You grew up on this story: “Franklin Roosevelt saved capitalism from itself.” This is one of the major myths of American history.
Here is how we should understand the New Deal: Franklin Roosevelt saved the big bankers from their depositors.
To understand the truth, you must understand what is never mentioned in the textbooks. Roosevelt gave his famous Inaugural Address shortly after noon on March 4, 1933. It is most famous for these words: “We have nothing to fear but fear itself.”
But the New York banks had a great deal to fear. There was a bank run going on: a run on the gold in the banks. The run on gold had begun as soon as Roosevelt was elected the previous November.
What the textbooks never, ever mention is this sequence of events.
1. The banks closed on Friday afternoon, March 3.
2. Roosevelt gave his Address on Saturday, March 4, around noon.
3. At one a.m. on Monday morning, March 6, Roosevelt closed the banks.
4. He made it illegal to withdraw gold from the banks before they opened.
5. He called this a “bank holiday.”
6. He had no authority to do this.
7. Congress retroactively gave him the authority on March 9.
On what judicial basis did he do this? Woodrow Wilson’s “Trading With the Enemy Act” of 1917. Roosevelt said it was still a wartime emergency. The phrase “grasping at straws” comes to mind.
All of this information is available from the documents, but the dots are never connected in the textbooks or PBS documentaries.
Fact: Roosevelt saved the New York banks in his first week in office. He saved the banks from their depositors, who were never again allowed to get their gold. They broke their contracts with the full support of the new government. This was theft, pure and simple. It was the end of the gold standard.
(For the rest of my article, click the link.)