3. The First Hundred Days
Since the Crash of 1929, the collapse of the credit bubble had been rippling through the banks across the country. As it became increasingly apparent deposits were no longer safe, clients began to withdraw theirs in droves, draining out the banks from their gold and currency reserves. Thus, by December 1930, the Bank of the United States failed; it was the fourth largest bank in the country. Barely five months later in Europe, the Creditanstalt which accounted for 16% of Austria's GDP failed too. Its failure cascaded through Europe and likewise caused a run on the US dollar for gold as central banks began to redeem it to make up for their losses. To counter this attack, the Federal Reserve doubled interest rates to maintain the dollar's value, but in doing so, had precipitated further deflation and bank failures. These fueled even more bank runs which in turn led to more bank failures. On February 14th, 1933, the crisis had reached a critical point as Michigan had to declare a bank holiday to avoid a complete collapse of its banks. Instead of avoiding a panic, the holiday caused one as people lost any remaining confidence in banks' health and began to rush to their banks, and over two months' course, the amount of currency held by the public - hoarded in other words - rose by about 1.8 billion dollars. Efforts to stem the panic largely floundered as on February 24th, Maryland followed suit, and by March 3rd, 32 states out of 48 had done so.
When Hearst was inaugurated, this crisis was his first to deal with. Using a proviso of the Trading with the Enemy Act of 1917, he declared on March 6th a national one week bank holiday. On March 9th, the Congress called in extraordinary session was considering a bill for an
Emergency Banking Relief Act, allowing the private issuance of clearinghouse certificates while also paving the way for taking the US dollar off of gold standard like the United Kingdom did in 1931. It was doubled with a de facto deposit insurance from the Federal Reserve banks aiming at restoring confidence. The bill was rushed through the Congress, adopted and signed into law within a single day. The success was quasi immediate. Over the next two weeks, about 900 million dollars, or half the withdrawn deposits, were returned, and by mid May, these deposits were back to before February 14th levels.
While a success, it arroused Huey Long's suspicion of Hearst, later criticizing the issuance of clearing house certificates and the President's perceived collusion with bankers. Yet, as the Senator from Lousiana vowed not to let banks get away with it, Hearst went from one side to another. If he had given to the bankers, he gave a hand to the labor. On March 14th, he had asked Congress to consider a bill for a
Civilian Conservation Corps Reforestation Relief Act - CCC - to provide employ for half a million men between age 18 and 25 and to veterans in public work projects on national forest lands and other federal held properties. However, though supported in principle, critics emerged from fiscal conservatives who wished to scale it down and worked to stall the bill through committees [1]. It was fated to be the stage of the first protracted battle to happen between the White House and the Congress, yet the Second Bonus Army arrived at that moment.
During the presidential election, Hearst had consistently supported the veterans' claims to immediate bonus payment, and as he was elected, they planned a second march on DC. On April 1st, when newspapers reported the oncoming arrival of about 2,000 veterans, it was thought as a joke. The joke however turned short as the 2,000 turned out to be 20,000 within a week [2], and it didn't show any sign of stopping. It quickly transpired on the Capitol Hill that President Hearst had effectively worked the past weeks to stimulate and amplify the movement and was seeking to use the Bonus Expeditionary Force to coerce the Congress into adopting his version of the bill on the CCC. After the Congress had begun to stall and amend the bill, Hearst newspapers began to largely diffuse critics of the Congress and praises of veterans by Hearst: "
I do not care whether a man got sick on the battlefield or did not; every man that wore the uniform of this country is entitled to be taken care of" [3]. At their father's guidance, William Jr and George were secretly funding the travel of groups of veterans to the capital. And when they arrived, the President made a show of receiving their leader Walter Waters at the White House. Moreso, Hearst worked along Superintendent Glassford [4] and Secretary Butler to provide food and housing, and yet through it all, also to keep the situation under control and keep the Army away. On April 4th, to further the pression, Wright Patman, Representative for Texas, reintroduced his bill for an
Adjusted Compensation Payment Act, to pay for $2 bilions in bonus.
At last, the Congress ratified the CCC bill on April 7th and the bonus one on Monday, April 10th. Then, within one week, the BEF was gone. Though both measures had had a previous large measure of support even in spite of conservatives' reservation, this first standoff with the president had brought both discomfort and distrust among congressmen. Never had they witness such a violence since Wilson's battle for the League of Nations, and they were surprised and taken aback to experience firsthand the micromanagement habits of a man whose ego barely suffered contradiction. Yet, after this stunt, Hearst was more popular than ever among Americans and the veterans, and noone dared to move openly against him... at least for now. So, when later that month Hearst nominated Senator Hugo Black (D-AL) to replace retiring Justice Willis Van Devanter, and that the nominee's past affiliation with KKK was brought up by Senator Vandenberg (R-MI), the issue was thoroughly investigated by the Senate Judiciary Committee, even though to no avail except for delaying it [5]. The same scenario happened when the Senate had to consider Robert Fechner, a former labor union leader, as nominee to head the CCC.
In the meantime, almost unnoticed among the Second Bonus Army crisis, Hearst at last outlawed by decree possession of monetary gold and effectively took the US dollar off of gold standard. Then, later in April, he had the
Agricultural Adjustment Act ratified, retaking the provisos of the previous McNary-Haughen Farm Relief bill, to purchase surpluses but at the same time, moving to incentivize reduction in the intent of bringing up the prices and farmers' purchasing power. In May, a
Gold Reserve Act drafted by Secretary Eccles, to definitively enact the abandon of gold standard and devaluate the dollar by about 40% to support exports and attract gold back into US banks, was introduced and ratified without much of a fuss.
Coming June, as the banking reform put forward by Senator Glass and Representative Steagall was nearing its conclusion, Hearst engaged into his second battle of date with the Congress, though a more silent one. To stay true to his engagement with the bankers - chief of which was JP Morgan Jr - that had supported his presidential bid, and effectively bankrolled his policies back in New York, the president set out to sabotage Glass' efforts at separating commercial and investment banking. In this, he played both sides and set out to aggravate the divergence of view between Steagall and Glass about inclusions of small unit banks in the reform - which the latter opposed - while also putting emphasis on the former's proposal for a Federal Deposit Insurance, and even pushed Long into keeping on with his filibuster of the bill by convincing Glass not to budge on the issue of branch banking. As it appeared the bill wasn't going anywhere, Hearst began to support Steagall move to pursue to dissociate both issues of divestment and deposit insurance, to press onto the latter. With it, it appeared that the House and Senate versions of the bill could not be reconciled and when Congress adjourned on June 10th, it was dead in the water [6].
Though he had torpedoed the banking reform, Hearst kept along with his promises to support a Federal Deposit Insurance, and in the meantime, supported the passage of the Securities Act establishing a
Securities Exchange Commission to regulate the markets and restore confidence shattered by the Crash of 29. To head it, he appointed Joseph Kennedy on account not only of his support of Hearst's candidacy a year earlier, but also and especially of his knowledge of the market mechanics, his success through the Depression and his connections in the business circles.
Notes :
[1] - A notable divergence from OTL here is Hearst neither pressed for balanced budget nor introduced the Economy Act to cut salaries and benefits across the Federal government. Here, the proposed CCC is a bit larger than the OTL one with 500,000 against 300,000, which without prior large cuts in the federal budget does not endear Hearst the fiscal conservatives, both Democrats and Conservatives.
[2] - Hearst' support for the Bonus ITTL is met with enthusiasm, hence a better start.
[3] - Actually, this one is OTL from Huey Long. I couldn't find satisfying Hearst quotes to adapt here.
[4] - He was enticed by President-Elect Hearst to stay in.
[5] - It's said that Devanter and Sutherland would have retired if not for the salary cut made by the Economy Act. ITTL, as such act has not passed, Devanter retires early. Sutherland will follow shortly, but that's for another update.
[6] - The divide between Steagall in the House and Glass in the Senate, and the filibuster by Long are OTL, and IOTL, Roosevelt seemingly sought to have the Congress adjourning before it could reconcile House and Senate versions of the bill. I read that while some banks had supported the move, others such as JP Morgan's was opposed to it. The bill had been in the work since 1932 and even Glass declared it happened too late to have a significant. So here, I'm just having Hearst actively undermining it.
That one was long due, but that was more a motivation issue than an inspiration block.
So, here, with a few adaptations, I mostly followed the OTL chronology. And here a few sources to complement this post.
