🚀 go-pugleaf

Someone has asked me to provide information on the  passage of the Emergency
Banking Act of March 9, 1933 -- legislation that figures prominently in the
Bankruptcy-Receivership Theory.

 Here is an unexpectedly good start:

The Act was authored by Walter Wyatt, at the time general counsel of the
Federal Reserve Board.  I have made an amazing discovery.

I am going to quote about 30k from each of  two books.   Part I, below,
from Moley's memoire, and establishes key players in the Bank Holiday and
the Act that came during it;  Part 2, second, from Garet Garrett's 1944
essay, The Revolution Was,  will prove to you that you have been completely
misled as to the true nature of the New Deal and that even 'China Bill'
Clinton is small potatoes next to FDR.
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Part I:

The reader will be surprised to learn (see below) that investment banker and
Federal Reserve architect Paul Warburg was thinking about the 1933 Bank
Holiday, back in 1918, when he made sure that the trading With the Enemy Act
was clandestinely revised to prevent the flight of gold, silver and currency
from the country in a  future post-war emergency. The history books teach
that it was a "spur of the moment" ad hoc   improvisation (Paul Warburg of
course is the European banker who came to the United States with portfolio
from the House of Rothschild and the specific mission of bringing into being
an American central bank, which he succeeded in doing with passage of the
Federal Reserve Act of 1913.)

Raymond Moley, The First New Deal (New York: Harcourt, Brace & World, 1966)

Again, Moley was Roosevelt's closest advisor and assistant, who assembled
and led the 'Brains Trust.'

  "Since I have put together the first comprehensive account of the banking
crisis and the rescue of the banks, I needed a great deal assistance.  Mrs.
A Ballantine permitted me to use her late husband�s papers accumulated
during that period.   F. Gloyd Awalt, who as acting comptroller of the
currency in 1933 was a major factor in the rescue of the banks, has not only
read and checked my account but has  generously permitted me to use freely
his own unpublished history of that operation.  Walter Wyatt, at that time
general counsel  of the Federal Reserve Board and after 1946 reporter of
decisions for the Supreme Court of the United States, read two successive
drafts of the banking section and contributed many essential facts and
incidents.  He was, as I indicate, the author of the Emergency Banking Act.
Lewis Douglas, director of the budget in 1933, supplied me with the history
of the Economy Act of that year.�  (Pp. xix -xx)

   "I is probable that the best-remembered periods in this century in
American, except the two wars, are the paralysis that gripped the banks in
February 1933, the unhappy holiday in March, and the lifting of the clouds,
which was the aftermath.  I have found these to be etched in the minds of
everyone now of mature years and also of those who were children at the time
but who knew of the crisis from family conversation.  Millions still recall
the pinch of cash and the fear for savings that gripped the land.

   "But despite the transcendent importance of the bank crisis and its
successful conclusion, most historical accounts of those times have given it
only minor attention. The roots of the trouble were widespread and so remote
in time from the events in 1933, the remedies applied came from so many
sources, the decisions made and actions in Washington were crowded into so
few days, the individuals  directly concerned were so few and so hidden from
public notice at the time, and the Congressional action was so swift and so
lacking in debate that the record tends to be speculative and sketchy.
Moreover, the individuals concerned were so busy then and in the weeks that
followed that there was little time for them to recall and recount what they
did and knew.

   "An objective, informed, and intelligent writer, Ernest K. Lindley, in
his book The Roosevelt Revolution, wrote this comment in late 1933:

   " 'The press could not publish all that it knew without aggravating the
panic; yet it could not ignore the situation without undermining public
confidence;   yet it could not ignore the situation without undermining
public confidence in the press and perhaps giving wild rumor moor leeway
than it otherwise would have had.   ...the press experienced unusual
difficulty in obtaining reliable information.  The few men that had it were
likewise trying to allay rather than accelerate the panic.  ...the best
informed men -- in the banking centers and in Washington -- were themselves
meagerly informed.  As in the thick of a battle on a broad front, infinite
numbers of events were happening simultaneously, the lines of communication
were uncertain, the reports from different points were colored by the
emotional state of the men who made them.  A complete picture of the rapidly
changing situation could neither be assembled nor coolly judged.  The more
reputable newspapers adopted the sensible course of publishing the evidence
of the progress of the panic as it was shown by moratoria, restrictions, and
gold and currency withdrawals without frightening headlines or doleful
comment which would have whipped even higher the waves of fear.  It is
doubtful if the story of the banking crisis and Mr. Roosevelt�s first week
in office ever can be put together to the satisfaction of everyone.  The
main participants in the drama were too numerous and they emerged from long
days and nights of tension with blurred and conflicting memories.� �

  "This challenge, that the story cannot be put together to the satisfaction
of everyone, is one which this writer, who was one of the inner participants
at the time, is reluctant to accept even At this distance of more than three
decades.  But from a variety of sources, many of them hitherto unavailable,
I shall attempt to answer the implied question in Mr. Lindley�s conclusion.

   "The public, the press, and even most historians have received and
retained impressions only of the high and most visible over-all incidents.
Roosevelt�s proclaiming a bank holiday; the huddling of a small circle of
officials who were formulating the steps that should be taken in reopening
the banks, the rush of gold hoarders first and the currency hoarders a few
days later;  the moving appeal of the President on the Sunday night
preceding the reopening; and the almost miraculous rise in public confidence
which followed -- these remain the ineradicable impressions.

  "Most of those who knew all or almost all of what happened in the
Treasury, the Federal Reserve Board, and the White House were, for a variety
of reasons, slow to tell their story.  This was because they were doers
rather than writers, because they were restrained by their official
aide-m�moire, and his only account is the memoranda which appear in his
collected papers.  The two Secretaries of the Treasury died leaving only the
papers that had accumulated at the time.  I wrote a somewhat abbreviated
account in my book After Seven Years .  Arthur Ballantine wrote nothing for
publication until 1944 and 1948.  And F. G. Awalt waited for twenty-five
years before writing his unpublished manuscript to which I have already
referred.

   "But now I have found a great deal more material that is relevant, which
makes it possible to piece the story together in these chapters.

   "The proclamation by the President declaring a bank holiday must be
examined closely to show why it was so extraordinary an extension of
Executive power.  The proclamation was prepared at the Treasury during the
period between the time when Roosevelt declared to Woodin and me that he was
willing to invoke this authority and some time on Sunday, March 5.

[Footnote insert:  �Wyatt letter to Raymond Moley of March 16, 1966, stated:
   " 'We had drafted and mimeographed a proposed proclamation much earlier;
Attorney General Mitchell had dictated a draft on the night of March 2;
Morrill and I had revised it; and a draft very similar to that finally
promulgated by President Roosevelt had been sent to Hoover on the night of
March 3.  It may have been revised somewhat at the Treasury on March 4 and
5.  When I was called to the White House on Sunday, March 5, President
Roosevelt already had a draft which differed somewhat from our draft, and it
was revised further in the President�s study on the second floor of the
White House in a conference participated in by the President himself,
Attorney General Cummings, Mr. Woodin, myself and others.  You must have
been in the group; but my notes do not mention you.  The document was ready
for signature before midnight; but at my suggestion, it was dated March 6
and actually was not signed until after midnight.  I told the President that
his great inaugural address had ended on a religious note, which had a great
psychological effect on me and possibly on many others, and it might spoil
the effect if this important document were promulgated on a Sunday.  Others
disagreed; but the President agreed with me on this point.�]

   "It was issued on Sunday, but under date of Monday, the sixth, at 1:00
A.M.

   "The provision of the old Trading with the Enemy Act which was cited as
authority was this:

   "That the President may investigate, regulate, or prohibit, under such
rules and regulations as he may prescribe, by means of licenses or
otherwise, any transactions in foreign exchange, and the export, hoarding,
melting, or earmarking of gold or silver coin or bullion or currency.
Following this were the punitive sections of the act.

   "It will be noted that there was not in this text any specific power to
close banks.  The authority to close the banks, as expressed in the
proclamation, was the emergency created by withdrawals from banks and the
inferences in the terms of the old act.  But it was believed that in the
emergency that then prevailed the terms of the act could not be exercised
without closing the banks.  However, in Roosevelt�s proclamation he
authorized the Secretary of the Treasury to make regulations, subject to the
approval of the President, to permit certain prescribed activities of the
banks.  This was clarified by a statement by Woodin, issued later.

   �The expression 'banking institutions' was defined in sweeping terms to
include specifically names of al sorts of institutions, or persons doing a
banking business.

  "It is important to note here that the authority cited by Roosevelt in his
proclamation declaring a bank holiday  to and including Thursday, the ninth
of March, was not a last minute discovery.  Nor was it, as Hoover declares
in his memoirs, Oa week reed for a nation to lean on in time of trouble.'
For nearly a year it had been quite familiar to the leading people in
Treasury and the Federal Reserve Board, and through them it was no doubt
quite generally known.  The existence of this authority was made known to me
on January 7, 1933, by Ren� L�on, a man who constantly had sought to
transmit information to Roosevelt for many months.

   "I must have communicated this tro Roosevelt, or he might have heard it
from many other sources with access to him.

   "In Awalt's unpublished manuscript, he tells the following:

   �In 1918, the 1917 Trading with the Enemy Act was revised by Congress.
Milton Elliot, then general counsel of the Federal Reserve Board,
incorporated an idea of Paul M. Warburg�s that at some future time the
government might find it necessary to place an embargo on the export of
gold.  Elliot talked with Walter Wyatt, who was then a member of his staff,
and who in 1933 was general counsel of the Federal Reserve Board.
[Inserted footnote:  In Wyatt�s letter of March 6, 1966, his account of what
happened is somewhat, but not materially, at variance with Alwalt's account:
   " 'Milton C. Elliot, the first General Counsel of the Federal Reserve
Board, had drafted the original Trading with the Enemy Act, and in 1918 he
was asked to draft certain amendments.  While he was doing so, the late Paul
M. Warburg, one of the original members of the Federal Reserve Board,
suggested that, if the powers granted under Sec. 5(b) to prohibit the
exporting or hoarding of gold, silver or currency, etc. could be made
permanent, instead of expiring with the termination of the war, it might be
a great help in some future emergency.  However, it was feared that, if this
were proposed openly to Congress, it might cause a money scare or opposition
which might defeat the proposed amendments which were needed during the war.
I was only a young law clerk in Milton C. Elliot's office; but he explained
the problem to me and asked me to see whether I could figure out a way to
make  Sec. 5(b) permanent without attracting attention to it or incurring
the risks mentioned above.  I had had little experience, if any, in drafting
legislative matters; but I went to work on the problem and, applying
principles of sleight of-of hand which I had played with as a boy, I figured
out how it could be done and pointed out the trick to 'Judge' Elliot, who
adopted it in drafting amendments to the Act.  The amendments went trough in
the form proposed without any difficulty.  Magruder Wingfield was not on the
Board�s staff at that time and did not join it until 1923 or later.

   " ' I had forgotten all about this incident when Adolph C. Miller, one of
the original members of the Federal Reserve Board, called me into his office
on day in 1932, reminded  me of it, and asked me to look into the matter to
see whether that power was still in effect and whether it might not be used
to stop the exportation of gold or the hoarding of money that was then
causing so much trouble to the banking system.  I was then to busy to do it
myself; but I called in Magruder Wingfield, who had become one of my
assistants, told him the above story, and asked him to study the matter
thoroughly and prepare a memorandum on the subject.  He did so, and his
memorandum left no doubt in my mind that Sec. 5(b) was still in force and
could be used to stop the exportation of gold, the hoarding of money, etc.
It is my impression that someone thought the matter was Odynamite,� and
consequently no formal opinion on the subject was written, and the
memorandum was not addressed to anyone or signed by anyone.  It was kept
very confidential, and at one time I was forced by Eugene Myer to decline to
give a copy to Ogden Mills, which embarrassed me greatly at the time.

   " 'I had no doubt that the President could use this power to stop the
exportation of gold or currency; but, when it was suggested that it be used
to close the banks entirely, I was a bit troubled by the fact that 90 per
cent of all business transactions are settled by means of checks, and they
usually result only in the transfer of bank credits from the accounts of the
drawers to those of the payees--without any coin or currency changing hands.
I concluded that the prohibition of this and other banking activities could
be justified as necessarily  incidental to the other powers in the
circumstances then existing; but I knew this point was debatable.
Therefore, when we started preparing drafts of a proclamation closing all
the banks under a nation-wide bank holiday declared by the President under
this authority, I felt that (1) such action should be ratified as soon as
possible by Congress, and (2) Sec. 5(b) should be amended at the same time
so as to apply also to 'transfer of credits.'  Therefore, when we first
drafted the proclamation, I also drafted legislative provisions for these
purposes, and they eventually became Sections 1 and 2 of the emergency
Banking Act of March 9, 1933.
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End of Part I
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Dick Eastman
Yakima, Washington
United States
Every man is responsible to every other man.