Forgotten Man, The (25 page)

Meanwhile, Morgenthau, whom Roosevelt had just made treasury secretary, was not planning to give up. When newspapers criticized the assault on Mellon, Jackson had turned to Morgenthau to ask whether the prosecution was worth it. As Morgenthau recalled the exchange, he commented, “You can’t be too tough in this trial to suit me.” Jackson then jumped up, exclaiming, “Thank God I have that kind of boss.” Morgenthau had then gone one better: “Wait a minute. I consider that Mr. Mellon is not on trial but Democracy and the privileged rich and I want to see who will win.”

The fury surprised some of Roosevelt’s earlier allies. James Warburg, the departed financial adviser, was in the process of preparing and publishing two books pointing out the economic errors he felt Roosevelt had made—
The Money Muddle
, which came out that May, about the gold standard, and another,
It’s Up to Us,
a counterattack on New Deal economics.
The Money Muddle
quickly became a best seller. Now Warburg thought about broadening his arguments—would Roosevelt stop at nothing? Ray Moley had taken his distance
and left the administration. He started his own weekly magazine,
Today,
financed by Vincent Astor and Averell Harriman. He still admired Roosevelt, but was baffled at the inconsistencies. He later would write his own, softer version of Warburg’s analysis, saying that the surprise at beholding Roosevelt “arose chiefly from the wonder that one man could have been so flexible as to permit himself to believe so many things in so short a time. But to look upon these policies as the result of a unified plan was to believe that the accumulation of stuffed snakes, baseball pictures, school flags, old tennis shoes, carpenter’s tools, geometry books and chemistry sets in a boy’s bedroom could have been put there by an interior decorator.”

Tugwell for his part was still in the game, anxious about his confirmation hearings for the undersecretary post, scheduled for June. In March, Congress had turned against Roosevelt for the first time and supported the American Legion, when it overrode his veto of legislation increasing government employees’ pay and veteran pensions. Like all of the brain trusters in Washington, Tugwell had not appreciated the level of pressure in Washington until he experienced it. Keeping his family happy while he was always at work was a problem, especially since he was emerging as the favorite target. It didn’t help matters that he had taken a salary cut to leave Columbia. As assistant secretary of agriculture, Tugwell was responsible for enforcing the Pure Food and Drug Act. In early June, the
New York Times
got a hold of a tiny but painful story: Sometime at the beginning of the year, Tugwell had been forced to fine his own father. The agriculture department had determined that the canning firm of Tugwell and Wiseman—Tugwell’s father, Charles, was a partner—had mislabeled cans of grapefruit and orange juice in a “false and misleading” way to disguise the fact that sugar had been added to a product labeled natural. For Tugwell, who adored his parent and knew so much about the man’s financial struggles, the headline must have been bitter: “Tugwell Fines Father.”

Tugwell’s allies spent a weekend in the country prepping him for interrogation with mock questions: “Who are you, anyhow?” “Are you a Communist? “Did you ever spread manure?” Tugwell worried.
It likely seemed ironic now that he had not even attended that interview with Stalin in 1927. For now, among all those on the junket, he stood a chance of losing something important because of it.

The preparation was worth it. One senator, L. J. Dickson of Iowa, read aloud Tugwell’s “make over America” poem of 1915. Over and again, senators assailed Tugwell as a red and questioned him on his loyalty to the United States and the Constitution. Tugwell told them he was not interested in implementing Soviet ideas, but rather Roosevelt administration ideas. Tugwell was already sensing what would become a pattern—the frankest of the New Dealers, he said what the others dared not. “Tugwell had been unjustifiably used as a whipping boy,” Douglas concluded from the sidelines. The
Spectator,
the student newspaper at Columbia, was busy criticizing him from the left. Columbia kept granting him leaves of absence, but Tugwell wondered if its president, Nicholas Murray Butler, would take him after it was all over.

In this instance, things worked out. Six of the seven Republicans on the committee reviewing his nomination voted for him in the end. The full Senate confirmed him 53–24; afterward, Tugwell celebrated at a party hosted by his friend
Babbitt
author Sinclair Lewis. Absorbing the hits as Roosevelt’s Red seemed, for the moment, worth it.
Time
put him on its June 25 cover.

That same June Roosevelt took another series of steps in the name of helping the economy. One, hardly given its sufficient due at the time, was to sign a treaty that Cordell Hull had been working toward since the disastrous London conference the previous year. The Reciprocal Tariff Treaty, as it was then known, ended penalty duties. It also granted the president the authority to shift tariff rates. The new agreement was classic Roosevelt—and perhaps classic Hoover—in that it strengthened the power of the executive. But it also happened to be good for the economy; trade increased dramatically. Americans understood this, after the bitter Smoot-Hawley experience. The country had seen trade volume narrow by 40 percent. Hull later said that “in both House and Senate we were aided by the severe reaction of public opinion against the Smoot-Hawley
Act.” Still, those who changed their views were mostly Democrats. George Peek, Tugwell’s old nemesis, was now criticizing Hull. The Republicans, obstinate, clung to their old party position notwithstanding the mounting evidence.

That month Roosevelt also gave Wall Street its own policeman: the Securities and Exchange Commission. Publicly traded companies must register with the SEC, and its officers were free to investigate and punish them. In one of his cleverest and most cynical moves to date, Roosevelt named Joseph Kennedy the SEC chairman. People said he had picked the fox to guard the henhouse. Harold Ickes noted the event in his diary: “The president has great confidence in him because he has made his pile, has invested all his money in government securities, and knows all the tricks of the trade. Apparently he is going on the assumption that Kennedy would now like to make a name for himself for the sake of his family, but I have never known many of these cases to work out as expected.” In the year and a half he was at the helm of the SEC, Kennedy would recommend hundreds of prosecutions. At
Today
, Moley devoted an article to praising Kennedy, writing hopefully that Kennedy’s and the SEC’s inauguration would bring for America a “reign of law in finance.” The article did not spell it out, but it contained a hidden criticism: arbitrary prosecutions were subtly different from consistent enforcement of existing rules.

In late May, on the 28th, Keynes, the British economist, visited with the president. The meeting between the man who was becoming the world’s most influential economist and the U.S. leader was not entirely successful, lasting fifty-eight minutes, and Frances Perkins, whom Keynes saw afterward, would later recall that Keynes told her the session did not go well. Roosevelt gave a similar report, telling Perkins that Keynes had left him, disappointingly, with a “rigmarole of figures. He must be a mathematician rather than a political economist.” Still, Keynes told other New Dealers, including Perkins, that he thought the spending of all the New Deal programs was a good thing, because cash outlays gave the common man purchasing power: “With one dollar paid out for relief or public works or anything else you have created four dollars’ worth of national income.”
Marriner Eccles, now at the Treasury with Morgenthau, was hearing intellectual justification for what he already believed instinctively. Whereas before there had been almost no framework to explain what Roosevelt was doing, now a respectable one was forming. Spending promoted growth, if government was big enough to spend enough.

All these events, but especially the public prosecutions, were sending business executives into new fits of housecleaning. Willkie busied himself making over Commonwealth and Southern. Late in June came Commonwealth and Southern’s annual meeting; Willkie saw to it that the departure of four board directors was announced—men not engaged in actual operations. Officers of actual operating utilities were elected to take their place. Willkie also cut off local lawyers in the states who had served Commonwealth and Southern and who had been too easy to bribe with stock. Commonwealth and Southern would manage its own lawyers in-house now.

A few days later, on June 28, Roosevelt gave a Fireside Chat that likely did nothing to quell such executives’ anxiety. The president posited that “much of our trouble today and in the past few years has been due to a lack of understanding of the elementary principles of justice and fairness.” And people seemed to like such remarks. Harry Hopkins had hired Lorena Hickok, a journalist and friend of Eleanor Roosevelt, to report on the state of the country and New Deal projects. In 1934 she wrote, “I carry away the impression that all over the area, from Knoxville, Tennessee, to Tupelo, Mississippi, and on up to Memphis and Nashville, people are in a pretty contented, optimistic frame of mind. They just aren’t thinking about the Depression any more. They feel that we are on our way out and toward any problems that have to be solved before we get out their attitude seems to be ‘Let Roosevelt do it.’” With Hickok some of the time was Grace Falke, Tugwell’s assistant. Both Hickok and Falke believed that getting people off barren land into industry was the best antidote to Tennessee-level poverty. The fact that some of the radio power through which the citizens heard Roosevelt had come via Roosevelt’s own TVA made him seem all the more impressive.

Come August, it was Lilienthal who was in the news, announcing that all of the TVA’s power had found a market and that the construction of new dams was ahead of schedule. Lilienthal and the TVA’s engineer, Llewellyn Evans, sailed to Britain to study something new that the United States might copy: what the Britons called their “grid,” which used power from both private and public companies. “The problem of linking public and private companies is similar to that of the Tennessee Valley,” Lilienthal told a reporter in New York at the Hotel Roosevelt before he sailed. In fact the UK grid owed some of its efficiencies to Sam Insull, who had advised Westminster repeatedly. The British press saw irony in the fact that Lilienthal of the TVA wanted to have a look at it. Lilienthal, the
Electrical Review
chuckled, said he was looking for a man of “seasoned specialized judgment, such as [Mr. Lilienthal] regards as essential for determining future policy in the States, but circumstances have deprived the American people of his experience and that of his associates.”

THE BRITISH WERE ON TO
something. Another reality was becoming clear that summer of 1934: the drama of the prosecutions and the spring cleanups was hiding something. While the Norris Dam and other New Deal projects might be ahead of schedule, the economy was not, at least not in the sense of being where it had been before. The American Federation of Labor had reported in late spring that 780,000 workers who had been reemployed by the National Recovery Administration in the autumn had been unemployed again by the spring of 1934. William Green, the AFL’s leader, began fighting with Richberg at the NRA over employment numbers: the AFL wanted industry, not relief agencies, to solve the economic problem. The job had to be done, and it had to be partly Richberg’s, since, challenged Green, “We cannot indefinitely support one-sixth of our population on money borrowed against future taxes.” There were still nearly eleven million unemployed. And the Dow was heading in the wrong direction; it would spend the summer below the 100 mark
of the preceding winter. Looking up, the New Dealers were taken aback. “The Depression was refusing to disappear,” Tugwell later wrote of the whole period.

Roosevelt now regrouped. Midterm elections were that November. The prosecutions had originally been about punishing financiers for the crash. If Insull’s debentures had lost all their value, then Insull must be guilty. But now the prosecutions and investigations should also be about justifying the New Deal, economically and morally. The Fireside Chats would help. Roosevelt and others had noticed that the medium of radio really did seem to create a new reality, separate from the reality of old politics. If voters focused on the voice and the message, and not the tardy recovery, that might carry the Democrats forward.

It was a hope that the administration concentrated on—for even as government lawyers prosecuted, they were also finding themselves on the legal defensive. The National Recovery Administration, for instance, was under fire in Congress, and from business, as a bureaucracy out of control. A report submitted to the fifty-seventh annual meeting of the American Bar Association noted that by June 25 of 1934, some 485 codes and 95 supplements had been approved by the president and 242 more by the Administrator for Industrial Recovery. In the period of a year, 10,000 pages of law had been created, a figure that one had to compare with the mere 2,735 pages that constituted federal statute law. In twelve months, the NRA had generated more paper than the entire legislative output of the federal government since 1789.

To survive, Richberg and the Justice Department warned—accurately—that the NRA must pass review by the Supreme Court, and soon. In any case, the law required renewal by Congress in 1935. Its constitutionality was a big question: could such a large program really be legal under the Constitution’s commerce clause? Marking Constitution Day in September, the
New York Times
commented that in regard to such legislation, “the winds of controversy over this issue are already rising.” With the election coming up, the New Deal had to score victories in national politics; if it couldn’t win a genuine
return to prosperity, then it might succeed with the negative victories of bringing down the villains.