Free Lords of Finance: 1929, the Great Depression, and the Bankers Who Broke the World by Liaquat Ahamed Page A

half-baked schemes for quasi-socialist industrial planning, regulation to protect consumers, welfare programs to help the hardest hit, government support for the cartelization of industry, higher wages for some, lower wages for others, on the one hand government pump priming, on the other public economy. Few elements were well thought out, some were contradictory, large parts were ineffectual. While much of the legislation was very laudable, aimed as it was at improving social justice and bringing a modicum of economic security to people who had none, it had little to do with boosting the economy. Tucked away, however, in this whole motley baggage, as a last-minute amendment to the Agricultural Adjustment Act, was one step that succeeded beyond anyone’s wildest expectations in getting the economy moving again. This was the temporary abandonment of the gold standard and the devaluation of the dollar.
    The rescue of the banks had been brought about by one of the oddest partnerships in the history of economic policy making—between a Democratic treasury secretary and his Republican predecessor. Devaluation involved one of the strangest confrontations in that history. On one side stood the top echelon of presidential economic advisers, a brilliant group of young men, most of them new to government, the “hard money” men, as they were colloquially referred to in the press. At Treasury was Woodin’s undersecretary, the polished and urbane forty-year-old Dean Acheson, son of the Protestant Episcopal bishop of Connecticut, a graduate of Groton, Yale, and Harvard Law School, a protégé of Felix Frankfurter and clerk for Justice Louis Brandeis at the Supreme Court. Though he knew little about economics—and with his British colonel’s mustache and his tweed bespoke suits, he looked like an old fogy—Acheson had a reputation as an outstanding corporate lawyer, a pragmatist with an incisive brain and a talent for crafting solutions to complex problems.
    The adviser to the president on monetary affairs was thethirty-seven-year-old James Warburg, son of Paul Warburg, the father of the Federal Reserve System. After graduating from Harvard, the debonair Warburg embarked upon a stellar career in banking, becoming the youngest chief executive on Wall Street while still finding time to publish his poetry in the
Atlantic Monthly
and write the lyrics to a Broadway musical,
Fine and Dandy.
He had turned down Acheson’s job as undersecretary of the treasury, preferring to exert his influence as an unpaid and untitled adviser to the president, who liked to refer to him as “the white sheep of Wall Street 726 .”
    And finally, the hardest-currency man of them all was the thirty-eight-year-old budget director, Lewis W. Douglas. Scion of an Arizona mining family, Douglas had taught at Amherst and since 1927 had been in Congress, where he had championed the cause of government economy and balanced budgets during the Depression.
    The spokesman for Wall Street should have been the head of the Federal Reserve Board, Eugene Meyer. But he found himself completely out of sympathy with the new administration and submitted his resignation at the end of March. As a consequence, Harrison of the New York Fed acted as the primary go-between for bankers and the White House.
    Every one of Roosevelt’s advisers, including Harrison, believed that having stabilized the banking system, they could rely on the traditional levers—expanding credit, undertaking open market operations—to get the economy moving again. Most important, none of them could see any reason for breaking with gold.
    Pitted against this array of economic expertise was one man—the president himself. Roosevelt did not even pretend to grasp fully the subtleties of international finance; but unlike Churchill, he refused to allow himself to be in the least bit intimidated by the subject’s technicalities—when told by one of his advisers that something was impossible, his response was