FDR - Jean Edward Smith [204]
The act was not only a lifesaver for millions of Americans, it initiated a housing boom that has continued to this day. New loan criteria, longer amortization periods, and lower interest rates made home ownership readily accessible for the first time in American history. The HOLC assumed one sixth of all urban mortgages in the United States. When its loan authority expired in 1936, it had made more than one million loans totaling $3.1 billion.77 Like the TVA, which brought southern Democrats and northern progressives together, nothing solidified FDR’s support among the American middle class as the HOLC.78
After six weeks in office, Roosevelt could relish his accomplishments. The banking crisis had been ameliorated, the government’s budget pruned, and the heavy hand of mandatory temperance overturned. The farm crisis, if not under control, was being dealt with; young men were being mobilized in the cause of conservation; and relief was flowing to embattled home owners and the unemployed. A significant public works program was in the making, the administration had undertaken to tame Wall Street, and a breathtaking experiment in government planning—the Tennessee Valley Authority—had been approved. FDR was at the top of his game. He was improvising from crisis to crisis and savoring every minute. The legislation passed and the initiatives undertaken shaped the New Deal and decisively altered the nation’s course. Yet each measure represented Roosevelt’s nimble response to circumstance rather than any grand design. “To look upon these policies as the result of a unified plan,” wrote Raymond Moley afterward, is “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.”79
Nothing better illustrates FDR’s response to circumstance than his decision on April 18 to take the United States off the gold standard. At issue was whether to inflate the nation’s currency and hope that commodity prices would rise in the aftermath. Advice was divided. Traditional economists and the Bureau of the Budget believed that prosperity would return only when government expenditures were brought under control. Adherence to the gold standard ensured a sound dollar and generous protection for creditors and bondholders. Most of Wall Street agreed. Bernard Baruch, an oracle of orthodoxy, ridiculed the idea that to inflate the currency might help restore prices. “People who talk about gradually inflating might as well talk about firing a gun off gradually.… Money cannot go back to work in an atmosphere filled with a threat to destroy its value.”80
Those favoring inflation included most members of Congress, particularly those from the farm states, brain trusters like Moley and Tugwell, and, surprisingly, the House of Morgan. Rising above conventional wisdom, J. P. Morgan and his partners, Thomas Lamont and Russell Leffingwell, worried about the unrest that continued to sweep the farm belt and believed a rise in commodity prices was essential to ensure the nation’s political stability.* The fastest way to achieve that was to go off the gold standard and let the market set the value of the dollar. A cheaper dollar would make American farm products more attractive to foreign buyers, and the increased demand would raise domestic prices. Morgan and his partners were not idle spectators. They made whatever overtures they could to the administration through Treasury secretary Woodin and enlisted Walter Lippmann, the nation’s premier political analyst, in the cause. “Walter,” said