GUESTWORDS: The F.D.R.-Woodin Miracle

By John Tepper Marlin
William Woodin at the American Embassy in Cuba, where he was selling railroad cars. This photo was provided by Anne Harvey Gerli, Woodin’s granddaughter.

    After his triumphant election in November 1932, Franklin Delano Roosevelt had to wait five months to address the desperate condition of the nation’s banking system, while exiting President Hoover rained down appeals to F.D.R. to endorse a continued gold standard.
    Roosevelt was interested in restoring confidence in the American financial system. To that end, he recruited a non-banker, a pillar of New York City and East Hampton, William H. Woodin.
    In February 1933, Roosevelt approached Woodin about being his treasury secretary. Woodin was a lifelong Republican, but was also a friend and supporter of F.D.R., and he agreed. Woodin had called him “Governor” for so long that he continued to call him that.
    The two men decided to end Hoover’s temporizing. Roosevelt got an opinion from his attorney general that he could legally close all the banks. So, starting the night of his inauguration, he declared a bank holiday, with a promise to reopen only the banks that were solvent. On March 9, Roosevelt convened an extraordinary session of Congress, which extended the holiday with the Emergency Banking Act.
    Woodin got to work. He supervised production of $2 billion in greenbacks to restore liquidity. The new bills were packed in trucks and delivered to the banks, with movie cameras filming. News clips were sent to cinemas around the country so people could see liquidity being restored.
    Woodin meanwhile sent out examiners to determine the solvency of each bank. Based on the financials, the treasury allowed solvent banks to reopen, and in one month deposits in the reporting member banks had increased by $1 billion.
    By the end of April 1933, confidence was largely restored. It was bracketed by two of Roosevelt’s fireside chats on the radio, one on March 12 and the second on May 7. In March, the president told the truth about the banks:
    “Some of our bankers had shown themselves either incompetent or dishonest in their handling of the people’s funds. They had used the money entrusted to them in speculations and unwise loans. . . . It was the government’s job to straighten out this situation and do it as quickly as possible.”
    The two of them did it.
    Who was William Woodin? He was a summer resident of the Dunes on Lily Pond Lane, but he was born in the coal-and-steel hills of Pennsylvania, in Berwick. His father and grandfather owned a foundry that made railroad wheels and rolling stock. Will wanted to become a physician but was told to prepare to work in his father’s business. He attended the Columbia University School of Mines, graduating in 1890. He was married in his senior year to the daughter of a judge in Montrose, Pa. — Annie Jessup, later called by her family Nan.
    Will had a great sense of humor. After three years’ apprenticeship, he was allowed to cast a wheel by himself in the Berwick foundry. His grandson Charlie Miner said that when Will showed some visitors how he did it, he changed the mold. So when the mold cooled and the top was raised, it revealed not a railway wheel but a cast-iron frog.
    It wasn’t clear that Woodin would be a business success. He celebrated his graduation from Columbia by leaving his new bride and sailing for the Near East to report for The New York Herald on Ottoman Sultan Abdul Hamid II’s killing of Armenians. His granddaughter Anne Harvey Gerli said her grandmother resented this gallivanting:
    “Nan was jealous of Will’s love of music and resented his going off to Europe to ‘play music with the gypsies.’ The family recalled him early. His father said he and the business were ailing. He dutifully hurried home.”
    The 1893 Panic doubtless played a part in his father’s appeal to Woodin to come home. But Woodin’s love for music was deep and abiding. He played the guitar and piano all his life. He composed many melodies, some of which are still performed, including the F.D.R. inaugural march. He composed music for “Raggedy Ann’s Sunny Songs,” with the lyrics supplied by his friend Johnny Gruelle, whose characters included “Little Wooden Willie”!
    Woodin’s capacity to entertain made him a good salesman and a business success. After a close second-place finish in a race for Congress, he threw himself into a succession of mergers that formed the giant American Car and Foundry Company, based in New York City. The company made the first steel railway car in 1904 and sold hundreds of cars to the subway systems of London and New York.
    Woodin became the company’s chief executive in 1915, riding the wave of industrialization in the first three decades of the century. Entertaining as well as successful, he joined many clubs in New York City. In East Hampton he became president of the Maidstone Club in 1926-27, as well as the third commodore of the Devon Yacht Club and the founding chairman of East Hampton’s arts center, Guild Hall.
    In 1922 he was made fuel administrator by Republican Gov. Nathan Miller of New York. Reappointed by Miller’s Democratic successor, Gov. Al Smith, in 1923, he supported Governor Smith for president in 1928. He followed this by supporting Governor Roosevelt in 1932 — F.D.R. was a near neighbor, two blocks away from 67th and Fifth, where Woodin lived.
    Will and Nan attended the Fifth Avenue Presbyterian Church and the East Hampton Presbyterian Church with their four children and grandchildren. Mr. Miner tells this story:

   I once asked him, “Grandpa, why do we have to sit up front?”
   “Because,” Grandpa answered, modestly, “I gave the church some money.”
   I asked him, “If we give more money, can we sit in the back?” Grandpa roared with laughter.

    Woodin was a serious coin collector. One hundred years ago, he published a major numismatic reference work, “United States Pattern, Trial, and Experimental Pieces.” Mr. Miner said that when his grandfather called on the King of Siam to sell railway cars, he was lectured on Siamese protocol, including the importance of backing away facing the king. But the two of them emerged later arm in arm, the king entranced with Woodin’s knowledge of rare coins.
    How did Woodin do as treasury secretary? He was crucially important. Unemployment was 25 percent in 1933. Public opinion was set boiling by the Pecora Commission (a Congressional subcommittee), which in 1932-34 was exposing multiple misdeeds on Wall Street. The country needed action.
    Woodin’s first success was in restoring stability to the financial system during April 1933. By the second fireside chat, financial markets were back in action.
    Then Woodin became co-designer and cheerleader for New Deal programs for direct creation of public jobs, and also for the Glass-Steagall Act, which set up a wall around bank deposits and insured them. The deposit insurance portion, which was Representative Henry B. Steagall’s half of the law, is still standing. But Senator Carter Glass’s wall was disassembled and made inevitable the financial collapse of 2008.
    Woodin disagreed with F.D.R. on going off the gold standard. Roosevelt favored devaluing the dollar against gold to allow for more fiscal policy flexibility. Whenever he brought it up, Woodin would say, “Oh no, not that again,” according to Mr. Miner. Roosevelt both devalued the dollar and forbade private citizens from owning gold for speculative purposes. Woodin worked to make it happen, while extracting an exemption for private ownership of “rare or unusual” gold coins.
    The pace of change, constant stress, and sleep deprivation set up Woodin for an illness that persisted into December. He was burned out in less than a year and resigned as secretary as of the end of 1933. He died on March 3, 1934, two days short of one year from the day he was sworn in. Mr. Miner said the cause of death was probably strep throat, for which there was then no cure. His austere funeral service was held at the Fifth Avenue Presbyterian Church. Roosevelt was there, himself no stranger to the challenges of illness. In his eulogy he called Woodin “a martyr to public service.” Which he was.
    What lessons can we draw?
    Neither F.D.R. nor William Woodin was an expert on bank liquidity or fiscal policy, but they both understood that the country had elected F.D.R. to act to end market illiquidity.
    Both were creative people with instincts nurtured by years of executive decision-making. They set the course for the New Deal.
    Their instincts were right. The country recovered until anti-deficit hawks in 1937 pressed for premature budget reductions that reversed the progress of the previous four years.
    The experts had not helped. The Federal Reserve created inflation and cycles and the Treasury Department adhered to the “treasury view” that fiscal policy is not an appropriate tool for tackling job creation.
    The joint success of F.D.R. and the man from Lily Pond Lane is a vindication of the American democratic system of putting elected nonexperts and their trusted appointees in charge of the career experts.
    As Woodin’s granddaughter, Ms. Gerli, put it to me:
    “Grandpa could deal with the bankers because he wasn’t one of them. He was a businessman. When J.P. Morgan lost his mink coat, Grandpa went shopping in second-hand stores for ratty old mink coats and sent several of them to Morgan with a note saying he thinks he ‘found’ the man’s missing coat.”
    You have to admire a man who could poke fun at J.P. Morgan. And we should appreciate the contribution he made to America’s recovery from the Crash of 1929 and to a financial system that worked well for the rest of the century.

   John Tepper Marlin has served as chief economist for three New York City comptrollers and as senior economist for the Joint Economic Committee of Congress. He is now chief economist for the New Jersey Institute for Social Justice. He has lived in Springs since 1981.