Why oh why can't we have a better press corps?
Amity Shlaes: Gatsby, Galbraith and the Myth of Coolidge’s Crash:
[John Kenneth Galbraith writes that] the 30th president [Calvin Coolidge] was the one to fall asleep at the wheel of our economic car [as the 1920s stock bubble developed]… [Galbraith's] reasoning… [is] as substantial as a champagne bubble…. [I]t wasn’t as if Coolidge didn’t know or care about the stock-market jump…. Privately, Coolidge counted on a crash…. What Galbraith and others take for Coolidge laziness was actually Coolidge restraint. Coolidge didn’t deem it appropriate for the federal government to intervene in the stock market…. Policy at the Federal Reserve was not set by Coolidge but by the Fed and, to some extent, his mighty Treasury secretary, Andrew Mellon, whose autonomy Coolidge respected…
Robert Gilbert: The Tormented President: Calvin Coolidge, Death, and Clinical Depression:
About four months later [in January 1928], as the Federal Reserve Board prepared to curb wanton stock speculation, Coolidge made a statement to the press that stopped the Board in its tracks. This was largely regarded as the greatest single blunder of his presidency. On this occasion, he indicated--quite amazingly for the president of the United States--that…
Whether the amount at the present time [of brokers' loans] is disproportionate to the resources of the country, I am not in a position to judge accurately…. [S]o far as indicated by an inquiry that I have made of the Treasury and so on, I haven't had any indications that the discount was large enough to cause particularly unfavorable comment…
Coolidge's reassuring statement did not come until after the close of the market that Friday afternoon The next day there was an explosion of stock buying, making it one of the most active Saturdays in stock-trading history, The New York Times reported on January 8 that:
Stocks were turned over on high volume on the New York Stock Exchange yesterday largely because of the enthusiasm caused by President Coolidge's statement that he saw no reason for alarm in the large expansion of brokers' loans…
Not everyone, however, was quite so enthusiastic. When Hoover was told that Coolidge had made such comments about brokers' loans, he was incredulous, asking: "Did that man actually say that?"
Had he known of a conversation between the president and H. Parker Willis, editor of the New York Journal of Commerce, [Hoover] would have been even more appalled. In this conversation, Coolidge had admitted that his personal view and his official views on brokers' loans were quite different…. [A]s an official representative of the government, he felt compelled to stand on information he received from a department of that government [i.e., Andrew Mellon's Treasury], even if he disagreed with it. Willis reportedly replied that if Coolidge had only indicated his concern, he would have had a great impact in curtailing 'an unwholesome speculation'. Coolidge's January 6 press conference remarks and the follow-up conversation with Willis are rather remarkable…
It is not often that words genuinely fail me…
Frederick Lewis Allen: Only Yesterday:
The bull party in Wall Street [in the 1920s] had been still further encouraged by the remarkable solicitude of President Coolidge and Secretary Mellon, who whenever confidence showed signs of waning came out with opportunely reassuring statements which at once sent prices upward again. In January 1928, the President had actually taken the altogether unprecedented step of publicly stating that he did not consider brokers' loans too high, thus apparently giving White House sponsorship to the very inflation which was worrying the sober minds of the financial community…
Donald R. McCoy: Calvin Coolidge: The Quiet President:
When in 1926 Professor William Z. Ripley of Harvard University drew his attention to the fact that pyramiding holding companies and rigging of stock markets threatened the United States with serious economic consequences, Coolidge was concerned. Yet searching Ripley's arguments, he could not find any justification for federal intervention….
Coolidge's statement declared that brokers' loans were not excessive because they reflected steadily increasing bank deposits and the larger number of securities on the market. To give emphasis to his reassuring view, he allowed it to be quoted directly in the press….
A few days later H. Parker Willis, who was editor-in-chief of the Journal of Commerce, discussed the statement with Coolidge at the White House. The President indicated that his official view and his personal opinion were divergent. He said, "If I were to give my own personal opinion about it, I should say that any loan made for gambling in stocks was an 'excessive loan'." He continued by way of explanation:
I regard myself as the representative of the government and not as an individual. When technical matters come up I feel called on to refer them to the proper department of government which has some information about them and then, unless there is some good reason, I use this information as a basis for whatever I have to say; but that does not prevent me from thinking what I please as an individual…
Galbraith's claim that Coolidge did not know--i.e., did not know enough to feel he could challenge Mellon's talking points--and did not care--i.e., thought the US headed for disaster but did not bother to learn enough to think he had an informed enough view to challenge Mellon--seems to me to hit the nail on the head. Certainly Herbert Hoover thought so...
