America's Money Machine

The Not So New New Deal
ment of commercial debts in drachmas of reduced weight. The devaluation
was approximately 26 per cent.
The devaluation ofthe drachma-the first debasement ofmoney which
history records, but not the last-seems to have been successful, but it
is noteworthy that thereafter the municipal officials ofAthens in assuming
office were required to take an oath not to tamper with the currency and
this restraint characterized subsequent Greek monetary experience.
Devaluation of the dollar was not indeed part of the Roosevelt New
Deal program. Upon his inauguration, he had issued an Executive Order
under the dubious authority ofthe war-time Trading with the Enemy Act
of Igl 7, by which he forbad the export of gold and trading in gold and
proclaimed a national bank holiday. When the Congress was convened
by him on March 9, in an atmosphere of war-time crisis, it was generally
anticipated that he would call for nationalization of the banking system.
The bill which he now submitted for passage did not go so far. Part of
this may have been due to the influence of the advisers whom he called
in: George Harrison, Governor of the New York Federal Reserve Bank;
Arthur Ballantine, Hoover's Under Secretary of the Treasury, whom
Roosevelt kept on in the same post; and Ogden Mills, Hoover's Secretary
of the Treasury. While the bill validated his executive decree and gave
the government the monopoly of gold, it went no further than to authorize
the issuance of Federal Reserve bank notes against whatever collateral
the banks held-dollar for dollar against government bonds and
notes, and go per cent of the value of notes, drafts, bills of exchange or
bankers' acceptances tendered. Commercial banks were put under the
absolute control of the Secretary of the Treasury, so long as the emergency
was declared in effect, ·and the Comptroller of the Currency was
authorized to appoint conservators to supervise the operations ofindividual
banks. At the same time, to hasten the reopening of banks by restoring
their reserves, the Reconstruction Finance Corporation was directed
to purchase the preferred stock of banks at the request of the
Secretary of the Treasury.3
The passage of the Emergency Banking Act, followed by thePresident's
radio "fireside chat" on the following Sunday evening (the
twelfth), assuring the American people that their deposits were now safe,
was electric in its effects. By March 15, about halfthe banks, holding some
go per cent of the deposits of the country, were reopened, and within
three weeks some $1,185 million ofcurrency had been redeposited in the
banks. By the end ofJune, all but 3,871 of the 18,394 banks in being at
the beginning of the year had been reopened, but many small communi-