1934  Sue the Bastards

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After a year of heady legislation the Roosevelt administration turned its attention to the punishing of the guilty, the men responsible for the crash. They would clear out the corrupt interests by exposing their deeds. First up would be Samuel Insull and Andrew Mellon.

But the New Deal zealots also found more humble folk in their sights, the Schechter brothers, who operated a kosher live poultry business in Brooklyn. The New Dealers found them in violation of the business codes of the National Industrial Recovery Act and took them to court. A year later the US Supreme Court overruled the government and found for the Schechters.

In the November Senate elections the Democrats gained 9 seats over the Republicans. In the House elections the Democrats gained 9 seats, the Republicans lost 14 seats, and the new Progressive Party gained representation in the House with 7 seats. In the 74th Congress the Democrats achieved a 69-25 majority, and in the House a 322-103 majority over the Republicans.

Prosecuting Businessmen

The identification of traitors or scapegoats performs a unifying function in human society during times of stress. Since the decline of transcendental religion the political elites have instinctively targeted the business elite during economic hard times when the people are anxious and afraid. The Roosevelt administration was not slow to adopt this prop to its power. Three prosecutions symbolized this spirit of retribution: the prosecution of Samuel Insull for mail fraud, the prosecution of Andrew Mellon for tax evasion, and the prosecution of the Schechter brothers, kosher butchers of Brooklyn.

Samuel Insull was a Briton who had come to the United States to work with Thomas Edison and the development of electric generation, distribution, and marketing. But his highly levered Chicago Edison (today Commonwealth Edison) failed during the crash, and New Dealers like Interior Secretary Harold L. Ickes were anxious to make an example of him. He was prosecuted on mail fraud and antitrust charges but found not guilty on all charges.

Andrew Mellon was a banker, philanthropist, art collector, and Secretary of the Treasury from 1921 to 1932. Three presidents had served under him, it was said.

The Justice Department attempted and failed to obtain an indictment of tax evasion. The Roosevelt administration tried again in a two year civil action, which continued after Mellon’s death. He was exonerated.

Responding to charges that the National Recovery Administration was a bureaucracy out of control, the administration pressed a case against a firm of kosher chicken butchers in Brooklyn run by the Schechter brothers. The government accused the brothers of violating NRA codes and pressed the case up to the US Supreme Court. In 1935 the Supreme Court struck down the case on the grounds that the Schechters did not engage in interstate commerce.

Intention: In the awful shambles of the crash ordinary Americans lost their life savings, their jobs, their homes, and their farms. Vast corporations had crumbled into bankruptcy yet wily speculators had made millions. It was not just bad luck that had brought these misfortunes, it was fraud and sharp practice. Those who had brought the United States to the brink of ruin should have to pay for their crimes. And no longer should businessmen, big and small, run roughshod over the consumer and the worker.Liberal Line: The modern economy was just too complicated to be run by a cabal of bankers on Wall Street. It needed proper supervision and regulation by public officials, educated people without conflicts of interest.
Outcome: The prosecutions sent a message to all businessmen and promoters. You could be next. Sensibly, businessmen drew in their horns and reduced their risk. If a failed business was a criminal affair, then why stick your neck out?Conservative Line: The choice of Insull and Mellon as scapegoats proves the economic ignorance of the New Dealers. How about the Federal Reserve officials that bungled monetary policy? How about the congressmen who racked up import tariffs and help collapse international trade? But it also indicates their political opportunism. Why not blame the businessmen? It''s worked every time it''s been tried.

1929-1939: “A Decade that will live — in stupidity.”

Why Stuck on Stupid?

Seventy years ago the leaders of both US political parties turned away from the policies that had created an economic powerhouse we call the Roaring Twenties. For ten long years Americans suffered through wrenching economic dislocations: deflation, inflation, a four-year economic contraction, endless unemployment, mindless political experiments, and ruthless attacks on businessmen for political gain as their leaders stayed Stuck on Stupid.

Today, after a twenty-five year economic boom, Americans are once more faced with a political elite that wants to monkey with success. It wants to raise tax rates. It wants to restrict trade. It wants to increase government power.

It’s time to look back and remind ourselves how it came to be, starting in 1929, that America got itself Stuck on Stupid. Otherwise it could happen again.

 — Christopher Chantrill



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presented by Christopher Chantrill