I have sympathy for Hoover and rightfully so. For many years I saw his portrait every time I would visit the headquarters of the IEEE in New York City. I read about his magnificent acts of logistical organization and the relief of suffering in the European famines. He was an accomplished and talented person.
And yet he failed, or at least has been judged a failure as President, because of a timidity and unwillingness to act, boldly and in a timely manner. He was constrained by bad advice, and an ideological bent that prevented common sense action from moving the country forward. Afterwards in his Memoirs he blamed the advice he received from his Treasury Secretary, Andrew Mellon, the great liquidationist, who had been appointed by Warren Harding in 1921, and who throughout the 1920's preached the gospel of tax cuts for the wealthy to stimulate growth.
"Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."This speech could be given with little alteration by Barack Obama today, although I am sure he would add quite a bit more flair.
The Too Big To Fail Banks are still with us, but even larger and more dangerous and powerful. Obama himself, despite pledges to the contrary, is taking large amounts of funds from the corrupt campaign process.
Instead of acting quickly to correct the causes of the financial collapse, he expended most of his early political capital on a healthcare plan that, despite some genuinely beneficial changes, serving to increase the control and reach of a few private healthcare monopolies by requiring all people to purchase insurance from them.
Fed policy still serves the few and is largely opaque in its dealings, becoming even more powerful as regulator.
And the markets are dominated by even fewer players, and tainted by a major scandal in which over a billion dollars was stolen from the customers.
Corporate profits are excellent and the very wealthy few are making enormous strides in increasing their wealth. And yet the bulk of the nation suffers from fear and uncertainty.
The people's vehement objections to the bailout, marked by faxes, calls and emails in their millions, were ignored.
Yes, Obama faces a rigid and uncompromising opposition in the Congress, which achieved its House majority during his term I might add, but he still has broad Presidential powers, including the ability to direct the enforcement activities of the regulators and the Justice Department.
And not one major participant in the fraud has been indicted and prosecuted. Instead, the perpetrators and beneficiaries of the fraud have crafted the words for the very reforms which they have opposed and weakened every step of the way. And the regulatory agencies continue to hand out wristslap fines for egregious market frauds that continue to add to the deterioration of the confidence of average market participants.
If the US had a Parliamentarian system, Prime Minister Obama would have most likely already been ushered out the door.
Am I being too harsh? He promised much, and achieved little, and broke almost every major pledge he had made to his constituency in his zeal to curry favor with those who would have nothing to do with his mandate. In this he is more Chamberlain than Hoover, who at least acted on his principles that were unfortunately mistaken as he later admitted.
When he writes his memoirs I will be shocked if the current President does not paint a picture of magnificent accomplishments, and for the shortcomings, blame everyone but himself and his inability to execute on principle.
President Obama will undoubtedly provide a good case study for the failure in leadership in a crisis for future historians.
"There are three definite directions in which action by the government at once can contribute to strengthen further the forces of recovery by strengthening of confidence. They are the necessary foundations to any other action, and their accomplishment would at once promote employment and increase prices.
The first of these directions of action is the continuing reduction of all government expenditures, whether national, state, or local. The difficulties of the country demand undiminished efforts toward economy in government in every direction. Embraced in this problem is the unquestioned balancing of the Federal Budget. That is the first necessity of national stability and is the foundation of further recovery. It must be balanced in an absolutely safe and sure manner if full confidence is to be inspired...
The second direction for action is the complete reorganization at once of our banking system. The shocks to our economic life have undoubtedly been multiplied by the weakness of this system, and until they are remedied recovery will be greatly hampered.
The third direction for immediate action is vigorous and whole-souled cooperation with other governments in the economic field. That our major difficulties find their origins in the economic weakness of foreign nations requires no demonstration...
Banking Reform
The basis of every other and every further effort toward recovery is to reorganize at once our banking system. The shocks to our economic system have undoubtedly multiplied by the weakness of our financial system.
I first called attention of the Congress in 1929 to this condition, and I have unceasingly recommended remedy since that time. The subject has been exhaustively investigated both by the committees of the Congress and the officers of the Federal Reserve System.
The banking and financial system is presumed to serve in furnishing the essential lubricant to the wheels of industry, agriculture, and commerce, that is, credit.
Its diversion from proper use, its improper use, or its insufficiency instantly brings hardship and dislocation in economic life. As a system our banking has failed to meet this great emergency.
It can be said without question of doubt that our losses and distress have been greatly augmented by its wholly inadequate organization. Its inability as a system to respond to our needs is today a constant drain upon progress toward recovery. In this statement I am not referring to individual banks or bankers. Thousands of them have shown distinguished courage and ability.
On the contrary, I am referring to the system itself, which is so organized, or so lacking in organization, that in an emergency its very mechanism jeopardizes or paralyzes the action of sound banks and its instability is responsible for periodic dangers to our whole economic system."
Herbert Hoover, Annual Message to Congress, 6 December 1932
