Free People, Free Markets. George Melloan
from the light-minded credulity of early 1929 and is now disposed to exaggerate its fears, just as it was inflating its hopes beyond all reason less than two years ago. At any rate, men everywhere recognize the necessity of sober calculation, of cold scrutiny of all business projects in relation to the inherent soundness and usefulness.”
But a short while later, the Journal was notably cool toward Hoover’s 1931 State of the Union address, criticizing him for a lack of leadership in signing Hawley-Smoot. An editorial said the message was “in fact disappointing,” betraying Mr. Hoover as “a man whose mental vision is apt to become focused on what he wishes to see.”
As the Depression deepened the Journal’s support for Hoover waned further and although it still leaned toward Hoover over FDR in the 1932 presidential race, there were no more enthusiastic endorsements. The Journal’s editorial position was equivocal, deeming both parties to be, in effect, antibusiness. Indeed, an editorial on July 1, 1932, favored the Democrat platform plank as being the “most honest” on the repeal of Prohibition, which even in the depths of a Depression, it described as the “most important issue facing the nation.”
But as the election neared, the Journal was furious at FDR for lending his own support to high tariffs and other political capitulations to the farm lobby. An editorial on November 3 stated: “Governor Roosevelt has unreservedly pledged himself to continue and extend the same impossible effort to afford tariff protection to export surplus producers which gave birth to the Hawley-Smoot and worse to the Agricultural Marketing Act and its $500,000,000 farm board folly.”
The latter was a reference to the 1929 law passed by the Republican Congress and signed by Hoover that lavishly refunded the 12 federal farm loan banks created by the Federal Farm Loan Act of 1916. The federally preferential loan terms offered by these banks probably had a lot to do with the overproduction that had held down farm prices, giving rise to farmer demands for import protection. Farmers paid a very high price during the Depression for the federal measures they had lobbied so hard for, and the Journal’s editors recognized the damage caused to the economy by these federal interferences with the normal workings of markets.
But after Roosevelt and the Democrats won a landslide victory, the Journal granted them a honeymoon, no doubt partly because the editors were themselves anxious about the state of the U.S. economy. An editorial praised the rapid-fire New Deal creation of legislation during FDR’s first 100 days by opining that the new administration had “superbly” risen to the occasion.
“It and the country still have incredible tasks to perform before they can afford so much as a pause for breath. But together they have a good beginning and there are times when a beginning is nearly everything.”
FDR and Hogate were in fact neighbors, with adjoining farms in Dutchess County, New York. They knew and liked each other, despite the differences in their political views, and often had long talks at their country places and in New York. Hogate had prevailed on Governor Roosevelt, apparently with some success, to give the New York Stock Exchange some slack, letting it have a try at self-reform.
Roosevelt, after his inauguration as president on March 4, 1933, immediately responded to the banking crisis, caused in part by Fed incompetence, by temporarily shutting down the nation’s banks, thereby freezing depositors’ funds. The Journal was only mildly critical. It even advised against the use of bank clearing house scrip, normally narrowly employed in the settling of interbank accounts, as a kind of substitute money, fearing it would lay the groundwork for inflation.
The Journal may have been wrong about that. Given the state of the banking system and a Fed that was little more than a bystander, a substitute money might have been useful in providing liquidity. Yet fears of inflation were a powerful force in that era, a time when the world had recently seen a German economy collapse under the weight of hyperinflation and when the British had in 1931 abandoned the international gold standard in their desire for more flexibility in the manipulation of money.
Although the Journal seemed to accept that some sort of emergency action was needed, it did point out that shutting down the banks was a further blow to an already weak economy and urged the government to end the “bank holiday” quickly. The government was less than responsive to that demand, as some bank inspections and depositor freezes dragged on until the end of the year. When the bank holiday ended, only 12,000 banks were permitted to open. In mid-1929, the nation had had 25,000 banks.
The Journal, however, supported two New Deal measures. It backed the Federal Deposit Insurance Act, which had an important influence on stabilizing the banking industry in the 1930s and thereafter by giving depositors more confidence in banks and reducing bank runs. And in a front-page editorial on April 4, 1934, it gave strong backing to the Securities Exchange Act, which created the Securities and Exchange Commission. The editorial said that “not only owners and users of investment capital but the investment bankers whose fortune it is to bring these two interests face to face, should welcome the legislation.”
For one thing, the Journal’s editors liked the idea of legal requirements that would bring about greater transparency in corporate reporting. They had historical memories of the Dow and Jones days when some companies, including the economically dominant railroads, didn’t even deign to issue public annual reports. Reporters like Jones and Bergstresser had to fight for information about the true financial condition of the companies that were the subject of large bets being made by Wall Street investors. Hogate and others likely felt that the securities act would go a long way in restoring public trust in Wall Street, and quite likely they were right.
The Journal even offered some initial support for what, along with the revolutionary Agricultural Adjustment Act (AAA), was an equally revolutionary New Deal experiment, the National Industrial Recovery Act. The act set up the National Recovery Administration (NRA), whose job it was to organize the entire American business community into industry cartels, with separate “codes” for each industry.
The Journal even joined other newspapers in displaying the NRA’s eagle symbol on its front page to show that it was a subscriber to the publishing code. But that sharp and uncharacteristic deviation from the newspaper’s traditional free-market policies would be short-lived, thanks in part to the rising influence of Hogate’s young protégé, Barney Kilgore.
The initial embrace of the NRA could be attributed to the fact that Dow Jones, along with the rest of the country in 1933, was facing hard times. Circulation and advertising had dropped sharply. Hugh Bancroft died in October of that year after a long illness at age 53. His widow, Jane, owned or controlled roughly 90% of the shares of Financial Press Companies of America, the family holding company that owned Dow Jones. She in essence turned the company over to Hogate, whom she much admired, telling him to do what was best for the company and “Don’t you and the boys worry about dividends.” Jane and her late sister Martha had loved their stepfather C.W. Barron, and Jane shared his trust in the abilities of the young man from Indiana.
Hogate worked tirelessly to keep Dow Jones afloat and focused much of his attention on rebuilding readership, in part by broadening the Journal’s scope, not only as a national financial newspaper but a national business newspaper as well. To this end, he endeavored to liven up the Journal and make it more readable. He and Bancroft in 1930 had brought back Thomas Woodlock, the Journal’s editor of a quarter century before, to write a front-page column. The Review & Outlook column originated by Charles Dow was moved from the front page to page 8 and became the official purveyor of the Journal’s institutional opinions, which it remains to this day.
As mentioned previously, after leaving the Journal, Woodlock had become a railroad analyst, and in 1924 Coolidge had appointed him a commissioner of the ICC. In 1930, Hogate correctly surmised that a talented wordsmith like Woodlock in his waning years might want to do something more interesting than reviewing railroad petitions for rate increases. He proved to be right. Woodlock accepted the offer and was soon back in the role of offering Journal readers front-page commentary on everything from the performance of Herbert Hoover to the philosophy of Spanish essayist and poet George Santayana. His philosophical pieces gave the Journal class but were hardly the trenchant observations on current events that had gained Barron fame. In short, he was not the voice of the newspaper.
Whereas