Fuller’s story of how we humans got ourselves into our present predicament continues. My annotations will be italicized and demarcated with an asterisk. This is the fifth post of the Human History Series.
When the war was over, all this power-production equipment was still in prime operating condition. There was enormous potential productivity–a wealth of wealth-producing capability that had never before existed, let alone as a consequence of war. The production capacity that had been established was so great as to have been able to produce, within a two-year span, all those ships, trucks, and armaments. What was the U.S.A. economy going to do with its new industrial gianthood? It was the vastness of this unexpected, government-funded production wealth and its ownership by corporate stockholders that generated many negative thoughts about the moral validity of war profiteering.
There were many desirable and useful items that could be mass produced and successfully marketed. Young people wanted automobiles, but automobiles were capital equipment. In 1920 capital equipment was sold only for cash. There were enough affluent people in post-World-War-I U.S.A. to provide an easy market for a limited production of automobiles. In 1920 there were no bank-supported time payment sales in the retail trade. The banks would accept chattel mortgages and time payments on large mobile capital goods, such as trucking equipment, for large, rich corporations. Banks would not consider risking their money on such perishable, run-away-with-able capital equipment as the privately owned automobile.
Because the banks would not finance the buying of automobiles and so many money-earning but capital-less young people wanted them, shyster loaners appeared who were tough followers of their borrowers when they were in arrears. Between the ever-increasing time-payment patronage and the affluent, a market for automobiles was opening that could support mass production.
In 1922 there were about 125 independent automobile companies. They were mostly headed by colorful automobile-designing and -racing individuals for whom most of the companies were named. They survived by individually striving each year to produce an entirely new and better automobile, most of which were costly. Many accepted orders for more than they had the mechanical capability to produce. Their hometown financiers would back these auto-designing geniuses so that they could buy better production tooling and build larger factories. Wall Street sold swiftly increasing numbers of shares in auto companies. More and more of them went broke for lack of production, distribution, and maintenance experience on the part of the auto-designer managements.
In 1926 the Wall Street brokerage house of Dillon, Read and Company made a comprehensive cost study of the auto-production field. They found that 130,000 cars a year was, in 1926, the minimum that could be accounted as mass production and sold at production prices. Any less production had to carry a much higher price tag. To warrant the latter, the cars had to be superlatively excellent. The English-built Rolls-Royce brought the highest price on the American market. There was fierce competition among Packard, Peerless, Cadillac, Pierce-Arrow, Locomobile, Lozier, Leland, and others for the top American car. All of those premium cars’ frames, bodies, engines, and parts were manufactured within their own factories. There were several in-between classes, such as that of the Buick. Most of the 100 or so cars in this intermediate range were assembled from special engines, frames, and other parts made by independent manufacturers.
The mortality in auto companies was great. Dillon, Read and Company led Wall Street out of its dilemma by buying several almost bankrupt companies, closely located to one another, such as those of the Dodge family, whose joint production capacity topped the 130,000 units per year mass-production figure.
They named their new venture the Chrysler Company. Dillon, Read and Company fired the auto company presidents, who were primarily interested in new-car-designing, and replaced them with production engineers. Wall Street followed suit and put in production engineers as presidents of all the auto companies–except Ford, who owned his company outright and had no obligation to Wall Street and its legion of stock buyers. Old Henry himself was already the conceiver, initiator, and artist-master of mass production.
Because the American public was in love with the annual automobile shows, the Wall Street financiers who had thrown out all the colorful auto-designer presidents started a new game by setting up the Madison Avenue advertising industry, which hired artists who knew how to use the new (1920) airbrush to make beautiful drawings of only superficially–not mechanically-new dream cars. They made drawings of the new models, which required only superficial mudguard and radiator changes with no design changes in the hidden parts. Parts were purchased by the big companies from smaller, highly competitive parts manufacturers operating in the vicinity of Detroit.
This was the beginning of Yankee ingenuity, which was frequently, forthrightly, and often naively manifest in American business. Big business in the U.S.A. set out to make money deceitfully–by fake new models–and engineering design advance was replaced by style design change.
In the late twenties first Ford and then General Motors instituted their own time-financing corporations. The bankers of America said, Let them have it, they’ll be sorry–autos, phew! We don’t want to go around trying to recover these banged-up autos when the borrower is in default. The bankers said, It is very immoral to buy automobiles ‘on time.’ They are just a luxury.
What the bankers did like to support in the new mass productivity was tractor-driven farm machinery. Farm machinery was easy to sell. As the farmer sat atop the demonstration plowing or harvesting equipment, with its power to go through the fields doing an amount of work in a day equal to what had previously taken him weeks, he said to himself, I can make more money and also take it a little easier. So the bankers approved the financing of the production and marketing of the farm machinery. They held a chattel mortgage on the machinery and a mortgage on the farmland itself and all its buildings. The bankers loved that. There was enthusiastic bank acceptance of the selling of such equipment on time to the farmers. The bankers did not consider this immoral. The farmer was producing food wealth. The automobilist was just joy riding.
Then there came a very bad hog market in 1926. Many farmers were unable to make the payments on their power-driven equipment. The local country banks foreclosed on the delinquent farmers’ mortgages and took away their farms and machinery. The bankers had assumed that the farms were going to be readily saleable. It turned out, however, that there were not so many nonfarmers waiting to become farmers, and most of the real farmers had been put out of business by the bank foreclosures so they couldn’t buy back their own farms. There were no city people eager to go out and buy one of those farms. How you gonna keep them down on the farm, after they’ve seen Paree? were the words of a popular World War I song.
So the dust bowls developed as the upturned, unsown soil began to blow off the farms. It is relevant to note that, in 1900, 90 percent of U.S.A. citizens were living and working on the farms; in 1979 only 7 percent were on the farms, mostly as local supervisors for big, absent-ownership corporations. The owners of the farmlands today are no longer farmers or even individual humans–they are the great business conglomerates. What began in 1934 as government subsidies and loans to farmers for farm machinery, later to keep acreage out of production, would by 1978 result in President Carter making enormous payments to appease big corporations for cutting off vital grain and other strategic shipments to Russia. Next, the U.S. government would make enormous subsidies to bail out large corporations such as Lockheed and Chrysler, which as basic military suppliers the U.S. government could not allow to go bankrupt. Eventually the U.S. taxpayers will be asked to make free-of-risk bail-outs of private enterprises, corporations with initial physical assets worth over a billion dollars classifed as risk enterprises.
We now return to the 1926-’27-’28-’29 sequence of events developing from selling the farmers’ machinery on the bankers’ drop-dead terms (mortage means on death terms). In 1927 and 1928 the bigger Western city banks began to foreclose on their local country banks that had financed the farm machinery sales and had been borrowing from the bigger city banks to cover their unprecedentedly expanded loaning. First the little and then the successively bigger banks found that they had foreclosed on farmhouses that had no indoor toilets, many with roofs falling in, barns in poor condition, with the repossessed farm machinery rusting out in the open–and no customers.
Word of the bad news gradually went around and in 1929 came the Great Crash in the stock market. All business went from worse to worser. Unemployment multiplied. Prices steadily dropped. Nobody had money with which to buy. Bigger and bigger banks had to foreclose on smaller banks, until finally in early 1933 there came one day in which 5000 banks closed their doors to stop the run on their funds.
*Remember that the Banks loaned their depositor’s money not once, but many times. They could do this by relying on an average deposit. This worked most of the time. The only risk was if every depositor suddenly wanted their money out, then the fraud would be discovered.
People were dismayed and both individually and collectively helpless to do anything to combat the economic collapse. The economy had gone to pieces. People did not parade and protest. They became so low in spirit and listless that they just sat around silently in their homes or in public places. The New York subway stations were filled with people sleeping on the concrete platforms and stairways. No religious organizations were willing to let people sleep in their churches.
There came a pecking-order point when the central Chicago banks foreclosed on all the other big Western city banks–followed by the big New York City central banks foreclosing on Chicago’s central banks. FinalIy came the denouement, when the big New York banks found themselves about to close because they were already behind-the-scenes insolvent. This occasioned the U.S. Congress voting to accelerate by four months the presidential inauguration of Franklin Delano Roosevelt who, minutes after taking his oath of office, signed the Bank Moratorium, which momentarily suspended the acknowledgment of the death of the wealthy landowners’ banking system that had lost all or much of its depositors’ money. About a month later Congress voted to the President of the U.S.A. the ability to control all money. Months later again the U.S. Supreme Court upheld that legislation. The U.S.A. citizens themselves and their government had become the wealth resource of last recourse. The underwriting wealth belongs to all the people and not to the few. That happened also to be the description of socialism.
The 150-year-long infinite wealth poker hand and its uncalled bluffng was over. The called hands were suddenly down. It turned out that the wealthy’s wealth was nonexistent. Their marble-walled, steel-barred, visibly vaulted banks had been psychologically attractive to the depositors, who preferred to have their earnings and savings deposited along with the wealth of the powerfully rich. What the banks had been doing was to loan the people’s deposits to other people. The banks had no money themselves. What they had done was to capitalize their land at their self-asserted value and had been credited with that value of stock in the bank’s ownership.
In 1933, for the first time ever, the hands of the U.S. American wealthy were exposed (and by inference, all land-based capitalism everywhere around the world)–most were money empty. Their land and multiservanted mansion values dropped to almost nothing. Nobody had the almost-nothing amount of money to buy those richly housed estates. There was one exception to the last statement–the Vatican-administered Roman Catholic Church’s world organization, which for a pittance acquired many extraordinary properties at that time, which it converted into monasteries and convents, colleges and schools.
The game of deedable land wealth had been a bluff from its very beginning-multimillennia ago, when that little man on a horse, armed with a club, first rode up to the giant shepherd leader of a tribe and said, bluffingly, It’s very dangerous out here in the wilderness for beautiful sheep such as yours, and the shepherd leader’s ultimate coercion into accepting protection from the claiming and proclaiming owner of the land. Landownership did not go back to an act of God. All the kings always had their priests present when the land claimage was made by their explorers. The priests planted their crosses to confirm that the king’s ownership was blessed by God. The Roman Catholic Church, starting in its emperor-pope days, has been in the deeded-land business for going on 2000 years. It is as yet the world’s largest real estate owner. Real, a Spanish word, means royal–the succession of king-deeded estate lands. With the bluff of wealth over in March 1933, almost all business in America stopped. On the inauguration of Franklin Delano Roosevelt the emergency was so absolute that Congress voted unanimously for whatever corrective measures the New Deal administration prescribed.
Roosevelt and his advisors said, One thing is clear. Despite the emergency America abhors socialism. Americans don’t like the assumption that everybody is equal. Americans are so independent, they don’t feel at all equal. They don’t like socialism, but, said the New Deal leaders, the fact is that we, the American people, are going to have to guarantee our own bank accounts. People don’t like to keep their money under their mattresses and prefer to put it into a bank, so we will have to do what we can to rehabilitate the banks. We the people acting unanimously through our government are going to have to guarantee the safety of each deposit in the banks to a convincingly substantial amount–$5000. We will leave the bank in ownership of the management of the stockholders of those banks that, by virtue of the presidential moratorium, are as yet theoretically alive, and hope that, with our guaranteeing, regulation, and supervising, many of them will reopen and will be able to progressively accredit their depositors with some percentage of their original deposits.
But let us not deceive ourselves. With the government of the people guaranteeing the bank accounts, it becomes, in operating fact, socialism. On the other hand people themselves know so little about banking, credit concepts, and the history of power structures that they will not know that they have adopted socialism, since the government has not taken ‘possession’ of the banks. Society will think well of ‘we the people’ as the government, guaranteeing the new deposits in the banks up to $5000.
Society likes the idea of a bank as a safekeeping device. People have always believed that when they put their money in the bank, it stayed there. They had no idea it went out on loan within minutes after it came in. They were completely hoodwinked by the appearance of the banks as safe, fire-proof, and robberproof depositories of their earnings. Even today, in the last twenty years of the twentieth century, people know little more about banks than they did during the 1929 Crash or at the depth of the Depression in 1932, when all they knew was that they had lost their deposits in most of them.
In 1933,’34,’35, and ’36 the New Deal and the U.S. Congress diligently investigated the banking system and the practices of its most powerful leaders. They found many malpractices, which we will discuss later. Most prominently they found the banks loaded with worthless mortgages on properties that were unsaleable because uninhabitable-mortgages on buildings without roofs, bathrooms, etc.
The government said, The first thing we must do is make those mortgages we’ve inherited worth something. At this point the American government dictated the banking strategy and started refinancing of the building industry. The so-called building industry was already 2000 years behind the arts of building ships of the sea and sky, which ships of the sea and sky are, in fact, environment-controlling structures in exactly the same sense that land buildings are environment-controlling structures.
While the design of the seagoing and airgoing environment controls are floatably and flyably weight-considerate and semiautonomous because they generate their own power, desalinate their own water, etc., there is no weight consideration in the designing of the land-anchored environment controls. They don’t have to float or fly. They are utterly dependent on sewers, waterlines, electric lines, highway maintenance. They are utterly controlled by the prime landowners, their building codes and readily imposable legal restrictions–all based on the real estates’ ownership and control of the highways-sewers-waterlines-the metabolic guts of all U.S.A. towns and cities.
When the government owns the wealth and controls the issuance of its money, it is socialism. The New Deal was not trying to deceive the people but was engaged in a rescue operation of the first order and was hopeful of not irritating the people psychologically by what it seemed critically mandatory to accomplish.
Paradoxically, the first people they irritated-greatly-were yesterday’s rich, in particular those who were as yet living on the dividends and interest of as yet solvent industrial corporations’ stocks and bonds. In fear of the New Deal they sought to discredit Roosevelt by a word-of-mouth campaign. From 1933 to 1940 individual members of rich gentlemen’s clubs of New York were ostracized from membership in the rudest manner by the members if they were not heard to speak frequently of that son-of-a-bitch in the White House.
Franklin Roosevelt and his advisors said, in effect,.We’ve got to do what we feel is best for the people by whatever name the ‘best’ may bear. We’ve got them depositing again in the banks and are rehabilitating all those mortgaged properties which we have inherited by loaning the new owners of the properties funds at negative interest provided they will rehabilitate the property–reroof or put in a bathroom, etc.
To those who understood some of its intricacies, everything was now out in the open about the world of banking. The New Deal said it was going to prohibit usurious rates of interest–the banks must earn enough to keep themselves going, but only can charge 1 1/2 percent for interest. Banks were regulated just like the Post Office. No banker had authority beyond that of a postmaster. The New Deal completely separated from banking what Morgan and many of the private banks had been doing–taking deposit money and putting it into common stocks and even into the bankers’ own highly speculative private ventures. Thus came the New Deal’s Securities and Exchange Commission and the complete separation of banking and initial risk financing–or, at least, supposedly so. Banks’ trust departments could as yet buy and sell corporate venture stocks for clients’ accounts however.
There were a number of individual bankers who went far beyond unwise banking practices and who, as individuals, took personal advantage of the information they had of individual depositors’ affairs and of their privilege as top bank officers to do truly inimical things to enrich their own positions. Few today remember that a half-century ago a number of New York and Chicago’s top bankers were sentenced into penitentiaries–the New Yorkers into Sing Sing–the senior partner of J. P. Morgan and Company, the president of the National City Bank, the president of Chase Bank. Every one of them had been found to be doing reprehensible financial tricks. They were selling their own friends short. They were opening their friends’ mail and manipulating the stock market. They were manipulating everybody. They were way overstepping the moral limits of the privileges ethically existent for officers in the banking game, so a great housecleaning was done by the New Deal.
The banking story is best told by a poem that was, at that time, allegedly composed by Ogden Nash but was never to my knowledge formally published and copyrighted. It was, however, memorized and widely recited from copies often typewritten by those who remembered it:
BUTCHER, BAKER, CANDLESTICK MAKER
I’m an autocratic figure in these democratic states,
A dandy demonstration of hereditary traits.
As the children of the baker bake the most delicious breads,
As the sons of Casanova fill the most exclusive beds,
As the Barrymores and Roosevelts and others I could name
Inherited the talents that perpetuate their fame,
My position in the structure of society I owe
To the qualities my parents bequeathed me long ago.
My father was a gentlemen and musical to boot.
He used to play piano in a house of ill repute.
The Madam was a lady and a credit to her cult,
She enjoyed my father’s playing and I was the result.
So my Daddy and my Mummy are the ones I have to thank
That I’m Chairman of the Board of the National Silly Bank.CHORUS:
Oh, our parents forgot to get married.
Our parents forgot to get wed.
Did a wedding bell chime, it was always a time
When our parents were somewhere in bed.
Then all thanks to our kind loving parents,
We are kings in the land of the free.
Your banker, your broker, your Washington joker,
Three prominent bastards are we, tra la,
Three prominent bastards are we!In a cozy little farmhouse in a cozy dell
A dear old-fashioned farmer and his daughter used to dwell.
She was pretty, she was charming, she was tender, she was mild,
And her sympathy was such that she was frequently with child.
The year her hospitality attained a record high
She became a happy mother of an infant which was I.
Whenever she was gloomy, I could always make her grin,
By childishly inquiring who my daddy could have been.
The hired man was favored by the girls in Mummy’s set,
And a traveling man from Scranton was an even money bet.
But such were Mother’s motives and such was her allure,
That even Roger Babson wasn’t absolutely sure.
Well, I took my mother’s morels and I took my daddy’s crust,
And I grew to be the founder of the Yew York Banker’s Trust.CHORUS:
Oh, our parents forgot to get married.
Our parents forgot to get wed.
Did a wedding bell chime, it was always a time
When our parents were somewhere in bed.
Then all thanks to our kind loving parents,
We are kings in the land of the free.
Your banker, your broker, your Washington joker,
Three prominent bastards are we, tra la,
Three prominent bastards are we!In a torrid penal chain gang on a dusty southern road
My late lamented daddy had his permanent abode.
Now some were there for stealing, but my daddy’s only fault
Was an overwhelming tendency for criminal assault.
His philosophy was simple and quite free from moral taint;Seduction is for sissies, but a he-man wants his rape.
Daddy’s total list of victims was embarrassingly rich,
And one of them was Mother, but he couldn’t tell me which.
Well, I didn’t go to college but I got me a degree.
I reckon I’m the model of a perfect S.O.B.,
I’m a debit to my country but a credit to my Dad,
The most expensive senator the country ever had.
I remember Daddy’s warning–that raping is a crime,
Unless you rape the voters, a million at a time.CHORUS:
Oh, our parents forgot to get married.
Our parents forgot to get wed.
Did a wedding bell chime, it was always a time
When our parents were somewhere in bed.
Then all thanks to our kind loving parents,
We are kings in the land of the free.
Your banker, your broker, your Washington joker,
Three prominent bastards are we, tra la,
Three prominent bastards are we!.I’m an ordinary figure in these democratic states,
A pathetic demonstration of hereditary traits.
As the children of the cop possess the Flattest kind of feet,
As the daughter of the floozie has a waggle to her seat,
My position at the bottom of society I owe
To the qualities my parents bequeathed me long ago.
My father was a married man and, what is even more,
He was married to my mother–a fact which I deplore.
I was born in holy wedlock, consequently by and by,
I was rooked by every bastard who had plunder in his eye.
I invested, I deposited, I voted every fall,
And I saved up every penny and the bastards took it all.
At last I’ve learned my lesson, and I’m on the proper track,
I’m a self-appointed bastard and I’M GOING TO GET IT BACK.CHORUS:
Oh, our parents forgot to get married.
Our parents forgot to get wed.
Did a wedding bell chime, it was always a time
When our parents were somewhere in bed.
Then all thanks to our kind loving parents,
We are kings in the land of the free.
Your banker, your broker, your Washington joker,
Three prominent bastards are we, tra la,
Three prominent bastards are we!