism of government authority, and he avoided, as long as possible, using the government in many roles; preferring voluntary cooperation and private charity, but when he found that these things just couldn't work under the conditions of the Depression, he finally gave in and used the government to intervene, but he received little or no credit for having done so. Conservatives could not say that he didn't give the old ways every chance to succeed, although he held out against using total government compulsion of business. As I noted in an earlier part of this series, Hoover refused to release his private papers from his White House days, even while he knew the papers would show many of his critics to be wrong about the charges of inaction against the Depression and an uncaring attitude toward the suffering of so many during those times.

WORD HISTORY:
Bough-This word, with the modern meaning of "branch of a tree," traces back to Indo European "bhaghus," which meant "arm, elbow." This gave its Old Germanic offspring "boguz," which moved the meaning upwards on the arm to "shoulder, upper arm." This gave Old English (Anglo-Saxon) "bog" (with a long "o"), with the same meanings, but including "arm," in general. The idea of "shoulder, arm" led to a secondary meaning, "branch, limb of a tree," which gradually developed into the main meaning of the word. To this day, English is the only Germanic language to have developed this meaning. The spelling changed to "bough," and the "gh" was once pronounced in English, although we now say "bow," which rhymes with "how," and the word appears in the famous bedtime lullaby "Rock a bye baby, on the tree top, when the bough breaks, the cradle will fall." (Hey Mom! What the hell ya doin' putin' me way up here? I mean, down here?) German has "Bug" (long "u"), Low German has "Boog," Dutch has "boeg," West Frisian has "boech," Icelandic has "bógur," Norwegian and Swedish have "bog" and Danish has "bov." All of these mean "shoulder (usually of an animal) or bow, as in the part of a ship," although the meaning "shoulder" is now in more limited use in some of these languages.

The Great Depression, Part Ten/B

Treasury Secretary Andrew Mellon felt that the bad banks should be allowed to go under, and that the strong banks would and should survive (Darwin is NOT dead, it’s the survival of the fittest! All of this sounds "good," to an extent, let the bad banks go under, but... keep reading). The thing was, there was a great deal of debt carried by banks on mortgage and business loans, in particular. Also, many folks had their life savings in banks; if a bank went under, it would prove a disaster for many, remember, there was NO deposit insurance back then. Hoover believed almost totally the opposite of Mellon’s “sink or swim” philosophy. He wanted to take some kind of action to shore up the nation’s banks, but he struggled with what exactly should be done. He resisted the idea of using the government to force the banks, or businesses in general, from doing anything. Hoover preferred “voluntary cooperation.” He tried using the stronger banks to voluntarily contribute to a fund to help bolster weaker banks, but the program was a miserable failure, as most banks didn’t want to contribute to the fund, including Mellon’s bank, if I remember right (Surprise! Surprise!). Finally, Hoover came up with the Reconstruction Finance Corporation, or RFC. This was a government program that would make loans to banks and other entities. Hoover, while seldom given any credit by his critics, took the Federal government into the world of “private business.” It was a step that helped to change America, and temporarily, it helped steady the banking system.

"The Election of 1932" brought an end to twelve consecutive years of Republican occupancy of the White House. Franklin Roosevelt won by a wide margin in both the popular vote and in the more important Electoral College. Interestingly, Roosevelt was able to attack his former friend Hoover from both flanks during the campaign; attacking him from the right for running large Federal deficits, but then attacking him from the left for not using the government more to combat the Depression.

In those times, as I indicated in an earlier part, a president was elected in early November, but did not take office until March 4 of the following year; leaving a four month period of a “lame duck presidency” for the outgoing chief executive. During this period of late 1932 and early 1933 banks began to fail at an alarming rate, which only caused “a run on the existing banks,” which only caused more failures. It was a “vicious cycle.” Banks do many things, but mainly they take in money in deposits and then loan that money out at such and such an interest rate to make money. With the economy so depressed, not only were banks not making many loans, they weren’t getting paid for loans they had already made. Hoover’s RFC helped to stem the shakiness in the banking system at first, but it couldn’t totally prop up a system that was so filled with weaknesses.* The government loans were able to tide the banks over, much like the used car dealer mentioned in Part 10/A was able to stay in business by selling a vehicle and then paying off the previous vehicle he had sold, but eventually things caught up to the car dealer AND to the banks.

The reasons for the banking crisis and the run on the banks, which really triggered the major problems, are another contentious issue in history. Reasons given are colored by people’s political ideas. Hoover, whose bruised ego was still smarting from his re-election loss, blamed the crisis on President-elect Roosevelt’s vague campaign ideas about the economy, feeling that Roosevelt needed to state forthwith what he intended to do. Again Hoover’s political naiveté came into play. He wanted Roosevelt to, in essence, join forces with him to reassure the country about the banking system and thus curtail the run on the banks. Roosevelt, perhaps the best political president we’ve ever had, was definitely NOT inclined to lay his prestige on the line before he took office, nor did he want to be associated in any way with Hoover’s now very unpopular and failed policies.

So, you have a few thousand dollars in the bank in 1932/33 (again, quite a sum in those times). With deflation, your money is actually becoming stronger in terms of actual purchasing power). Suddenly you hear on the radio that such and such a bank has been stormed by depositors wanting to withdraw their money. The news is filled with new stories of banks being overwhelmed by withdrawals. What do you do? Sit and wait, and potentially lose your life savings? Hell no, you head to your bank and want to withdraw all of your money, figuring your mattress is safer than the current state of the banking industry. With so many depositors withdrawing their money, a slew of banks went down, with many others down for the count. The whole country seemed about to implode, but then in stepped a new president.

* I originally did this article about a year before the financial crisis of 2008, thus I wrote that Hoover's RFC "couldn't totally prop up a (banking) system so filled with weaknesses." As the crisis of 2008 came to a head, the Bush administration, along with Federal Reserve Chairman Ben Bernanke, a Republican, decided to ask Congress for hundreds of billions of dollars to shore up the banking system. The money and some strategic mergers helped to eventually stabilize the system, but even then, a number of banks failed. Even with this recent event, however, many people, often, but not always, conservative Republicans (there really aren't many other kinds of Republicans these days), did not learn the lessons of the Great Depression. They were against any intervention into the banking system, and they wanted the weak banks to go under; thus letting things happen naturally, at least by their definition. Some folks just don't learn! In my fantasies, I'd like to put all of these "let things be natural" and "don't do something, stand there," people all together somewhere, where they have to live as people did 5000, 10,000, or 50,000 years ago, which seems to be want they want. Then if they got sick or injured, they couldn't call a doctor or go to a pharmacy for medications, they'd either survive or kick the bucket. I wonder how many would be screaming to get back to the reality of 2012, with all its shortcomings, and say, "Get me to a doctor?"

WORD HISTORY:
Branch-The ultimate origins of this word are uncertain, but it "may" go back to Gaulish^ "vranca," which seems to have had the notion of "angle;" thus the idea of "branch," "an offshoot that forms an angle." If true, where Celtic got the word is uncertain, but some believe Latin borrowed the word from Gaulish as "branca," which initially meant "paw" (offshoot from a leg), and also "footprint" (an impression made by a 'paw'). Later it took on the meaning "claw." Old French, a Latin-based language, inherited the word as "branche," which by then had taken on the meaning "bough, limb of a tree." English borrowed the word in the 1200s as "braunch." As had already happened in its previous history, the word has "branched out" in meaning, to include more than just trees; for instance, in reference to river systems and circulatory systems, as well as family history (branches of a family tree). The verb form developed from the noun in the 1300s.   
 
^ Gaulish was a Celtic dialect or language in western Europe, primarily in what is now modern France and part of Belgium. Celtic is an Indo European group of languages, thus related to English further down the family tree. Celtic dialects/languages, once widespread in Europe, are now much diminished, but include Welsh, Breton (in Brittany, France), and Irish Gaelic.