Keynesian Mortgage Policy in the 1937 Recession
Judge Glock
Visiting Professor
College of Business and Economics
West Virginia University
March 2017
President Franklin Roosevelt’s reaction to the economic recession beginning in September 1937, the
third worst recession in the 20th century, is often portrayed as his “coming to Keynes” moment, when both
he and the New Deal gave up any lingering austere inclinations and embraced pure deficit spending as the
sine qua non of economic recovery.1 Roosevelt’s actions are also said to be part of a move by the New Deal
towards embracing higher wages and increased consumer spending, as opposed to broader economic reforms
to production, as its singular focus.2 In this paper, I would like to argue that although Roosevelt did embrace
Keynesianism as a response to the so-called “Roosevelt Recession,” it was not the Keynesianism commonly
understood in modern discussion. Instead, Roosevelt embraced Keynesianism as John Maynard Keynes
himself first understood it, which focused on the need to use the government control of finance to spur the
investment and production of durable and “fixed capital” goods, the most important of which was housing.
Thus the most significant reforms Roosevelt undertook during the recession were those that expanded
federal guarantees to mortgages and loans for construction, not direct expenditures or deficit spending. When
considered in this revised perspective, the New Deal’s simultaneous attack on price fixing in the recession
was not a last gasp of reform or an attack on “administered prices” by large corporations, as has been
For typical discussion of this, see William Leuchtenberg, Franklin D. Roosevelt and the New Deal, 1932-1940 (New York:
Harper, 1963); Herbert Stein, The Fiscal Revolution in America (Chicago: University of Chicago Press, 1969); William J.
Barber, Designs within Disorder: Franklin D. Roosevelt, the Economists, and the Shaping of American Economic Policy, 1933-1945
(Cambridge: Cambridge University Press, 1996).
2 Alan Brinkley, The End of Reform: New Deal Liberalism in Recession and War (New York: Vintage Books, 1995); Meg
Jacobs, Pocketbook Politics: Economic Citizenship in Twentieth Century America (Princeton: Princeton University Press, 2005)
1
commonly argued, but was instead a way to lower production costs, including wages, to spur further finance
and investment, most especially, again, in mortgages and housing.3
Early Keynes and Keynesians in the New Deal
John Maynard Keynes began his career as a monetary economist, one focused on how changes to
money and finance affected the business cycle.4 In his writings in the 1920s and early 1930s, Keynes began to
absorb the work of economists who demonstrated that certain industries, often described as durable good or
fixed capital industries, were most likely to lead both recessions and recoveries, and also the most sensitive to
the costs of financing. Many of these economists thought that government incentivizing of long-term
financing and investment in these sectors, of which housing was the largest and most sensitive, could help
smooth or eliminate the business cycle.5 In Keynes’s first extensive theoretical work, the 1930 Treatise on
Money, he argued that “[a]lmost the whole of the fixed capital of the world is represented by buildings,
transport, and public utilities; and the sensitiveness of these activities to even small changes in the long-term
rate of interest…is surely considerable.”6 In his chapter on “Fixed Capital,” he also noted that “house-
Brinkley, End of Reform; Theodore Rosenof, Economic in the Long Run: New Deal Theorists and Their Legacies (Chapel Hill:
University of North Carolina Press, 1997). Although many urban historians have described the economic implications of
Roosevelt’s drive for increased housing, they have not focused on how these ideas fit into the wider projects of the New
Deal or into existing economic theories, or the importance of the 1938 mortgage and housing reforms. Jackson,
Crabgrass Frontier: The Suburbanization of the United States (New York: Oxford University Press, 1985); Marc A. Weiss, The
Rise of the Community Builders: The American Real Estate Industry and Urban Land Use Planning (New York: Columbia
University Press, 1987); David Freund, Colored Property: State Policy and White Racial Politics in Suburban America (Chicago:
University of Chicago Press, 2007) ; Louis Hyman, Debtor Nation: The History of America in Red Ink (Princeton: Princeton
University Press, 2011).
4 Robert Skidelsky, John Maynard Keynes: Hopers Betrayed, 1883-1920 (London: MacMillan, 1983); John Maynard Keynes, A
Tract on Monetary Reform (London: MacMillan and Company, 1923).
5 For contemporary work on durable goods and financing, see Wesley Clair Mitchell, Business Cycles (Berkeley: University
of California Press, 1913); J. Maurice Clark, “Business Acceleration and the Law of Demand: A Technical Factor in
Economic Cycles,” Journal of Political Economy 25, no. 3 (Mar., 1917): 217-235; W.F. Mitchell, “Interest Rates as Factors in
Business Cycles,” American Economic Review 18, no. 1 (March, 1928): 217-23; For Keynes’s embrace of some of these
ideas, see David Laidler, Fabricating the Keynesian Revolution: Studies of the Inter-war Literature on Money, the Cycle, and
Unemployment (Cambridge: Cambridge University Press, 1998). For contemporary echoes of these ideas, see Edward
Leamer, “Housing Really Is the Business Cycle,” Journal of Money, Credit, and Banking 47, no. 1 (March 2015): 43-50.
6 A Treatise on Money, Volume II: The Applied Theory of Money (London: MacMillan and Co., 1930), 362. Many
commentators focus on Keynes’s desire to lower interest rates in a slump, but as Axel Leijonfuild said in his study of
Keynes “’the’ interest rate in Keynes’ works is always the long-term rate of interest.” This truth is still not recognized in
many descriptions of Keynes, and therefore causes some commentators to understate the importance Keynes gave to
encouraging such interest-sensitive sectors such as housing. Axel Leijonfuld, On Keynesism and Keynesian Economics, 41.
3
building is probably larger than any other one kind of investment.”7 Therefore his solution to economic
recessions was clear. Keynes argued that in “the long run [at least, to note an earlier Keynes’s slogan, the long
run in which most people were still alive] I rely on a fall in the long-term rate of interest more than any other
factor” to spur investment in fields such as house-building and ensure recovery.8 In a 1931 speech at the New
School in New York, he argued that what the United States needed most was “low rates of interest for typical
bonds or mortgages.” He told his audience this would stimulate building, and that “[i]t is above all of building
that we must think…when we are considering how to stimulate investment.”9
The two people most often identified inside the Roosevelt administration as deficit-spending
“Keynesians,” were in fact sympathetic to Keynes’s desire to spur durable goods investment through
.lowering long-term interest rates. Lauchlin Currie was a master memo writer and the eminence grise at the
Federal Reserve.10 He had written a dissertation at Harvard that advocated easier money by the Federal
Reserve, which he hoped “would cause an immediate easing of the long-term interest rates,” and this would
lead to “an increase of loans for fixed capital purposes [which] is the very best way credit can be created in
times of depression.”11 Currie argued that while many types of business did not respond to interest rates, in
“others, such as residential and office building, [interest rates] are extremely important.”12 At the time of
Curie’s arrival at the administration, his focus on long-term loans and the “fixed capital asset” of housing was
made clear in his memo, “Comments on Pump Priming.” Currie in fact wrote that “Pump priming may be
Ibid, 98.
Keynes, “Lecture at Royal Institution, The Internal Mechanics of the Trade Slump" February, 6, 1930, Collected
Writings, 480.
9 Keynes, "Do We Want Prices to Rise?" June 15, 1931, ibid, 544, 553. Although Keynes moved somewhat away from
his financial focus in his later work, his predominant concern remained encouraging investment. Even in the 1936
General Theory, Keynes claimed that the “The weakness of the inducement to invest has been at all times the key to the
economic problem,” and he argued that the best way to control that investment in most periods was through decreasing
interest rates and finance costs. John Maynard Keynes, The General Theory of Employment, Interest, and Money (London:
MacMillan, 1936).
10 Lauchlin Currie, ”Lauchlin Currie’s memoirs: Chapter III: The New Deal,” Journal of Economic Studies 31, no. 3 (2004):
203.
11 Lauchlin Currie “PhD Thesis: Chapter IX: Bank Assets and the Business Cycle,” 253, 247, reprinted in Journal of
Economic Studies 31, no. 3 (2004): 244-255.” The anti-consumer spending thrust of his theory is made clear in the next
line where he says “What is needed is that consumers’ incomes should be increased with no corresponding immediate
increase in finished consumption goods.” Consumer spending on immediate goods would divert spending away from
durable goods.
12 Roger J. Sandiland, The Life and Political Eocnomy of Lauchlin Currie: New Dealer, Presidential Adviser, and Development
Economist (Durham, NC: Duke University Press, 1990), 83.
7
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described as a process of making it profitable to increase the production of durable goods.” Again one
particular type of durable good was central: “The most desirable type of private expenditure that should be
subsidized is housing,” since it will be “decentralized and speedily undertaken provided the incentive is
substantial.” As his final section of his memo stated “The impasse is building.” His goal, likes Keynes, was to
offer investors and capitalists incentives to increase investment especially for building and construction, not
to provide more short-term consumer spending.13
Currie’s boss at the Federal Reserve, Marriner Eccles, a former Utah banker, was of a like mind.
Although often identified as a “Keynesian” deficit spender, he also focused on spurring incentives to
investment. He first came into the administration to help them spur mortgage investment and housing
construction. Eccles said that “a program of new home construction…would act as the wheel within the
wheel to move the whole economic engine. It would affect everyone, from the manufacturer of lace curtains
to the manufacturers of lumber, bricks, furniture, cement, and electrical appliances.”14 At the Federal Reserve,
he said he wanted encourage real estate financing, and “enable commercial banks to take an effective part in
the reopening of the mortgage market, and to give their unstinted support….to that branch of industry in
which the opportunity for meeting both a social and an economic need is now the greatest.”15
Eccles, Currie and other economists in the administration, such as Winfield Riefler, pushed the
administration to spur private mortgage investment, first through the National Housing Act in 1934, which
Lauchlin Currie Memoranda, “Comments on Pump Priming,” November 30, 1934, Eccles Papers, FRASER. In
Sandiland, Barber and other commentators, Currie’s seemingly anachronistic focus on certain sectors, especially building,
are usually explained away as just one part of a broader interest in “active fiscal policy” or “compensatory budgets.”
Most, such as Barber and Brinkley, eschew Currie’s and Eccles’s concerns about deficit spending. It is worthwhile to
note that later Currie helped organize a housing finance system in Columbia, and when asked in 1981 what to do about
combined inflation and unemployment in the United States, he suggested “monetary constraint combined with one of
providing stimuli to selected sectors…take, for example, the building industry at the present time.” Roger J. Sandiland,
The Life and Political Eocnomy of Lauchlin Currie: New Dealer, Presidential Adviser, and Development Economist (Durham, NC:
Duke University Press, 1990); Barber, Designs within Disorder; Alan Brinkley, The End of Reform: New Deal Liberalism in
Recession and War (New York: Vintage Books, 1995); Byrd L. Jones, “Lauchlin Currie and the causes of the 1937
recession,” History of Political Economy 12, no. 3 (1980): 303-315; Meltzer finds himself puzzled that Currie seemed so
focused on separate industries, Melzter, A History of the Federal Reserve, 473.
14 Marriner Eccles, Beckoning Frontiers: Public and Personal Recollections (New York: Alfred A. Knopf, 1951), 145-146.
15 Marriner Eccles, “Press Conference of February 8, 1935,” Eccles Papers, FRASER. The quotes by Eccles on this
score could be elaborated ad nausem, e.g., “the lag in construction continues to be the chief factor in unemployment,
and also the chief factor in retarding a more general recovery among the heavy industries…particularly in the field of
residential building.” Eccles to Messrs, Clayton, Thurston, Smeed, Perry, Chester Morrill, Walter Wyatt, Leo Paulger,
Emanuel Goldenweiser, November 6, 1935, “Housing and Mortgage Matters,” Eccles Papers, FRASER.
13
created the Federal Housing Administration to guarantee mortgages.16 AT the beginning of the drafting,
Riefler wrote a memo “Mortgage Situation,” and the need to provide more mortgage money so that an
“expansion in construction activities may help to pull us out of the depression.”17 Keynes himself had a part
in passing this act, since, during a visit to the United States, he talked to the Senate Banking committee and
urged them to pass the bill. Riefler later told Keynes that “Your conversations with the Senators had a most
salutary effect and may have constituted the turning point in passing the housing legislation. I can’t thank you
enough for your help.” Keynes later said he remembered “vividly” Riefler’s insistence on the housing bill, and
his full agreement with him on the importance of housing.18 This group of Eccles, Currie, and Riefler also
pushed the Federal Reserve Amendments of 1935. It is little noted that these amendments, which centralized
power in the Chair of the Federal Reserve Board of Governors, Eccles himself at the time, also encouraged
increased mortgage investment, first by ending limitations on mortgage investments by national banks, and
second by allowing the Federal Reserve to make long-term assets, including mortgages, “eligible” for
discounting at the discount window.19 When presenting his bill to Congress, Eccles argued that the
“eligibility feature of this legislation, and the real-estate feature, one of which is the corollary of the other”
were both essential. He and other administration officials told Congress that only through such reforms could
they spur recovery.20
When Eccles first came to the Treasury Department he was sent to Riefler, who, he said, “opened the sluice gates on
my own thoughts about housing, and after a torrent of talk lasting many hours Riefler suggested that I become
associated,” with the new group creating the National Housing Act. Eccles, Beckoning Frontiers, 146. Riefler’s theories on
the importance of long-term interest rates and investment led some to describe “the Riefler-Keynes theory” of longterm interest rates, and the possibility of controlling these as a means of alleviating depression. Eleanor Lansing Dulles,
“Review: ’The Theory of Monetary Policy,’ by Bhalchandra P. Adarkar,” Journal of the American Statistical Association 31, no. 195
(Sep., 1935): 634.
17
Riefler, “Mortgage Situation,” September 1933, Box 1, Riefler Papers, NARA II.
18 It was perhaps Keynes’s most direct, and maybe even his most important, impact on the New Deal, and it was done to
support housing and mortgage finance. Riefler to Keynes, June 6, 1934, Collected Writings, Volume XXI, 320-321. See also
Skidelsky, Keynes, Economist as Savior, 508; FDR to Keynes, March 3, 1938, FDR Library,
http://www.fdrlibrary.marist.edu/aboutfdr/pdfs/smFDR-Keynes_1938.pdf.
19 The Bankers Magazine noted it once was said “That the art of banking consisted in the ability to distinguish between a
mortgage and a [real] bill of exchange. But should the pending banking bill become a law,” this old-time distinction
would evaporate. “If the door is opened to the rediscount at the Federal Reserve of mortgages, it will constitute…a
revolutionary change.” “The Liquefaction of Ice,” Bankers Magazine 130, no. 3 (Mar., 1935): 296.
20 Eccles received support from House Banking Committee Chairman Henry Steagall. Though his name graced a bill just
two years earlier separating short-term commercial and long-term investment banking, Steagall went out of his way to
praise the importance of mortgage loans in banks, saying “there are no outlets that would serve a more useful economic
purpose at the present time than real-estate loans. The restoration of building activity…is absolutely essential to further
business recovery.” He went on at some length about long-term real estate loans, which had “not been eligible as
16
Despite the passage of these acts, the economy and home construction remained depressed. While
housing had picked up from its low of 200,000 homes a year in 1933 to about 300,000 in 1937, this was still
70% below its peak in the 1920s.21 By early 1937, administration economists were concerned that mere
financing changes would not produce sufficient housing and therefore a broader recovery. Something more
drastic seemed necessary.
The Price Danger to Housing Investment
Many economists both in and outside the administration came to the conclusion that one reason for
lagging construction was that the costs of everything that went into homes, from lumber to cement to piping,
was still rising rapidly. This cost inflation in producers goods, especially of construction, reduced the incentive
to invest. One example of this turn was represented by George F. Warren and Frank A. Pearson, the “Gold
Dust Twins” of late 1933, who were Roosevelt’s top monetary advisors in encouraging inflation. In a paper
written by Pearson and read by Warren in 1936, they declared that “building is our most important urban
industry and full employment cannot occur until building is active,” and said that they “considered the
building cycle [the] most important for forecasting business decisions.”22 Yet they worried that increasing
prices to construction would limit any boom. They began working on a sequel of sorts to their magnum opus
Prices (1933), which had focused on the general price level. Now their World Prices and the Building Industry
(1937) declared that the most “most important [indicator of the business cycle] is the building cycle.
collateral” earlier, but “do not differ from other types of assets.” The head of the Federal Deposit Insurance
Corporation also pontificated at some length the problems with illiquid mortgages in banks at the hearing. He said that
“If they [banks] cannot rediscount, there is a great danger of a bank being frozen.” He explained that “What I am trying
to do is put the banking system in a position where it can furnish long-term credit to the communities, just as the mutual
savings banks and savings and loan associations do,” which of course focused on mortgages. Likewise he said that
“[c]loosely allied to this matter of eligibility is the proposal that the limitations on real-estate loans be modified.” House
Banking and Currency Committee, Hearings on the Banking Act of 1935, 74th Cong., 1st sess., 1935, 179, 184, 224-226, 240,
258-270, 106, 184, 301; Studs Terkel, Hard Times: An Oral History of the Great Depression (New York: Pantheon Books,
1970), 273, Interview with David Kennedy. For more explanations of connection between the two provisions, see
Lauchlin Currie, “The objectives of the Banking Bill of 1935,” Journal of Economic Studies 31, no. 3 (2004 [1935]): 285.;
J.M. Daiger to Senator Fletcher, February 20, 1935, Eccles Papers, FRASER. For increase in “shiftability,” theory at the
Federal Reserve, see Perry Mehrling, The New Lombard Street: How the Fed Became the Dealer of Last Resort (Princeton:
Princeton University Press, 2011), 30-50.
21 Susan Carter, ed., Historical Statistics of the United States: Earliest Times to the Present, Millennial ed.(New York: Cambridge
University Press, 2006), Table Da693-706; Table Da717-729.
22 “Boom in Building in 1936 Held Likely,” New York Times, July 17, 1935.
Construction is important because of the large amount of basic materials that it uses, and the large amount of
labor employed” and reiterated that “Full employment in production and distribution does not occur unless
building is active.” They connected the building cycle to everything from railroad miles to bank failures, and
described how it was affected both by interest rates and by the costs of the materials that went construction.23
Leon Henderson, a soi-disant economist and new infant prodigy of the administration, who had a long
friendship with Lauchlin Currie,24 also produced a report, “Boom and Bust,” that made similar arguments.
Henderson worried about a “real danger of runaway prices,” as one economic historian described it,
“particularly those producing materials for the construction industry…[that] might put a brake on capital
spending.”25 Roosevelt himself was worried. As he said in an April press conference, “I am concerned – we
are all concerned – over the price rise in certain materials that go into durable goods primarily.” He called it a
“danger sign” and said “I think almost all economists agreed on that.”26 The danger was that increased costs
would decrease that profitability of construction and thus lower investment.
Some in administration thought further liberalizing financing could spur housing investment and also
fight high wages and costs in the industry. A Currie memo in August described continued problems of
unemployment, low national income, and low investment, and said “all these are bound up with
developments in the field of construction generally and the field of housing particularly.” He blamed high
prices and wages, and said that in order to increase housing production, the government had to fight the
“collusion of unions and contractors.” Currie said despite the efforts to lower mortgage rates, continuing
“high financing costs contribute[d] to the unstability [sic] of the industry” and thus exacerbated increased
union power for strikes. He said “Somehow, in some way, the industry must be converted into a large-scale
George Warren and Frank Pearson, World Prices and the Building Industry (New York: John Wiley & Sons, 1937), 97, 132,
143-144. They reiterated that “Building is so important that recessions in the production of other goods usually do not
bring any great economic trouble during times of active building.” Ibid, 163.
24 Lauchlin Currie, “Memoir’s New Deal,” 209. For meeting with Henderson where they discussed price problems and
labor, see Currie to Eccles, March 23, 1937, Eccles Papers, FRASER.
25 William Barber, “The State and Economic Knowledge,” in 112. Even Henry Wallace at this time, at the Department
of Agriculture worried that a “major danger spot is the housing industry,” for the recovery. Henry A. Wallace,
“Technology, Corporations, and the General Welfare,” June 24, 1937, Eccles Papers, FRASER.
26 Franklin Roosevelt, “Excerpts from the Press Conference,” April 2, 1937, American Presidency Project. The influence
of Currie in this conference is clear in the President’s interest in the rise in copper prices, which Currie had recently been
studying, and which were used in homes for wiring, flashing, and piping. See Currie to Eccles, March 23, 1937, Currie to
Eccles “The Copper Situation,” April 19, 1937, Eccles Papers, FRASER..
23
mechanized industry,” most importantly by subsidizing mortgages for large-scale apartment style
construction. Thus the old Keynesian goal of cheap financing would spur more corporate organization and
also lower wages and costs.27
The Mortgage Response to the Recession
In September 1937, as the recession was just beginning, Currie wrote the first draft of what would
become his most famous memorandum “The Causes of the Recession.” Currie’s memorandum has often
been cited has a predominant cause of the Roosevelt administration’s move from a focus on economic
reform to a focus on Keynesian spending and mass consumption. Alan Brinkley claimed that for “the next
six months, the memo served as a New Deal samizdat, continually revised and passed from agency to agency
and official to official. It became the central document in the battle for new federal spending.”28 Currie, in
fact, remained suspicious of fiscal policy. Earlier in the year Currie had written a review of Keynes’s General
Theory of Employment, Interest, and Money (1936) where warned especially against continuous deficits as a solution
to recessions.29 One biographer said that even after 1936, Currie still believed that “the Keynes of the General
Theory, in contrast to the Keynes of the Treatise, was neither necessary nor altogether helpful” for solving
America’s economic problems. He still believed that financing costs, interest rates, and investment were more
important than deficits or consumer spending.30 The “Causes” memo was written with these early Keynesian
ideas in mind, and was originally prepared for Marriner Eccles as Eccles was drafting a new housing finance
bill to lower mortgages for large-scale apartment construction.
Currie’s memo noted that economic forecasters are “all are relying upon an upswing in building to
start us upward again sometime next year….The importance of securing a building revival next year cannot
Currie, “Our Common Responsibility for Economic Balance.” August, 1937, Eccles Papers. FRASER. The goal of the
mechanization of housing, was further spurred by the supposed success of Britain in expanding housing production in
this way. One Federal Reserve assistant attributed British’s housing “magnitude and success” to the existence of “a
handful of big companies” that could lower costs. The head of the FHA celebrated large-scale construction in Britain
and to this end “had some excellent moving pictures of the English method made by Pathe” which would help as
encourage producers “in respect to lower costs, wholesale prices, and elimination of labor rackets.” M. Daiger to Eccles.
Stewart McDonald to Winfield Riefler, May 17, 1938, Folder 6, Box 1. Riefler Papers, FRASER. See also Marian Bowley,
“Fluctuations in House-Building and the Trade Cycle,” Review of Economic Studies 4, no. 3 (Jun., 1937): 167-181.
28 Brinkley, End of Reform, 97.
29 Jones, “Currie and 1937 recession,” 307.
30 Sandiland, The Life and Political Economy of Lauchlin Currie, 71.
27
be overstressed. The continuation of recovery depends on it.” He did admit that deficit spending was a
possible spur to recovery, stating that, “the impetus to increasing expenditures must come from building, as
in 1922 and 1924” or from excess government expenditures, as in 1934 to 1936, but he warned that deficit
spending was difficult and perhaps dangerous in such a time. Therefore, “we are by a process of elimination
forced back to building as being the primary source on which we must depend for a reversal of the downward
trend.” He thus suggested that the government should “take the lead in getting the unions” to reduce costs,
and told Eccles that the “Federal Housing Act should be amended along the lines you suggest” to encourage
more liberal financing.31
During Roosevelt’s Hyde Park sojourn that September, he invited Marriner Eccles to talk with him
about what he could do about the economy. Currie emphasized to Eccles that he had to “impress on him
[Roosevelt] the possible seriousness of the decline in residential building.”32 Eccles gave the President a
memo explaining that “an expansion of residential construction would be at least an important aid in
checking the deflation,” and thought this could be accomplished by reducing down payments and interest
rates on all Federal Housing Administration loans, including apartment loans, which would also reduce labor
union power and price rises.33 Eccles told the Secretary of the Treasury ,Robert Morgenthau, that his memo
to Roosevelt on the recession, “has to do pretty largely with the labor problem and the price rise that stopped
our building.”34
In early November, as the slump continued and worsened, Roosevelt began a thorough canvassing of
his administration for solutions, but focused on the possibilities of increased housing construction. On
November 3rd, Roosevelt asked Morgenthau to further investigate Eccles’s memo on housing, mortgages, and
Currie, “A Tentative Program to Meet the Business Recession.” September 1937, Eccles Papers, FRASER. Brinkley
notes Currie’s focus on the importance of federal spending to the recovery in 1934 and 1936 in a later version of the
paper without noting that his focus on residential spending as the cause of recovery in the earlier period, or his caveats
about the weakness of deficit spending considering the fiscal outlook. Brinkley, End of Reform, 97.
32 Currie, “Memoir, New Deal,” 212. Currie remembered that by October he tried to convince Eccles of the importance
of housing expansion, and was “especially critical of the monopolistic practices in the skilled building trades.” He argued
that “abuses in the labor field must not be tolerated any more than in any other field.”
33 Eccles, Beckoning, 302-303. Roosevelt Day by Day, FDR Library, November 1, 1937
<http://www.fdrlibrary.marist.edu/daybyday/daylog/november-1st-1937/>.
34 Phone Transcript between Morgenthau and Eccles, 10:48am, November 4, 1937, Volume 94, p. 54-60, HMJ Diaries.
31
economic recovery. 35 The following day, in a seminal cabinet meeting, he continued to harp on this theme.
He told the Cabinet that the “speeding up of housing will go a long way toward adjusting the present business
situation. An increase in construction will give considerable help to the industry itself, which has been in a
bad way for a long time. Its stimulation will help, naturally enough, all industries engaged in supporting
materials and also will help the transportation industry.”36 Roosevelt soon held a meeting with Currie, Leon
Henderson, and economist Isador Lubin to further discuss their plans on recovery, and again the focus was
housing.37 They submitted another memo to the President which said, “The one field on which reliance can
be placed for a sufficient volume of expenditures to turn the tide, if adequate stimulation is given, is
residential building. It has been proven many times.”38 Roosevelt finally gave Eccles and his aides official
sanction to prepare and introduce his new housing bill, the administration’s first official proposal for the
recession.
Eccles’s final bill and plan was ready by November 10th, in time for the special session of Congress
Roosevelt had called to fight the recession. In the introduction to the bill, Eccles argued that the continued
lag in construction work was “the most deep-rooted retarding factor in national income, budget balancing,
and full employment of labor. It still remains to be dealt with in a decisive way. Since housing is both
economically and socially the most important branch of the construction industry, and also the most
depressed area of industrial production and employment.” He thought the plan, however, would give “a
vigorous emphasis to the private financing and construction of housing.” Most importantly, the program was
“designed especially to encourage and facilitate large-scale operations in housing both for sale and rent – that
Phone Conversation Transcript, HMJ and Marriner Eccles, November 4, 1937, 10:48am, Volume 49, p. 54-55, HMJ
Diaries. (Describing previous night’s conversation with President.)
36 Ickes, Secret Diary, Volume II, 240.
37 Stephen B. Adams, Mr. Kaiser Goes to Washington: The Rise of a Government Entrepreneur (Durham: University of North
Carolina Press, 1997), 55-56
38Roosevelt Day by Day, FDR Library, November 8, 1937, and November 10, 1937,
<http://www.fdrlibrary.marist.edu/daybyday/daylog/november-10th-1937/>; Lauchlin Currie, “Causes of the
Recession,” November 8, 1937, Eccles Papers, FRASER; Isador Lubin Oral History, Columbia Center for Oral History,
112. “President Studies Plan to Speed Up Federal Spending,” Wall Street Journal, November 9, 1937 (This public account
of the meeting, despite the title, only mentions the liberalizing of FHA terms.) Journalistic accounts noted that Lubin
was in the camp looking to “’leverage spending directly simulative to private enterprise,” on things such as housing.
Joseph Alsop and Robert Kintner, Men Around the President (New York: Doubleday, Doran & Company, 1939), 149. For
other investigations of interest rates effect on housing costs, see Krost to Lauchlin Currie, November 3, 1937, Box 166,
Federal Reserve Central Subject Files, RG 82, NARA II.
35
is, building by companies or groups of companies large enough” to have economies of scale and scope in
construction, especially large rental housing projects.
The proposed plan would liberalize FHA loans in order to get average mortgages down to 5% annual
interest, and would allow loans on some houses to go up to 90% of the house’s value, with only a 10% down
payment. The plan would also allow more support for large-scale rental housing projects that could be easily
mechanized, and would liberalize the terms of private groups chartering new National Mortgage Association,
which they hoped would allow some combined public and private investment. The administration’s proposal
would also make the FHA a permanent part of the American economy, and the government a permanent
part of the FHA, since, unlike the original National Housing Act, the government now promised to guarantee
any defaults into the foreseeable future. 39 Roosevelt announced the plan at his press conference, and
afterwards the New York Times said that the “New Deal is turning once more to private housing as a means of
stimulating the lagging construction industry and through it industry in general,” in this they were “following
a well-proved business rule: that construction, and particularly housing, should be the leader in business
recovery.”40
In his message to Congress on the plan, Roosevelt said “From the point of view of widespread and
sustained economic recovery, housing constitutes the largest and most promising single field,” and “This
industry, to a greater extent than any other, can put idle funds to work.” He furthermore said that the high
costs of home construction “was primarily responsible for the downturn in housing and thus recovery
generally in this year.” If the building industry was to lower costs “it must do it in the characteristic American
way. It must develop, as other great industries have developed, the American genius for efficient and
economical large-scale production.”41
“Immediate Measures to Stimulate Housing Construction,” November 10, 1937, Eccles Papers, FRASER.
Delbart Clark, “Housing Viewed as Key to Recovery,” New York Times, November 14, 1937. The move was
supported, among others, by the American Construction Council, the organization Roosevelt himself had led in the
1920s. “Federal Mortgage Aid and Tax Relief Called Key to Construction Revival,” New York Times, November 23, 1937.
41 FDR, “172- Message to Congress on Legislation for Private Construction of Housing,” November 27, 1937.
American Presidency Project http://www.presidency.ucsb.edu/ws/?pid=15333 By contrast Meg Jacobs claims that after
the 1937 recession Roosevelt only worried that “wages were still too low.” Jacobs, Pocketbook Politics, 137.
39
40
The housing financing plan, however, faced a dire threat from the very labor groups some
economists blamed for the recession. Senator Robert Bulkley of Ohio proposed an amendment that that
union wages be paid on all home construction insured by the FHA. This would have possibly unionized the
entire American construction industry in one fell swoop, and it was vigorously opposed by everyone
associated with the program and by private industry. When the administrator of the FHA, Stewart McDonald,
ran into Senator Buckley in the corridor leading form the Senate to the House chamber, according to his
assistant, he “took him by the coat lapel…and said to him ‘If you pass this amendment, you can kiss my ass
in Macy’s window and that will be the end of the FHA.” (As the assistant said “It was an example of
McDonald’s type of persuasion.”)42 At the conference committee, a Federal Reserve assistant wrote a long
confidential note claiming that a union provision would “destroy any prospect of stimulating housing
construction,” and the section was excised at the administration’s behest.43
When the bill passed in early 1938, it was the only part of Roosevelt’s recovery agenda to be enacted
during the special session.44 The most immediate result of its passage was the creation by the government of
the Federal National Mortgage Association, better known by its nickname, Fannie Mae. According to Jesse
Jones, the head of the Reconstruction Finance Corporation, which funded the new corporation, Fannie Mae
and its purchases of mortgage loans would “stimulate business, more perhaps than any other thing that can
be done.”45
Soon after the bill passed, Roosevelt received an important letter that further cemented his belief in
the need to increase housing production and lower construction costs. John Maynard Keynes wrote
Roosevelt on February 1, 1937 to say that it was obvious what was needed to cure the recession, “namely
increased investment in durable goods such as housing, public utilities, and transport.” Of course, as earlier,
Colean, Backward Glance, 40. McDonald was particularly concerned with labor union power. See W.D. Freeman to
Stewart McDonald, December 18, 1937; McDonald to Marriner Eccles, December 20, 1937. Eccles papers, FRASER.
43 J.M. Daiger “Statement on the Lodge Amendment,” Confidential Notes for January 10, 1938, Meeting of House and
Senate conferees, Eccles Papers, FRASER. See Roosevelt’s opposition, in FDR, “1-Annual Message to Congress,”
January 3, 1938, American Presidency Project http://www.presidency.ucsb.edu/ws/?pid=15517;
44 Eccles, Beckoning, 307.
45 “Housing Loan Body is Set Up by RFC,” New York Times, February 11, 1938. Widespread hopes at this time indicated
by “Home Building May Lead U.S. Out of ‘Slump’: Building Industry Hopes to Repeat Role of ‘Moses’ Played in 1921,”
Washington Post, April 10, 1938. As part of the President’s message to Congress back in November, he told them he
planned to have the RFC allocate $50 million dollars, taken out of those funds planned for the RFC Mortgage Company,
to support new national mortgage associations.
42
Keynes viewed the first of these as the most important. “Take housing. When I was with you three and a half
years ago the necessity for effective new measures was evident.” He said “Housing is by far the best aid to
recovery …I should advise putting most of your eggs in this basket, caring about this more than about
anything, and making absolutely sure that they are being hatched without delay.”46 Roosevelt responded that
it “was very pleasant and encouraging to know that you are in agreement with so much of the
Administration’s economic program,” and said the “emphasis you put upon the need for stimulating housing
construction is well placed.” Roosevelt, however, noted some obstacles in the way, and claimed “I hope that
our efforts will be successful in removing the barriers to the revival of this industry.”47
Price Barriers to Recovery
Since reshaping the mortgage market and mechanizing the housing industry would take time, the
administration began more direct action against the menace of high housing costs. They hoped that lower
wages and lower input costs would make building more profitable and spur investment, and thus inspire
general economic recovery. Robert Morgenthau and the Treasury spent an almost unimaginable amount of
time trying to use the power of government purchasing to force cement manufacturers to reduce prices, or to
push them to sign non-collusion agreements, and this attempt soon spread to other building trades areas.
Morgenthau helped organize the War Department, Navy Department, Veterans Administration and others to
use their purchasing power to lower producers goods’ costs. As one Treasury official noted those agencies,
seemingly unrelated to any housing industry, “were in complete agreement that something like this should be
done to lower the costs of housing.” Morgenthau kept the President updated on studies of building prices
and even agreed to set up an interdepartmental committee on such prices, writing in his diary that it, “would
sit continuously on prices in the building industry and the building rackets, and would be a sort of Board of
Arbitration. [Roosevelt] seemed to like this idea.”48 The administration also created a “Committee on Certain
Keynes to Roosevelt, February 1, 1937, http://www.fdrlibrary.marist.edu/aboutfdr/pdfs/smFDR-Keynes_1938.pdf
FDR to Keynes, March 3, 1938, biid.
48 Morgenthau Diaries Presidential, February 25, 1938, Book 1, HMJ Diaires; Cement was earlier identified as the
building material with the highest “relative stickiness” of prices. See W.D. Conklin, “Building Costs in the Business
Cycle,” Journal of Political Economy 43, no. 3 (Jun., 1935): 391.
46
47
Uneconomic Practices in the Building Industry,” which recommended antitrust action and attacks on
collusive bidding by subcontractors, manufacturers, jobbers and others in the area.49 Soon the government
even had the London Embassy, under John Kennedy, Sr., reporting back on building materials prices in
Britain and how that government tried to keep prices down by fighting the “’price rings.”” One embassy
message on the imperative issue of lumber costs had in handwriting the note that it was “To be seen by the
President.”50
After the bill passed, Roosevelt also further emphasized to the public the importance of these high
housing costs to the ongoing recession. At one lengthy press conference, Roosevelt said he had assembled a
group of all the major economic officials in his administration, including Henry Wallace of Agriculture,
Frances Perkins of Labor, Morgenthau, Eccles, and “economists of various departments,” and together “they
worked up for me yesterday a statement on which they are all agreed. That is pretty good, to get six or eight
different agencies of the Government to agree. It might be called noteworthy,” especially for Roosevelt’s
fractious administration. He read a memo which argued, “Prices of different groups of products must be
brought into balanced relations to one another. Some prices and some costs are still too high to promote that
balanced relationship between prices that is necessary for sustained recovery... This is shown by our recent
experience with housing… all the major elements in housing costs advanced so sharply by the Spring of 1937
as to kill a promising expansion of activity in an industry whose restoration is vital to continued recovery.” He
brought out several charts for the reporters assembled around his Oval Office desk: “This chart is, I think,
one of the most significant ones. It shows the price trends of certain building materials.” The President of the
United States then preceded to discuss at length such issues of national importance as the prices of “board
and house paint,” “plaster,” and “prepared strip shingles,” and tried to show how each had stymied housing.
When asked by one reporter how he would get prices down without further driving down wages, the
President mentioned “That is the very next question. You are a mind reader” and said that the key was
“Report of the Committee on Certain Uneconomic Practices in the Building Industry,” March 27, 1938, Volume 117,
p. 361-362, HMJ Diaries.
50 Johnson to Cordell Hull, February 28, 1938. Volume 112, HMJ Diaries.
49
increased volume by mechanization. He said the housing bill with its finance improvement and incentives to
large-scale production would help accomplish this task.51
Most of his administration was more forthright about the labor problems and the need to lower
some wages. Lauchlin Currie’s final version of his famous “Causes of the Recession” memorandum, issued
on April 1, 1938, focused on the issue of high labor costs. He again described two avenues of increasing total
spending, more deficits or more housing, but said that that continuing deficit spending at that time “would
only have been achieved by a very substantial increase in the Government’s contribution to national buying
power. It is not necessary to stress the difficulties in such a course.” Instead, he noted that the “petering out
of the promising building revival that had gotten under way in 1936 appears to be associated with the advance
in the price of new houses.” He blamed “individual strategically-located unions” for “enforcing various trade
practices that increased cost.” He finally said that “The broad lesson or moral that emerges is” that there “is
absolutely no assurance that another recovery will not be chocked off by excessive price and cost advances.”52
Far from a call for more federal spending, Currie’s final memo was primarily a demand for cost control and
lower wages in strategic sectors, most especially housing.
In the same month, Roosevelt was finally encouraged by some deficit doves in the cabinet, such as
Harry Hopkins, to embrace more direct federal spending as a spur to recovery, but the federal expenditures
he proposed were still focused on spurring private investment, especially in construction and housing. When
Roosevelt outlined his plans to his administration three days before his crucial speech to Congress, the first
section he mentioned was to allow the new public housing program, under the U.S. Housing Authority, to
make $500 billion in “commitments,” that is guarantees for loan financing, and “to loan over that” if it was
needed. Then he explained that the FHA was to guarantee another “500 million dollars worth of housing for
rent,” and Harold Ickes would loan money to states and municipalities, where most public construction
51
52
FDR Press Conference #435, February 18, 1938, 159-169, 174.
Lauchlin Currie, “Causes of the Recession,” April 1, 1938, , Eccles Papers, FRASER.
happened.53 Thus the first programs Roosevelt as government spending were in fact government loans and
guarantees for construction and housing of various sorts, not direct federal spending.54
In Roosevelt’s speech to the nation on his plan on April 18th, he blamed the recession on the fact
that “In many lines of goods and materials, prices got so high that buyers and builders ceased to buy or to
build,” thus maintaining the price focus and housing focus he had throughout the past year. Besides the other
lending measures for construction he elaborated, the largest measure he mentioned was the making over $2
billion of “additional bank reserves available for the credit needs of the country” through gold sales and
regulatory changes to banks, the vast majority of which would go to business lending and he hoped
specifically to investments.55 Far from direct expenditures, Roosevelt’s plan focused on what journalists
would soon call “splending,” increasing government loans to encourage spending and investment, much as
the housing act itself did, not direct federal expenditures.56
Economists such as Eccles, Currie, and Henderson, continued to view government spending as at
best a necessary fallback for more substantial types of recovery using federal credit. Two of the supposed
greatest deficit doves, Currie and Eccles, continued even after the speech to argue for more housing loans.
Currie soon submitted a memo on “The Necessity of Stimulating Private Housing,” where he argued that
“recent amendments to the F.H.A. are not creating sufficient inducement,” due to high prices, and therefore
“won’t make a dent” in the next year “unless further inducements are offered to builders.”57 Likewise, Eccles
HMJ Diary, April 11, 1938, Morgenthau Presidential Book 1.
HMJ Diary Entry, April 12, 1938, Volume 118, HMJ Diaries. Although some of this subsidized building was to be
carried out by local governments
55 FDR, “50 - Fireside Chat,” April 14, 1938. American Presidency Project.
http://www.presidency.ucsb.edu/ws/?pid=15628. Roosevelt’s biggest announcement in the direct spending field was
that he hoped to “keep the Government expenditures for work relief and similar purposes during the coming fiscal year
at the same rate of expenditure as at present.” As for public works, “I believe that by the expenditure of $450,000,000,
and the granting of authority to loan up to $1,000,000,000 to states and their sub-divisions, a vast number of well
thought out, needed and permanent public improvements can be undertaken this summer and autumn.” Frank
Roosevelt, “49 – Message to Congress on Stimulating Recovery,” April 14, 1938. American Presidency Project.
http://www.presidency.ucsb.edu/ws/?pid=15626. The total recommendations Roosevelt made, if one takes into
account all possible increased authorizations to loan, would be $1.95 billion in expanded loan authority, and $1.06 billion
in increased direct expenditures, which, as mentioned earlier, was largely a continuation of previous spending levels. For
the final law which largely mimicked recommendations, see “Joint Resolution: Making Appreciation for work relief,” 52
Statutes at Large 809 (June 21, 1938).
56 James Patterson, Congressional Conservatism and the New Deal: The Growth of the Conservative Coalition in Congress, 1933-1939
(Lexington: University of Kentucky Press, 1967), 319.
57 Currie, “The Necessity of Stimulating Private Housing,” May 4, 1938, Eccles Papers, FRASER.
53
54
went with Morgenthau to the Treasury to give Roosevelt his “Next Steps in the Recovery Program.” He too
suggested “Further Stimulation of Residential Construction,” noting that “additional stimulus appears
necessary.”58
Even after the new lending and spending bills Roosevelt introduced had passed, the contention that
high prices were holding back the housing sector, and therefore the economy as a whole, continued as a
rallying cry for much of the administration. As part of his April speech on economic stimulation, Roosevelt
had already mentioned that they had to deal with “the problems of monopolistic practices and price fixing.”59
When he presented this issue on high prices more thoroughly in another message to Congress, he focused
again on housing, using as an example that the “contractor pays more for materials; the home builder pays
more for his house; the tenant pays more rent; and the worker pays in lost work.” In fact, the President said
“our housing shortage is a perfect example of how ability to control prices interferes with the ability of
private enterprise to fill the needs of the community.” Though many historians claim this was part of a focus
on supposed “administered prices” by larger corporations, here as elsewhere high prices by labor were
squarely in Roosevelt’s sights.60
Thurman Arnold, the new head of the Antitrust Division of the Justice Department, fully embraced
the ideology. 61 He launched a public attack on the whole housing industry in May of 1939. In his book,
published the next year, Bottlenecks of Business, Arnold noted that high construction costs meant the
government “has had to step in with various kinds of subsidies and housing projects.” So far, however, such
subsidies only led the “costs of construction to go still higher.” His question was “why pump-priming on the
housing market failed to start the pump,” and his answer was because of combinations, monopolies and
unions.62 Because of these “the building boom choked itself off and the subsidies became only a bonus for
inefficiency.”63
58Marriner
Eccles, “Next Steps in the Recovery Program,” 148-157. HMJ Diaries.
FDR, “Message to Congress on Stimulating Recovery” April 14, 1938.
60 See Ellis Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (New York: Fordham
University Press, 1995).
61 Thurman Arnold, The Bottlenecks of Business (New York: REynal & Hitchcock, 1940), 13-18.
62 Ibid, 36-37
63 Ibid, Bottlenecks, 45.
59
Arnold’s housing price drive became a national campaign, “the first [prosecution] of industry-wide
scope ever undertaken in the history of” antitrust, Arnold claimed. He said that with over a million dollars in
prosecuting funds and over 200 lawyers meant that he could conduct “[f]or the first time anti-trust
enforcement on a nationwide scale.”64 The campaign led to over 200 indictments. Far from an enhancement
of worker and consumer purchasing power, Arnold worked to break certain strategic unions’ power. He
indicted one of the most powerful members of the American Federation of Labor, who worked for its
construction unions. The use of antitrust laws against labor had been a liberal bugbear for half a century, but
here the Roosevelt administration was eager to use it to enlarge housing production.65 The indictment,
however, lead to a Supreme Court decision that once and for all exempted labor unions and their officials
from the reach of antitrust claims.66 The attempts to break what Arnold and others called “bottlenecks” in the
housing industry caused only more frustration.
Around the same time as the spending and lending bill, the administration had also proposed a
Temporary National Economic Commission (TNEC), which they hoped would elaborate a mature New Deal
philosophy in regards to economics. In most histories, the TNEC has been described as a “showcase for
Keynesian economics.” The most important economists were Lauchlin Currie (described as “Mr. Inside”) and
the “American Keynes,” Alvin Hansen (also described as “Mr. Outside”), who Currie arranged to be the first
and “star witness.”67 Since the early 1920s, however, Hansen had in fact emphasized the need to spur housing
investment first as a mechanism of recovery, and had long supported programs such as the FHA. He
continued these themes before the TNEC.68 Hansen said that the “prosperity of the twenties...rested heavily
upon several factors,” of which he said “First, and this I regard as of quite extraordinary importance, there
was residential building which reached in this decade an all time high.”69 More recently, “The most important
single gap, and I would like to stress this, in the recovery of ’36 and ’37, was residential construction.” When
Brinkley, The End of Reform, 112.
“Suits to Cut Cost of Housing Likely to Hit Union Labor,” New York Times, July 3, 1939; “Maps Trust Drive in
Building Trades,” July 8, 1939; David M. Hart, Forged Consensus: Science, Technology, and Economic Policy in the United States,
1921-1933 (Princeton: Princeton University Press, 2010), 110-113.
66 United States v. Hutcheson (312 U.S. 219) (1941) (Frankfurter, J.)
67 Stein, The Fiscal Revolution, 167-168; James Tobin, “Hansen and Public Policy,” 33-34.
68 Alvin Hansen, “Thrift and Labor,” Annals of the American Academy of Political and Social Science 87, no. 176 (Jan., 1920):
49; See also Perry Merhling, The Money Interest and the Public Interest, 75-76, 93, 95.
69 Joint Committee, Hearings of the TNEC on Savings and Investment, 3512.
64
65
offering suggestions for the future, Hansen would say that “Residential building, everything considered,
would appear to offer the most hopeful field.” He described the lack of income caused by a lack of housing
construction as a “vicious circle,” and focused on the need to encourage more private investment. “It is for
this reason that active measures are urgently needed. For one thing, it seems to me that the time has come
when we could well reduce the guaranteed rate of interest allowed under the Federal Housing Administration
regulations.” Only after describing such plans did he go on to mention particular public spending possibilities,
largely on construction. Currie of course had similar concerns. He said “the most serious gap in these
offsetting expenditures in 1937, as contrasted with the twenties, was in residential building.”70
The final report of the TNEC elaborated again on the singular importance of housing investment for
economic recovery. It said that “the construction industry affords the largest single unexploited outlet for
investment funds – outlets for which are so necessary to maintain a proper balance in our economic system,”
and of construction “the greatest need lies in the field of residential construction.”71 It mentioned similar
concerns with pricing, claiming “Prices of producers’ goods have been uneconomically high levels since the
early 1920s’” and that “adjustment downward of various important producers’ goods’ prices…may open up
favorable opportunities for investment. To mention one example, residential construction, discussed in detail
in the next chapter, offers considerable possibilities.”72 In that chapter devoted to residential construction, it
said the falloff in construction from 1929 onwards, “explains in large part both the disastrous depression of
1929-1933 and the halting nature of the subsequent prosperity.”73 When discussing interest rates, the report
argued that “What is needed is to find fields where interest rates have the most important effect” and then
“devise appropriate means of reducing rates in these fields” and not surprisingly the first mentioned was
“residential construction.”74
Ibid, 3514-3515, 3527.
Temporary National Economic Committee, Investigation of Concentration of Economic Power, 76th Cong., 1st sess., 1939, xvxvi. Hart, Forged Consensus, 98. The report also noted that the “most serious restraints in the field of housing finance
either have been eliminated or the machinery has been set up for their elimination.”
72 Ibid, 276
73 “It would appear that, insofar as our economic problems can be solved by increasing investment, there is no more
suitable field than that of residential building.” They cited Hansen, Currie, and Lubin, among others Ibid , 285.
74 Ibid, 277. A whole chapter was devoted to “Investment in the Housing Industry” which “is one of our most
important industries but for the past 10 year it has been one of the most depressed industries.” Ibid, 285.
70
71
The final TNEC report showed the essential continuity of New Deal economic philosophy. Both
before and after the recession, New Deal “Keynesian” economics aimed to spur recovery through
encouraging investment, most especially in mortgages and housing. After the 1937 recession, the Roosevelt
administration did not forge a radically new path, but doubled down on its previous goals of furthering
investment through financial incentives and the reduction of prices, including that of labor. Here, as
elsewhere, the New Deal’s goal was to encourage the “purchasing power” of business first, which
occasionally meant restricting the purchasing powers of workers and consumers.