A Tale of Two Fine Roosevelts

The traumatic financial crisis has emphatically ended the political age of Ronald Reagan. For more than 30 years, conservative ideas about small government and the unfettered free markets set the tone of American politics and government. Government, Reagan said, had become the problem and not the solution. His conservative Republican successors took the dogma of deregulation and regressive tax cuts to its logical conclusion, in line with former House majority leader Dick Armey's axiom: "The market is rational and the government is dumb." But today, amid what Republicans and Democrats agree is the worst financial catastrophe since the Great Depression, government has become the solution again—the only conceivable one—and it seems that it will remain so for a long time to come. In the short term, the turnabout has boosted the Democrats and their presidential candidate, Barack Obama. Even Obama's self-described Reaganite Republican opponent, John McCain, has proposed massive government action to prop up ordinary homeowners. Instead of Ronald Reagan, the times seem to call for a new Roosevelt. And although most commentators apparently mean Franklin D. Roosevelt, we should remember Theodore Roosevelt as well—John McCain's other hero, who successfully faced his own showdown with financial mayhem late in his presidency.

In 1907, when a group of New York tycoons failed to corner the copper market, Wall Street securities markets faltered and, by the end of October, reached the brink of collapse. The trustbusting TR had long antagonized the chief captains of American business and finance. Yet to stave off a complete collapse, Roosevelt was willing to cooperate with New York bankers, led by the redoubtable J. P. Morgan, and supply their failing institutions with infusions of federal aid. By year's end, the government had deposited more than $70 million (roughly $28 billion in 2008 dollars) in customs receipts in New York banks and sold to the banks, on credit, more than $150 million (about $61 billion today) in Treasury certificates and low-interest bonds, which they used as collateral to keep themselves afloat. By January 1908, the downward spiral had been reversed, and the panic was over.

The panic's political repercussions, however, had barely begun. Even as Roosevelt came to the bankers' rescue, pro-business reactionaries blamed the entire crisis on his hostility to the trusts. Critics accused him of trying to destroy enterprise and prosperity, and charged that he had disastrously undermined national confidence. Roosevelt, for his part, never doubted that profit-hungry speculators had caused the emergency. He proclaimed that the panic proved how "speculation, corruption and fraud," camouflaged by pieties about economic freedom, individualism and justice, were enriching Wall Street crooks at the expense of the commonwealth.

Roosevelt was as good as his word. In his annual message to Congress delivered in December 1907, he called for the adoption of inheritance and personal income taxes, the national regulation of railroad securities and the fixing of railroad rates, among a long list of other reforms. Congress balked, and TR sent another message, resubmitting his original proposals, adding a new one for federal regulation of stock-market speculation. Equating gambling on the stock market with gambling with cards, Roosevelt declared that the time had come "to make the class of great property holders realize that property has its duties no less than its rights."

The chief reform to arise from the panic, the creation of the Federal Reserve System, was not enacted until 1913 under President Woodrow Wilson. But after Wilson's political and physical collapse in 1920 came 12 years of Republican rule, during which some of Roosevelt's proposals, notably on regulation of the stock market, continued to languish.

TR's cousin Franklin won the Democratic nomination amid economic conditions far more fearsome than any previously known. The slump that had begun with the stock-market crash in 1929 had metastasized into full-scale collapse. The banking system was virtually moribund. Yet FDR did not inspire universal confidence as a new TR. The influential columnist Walter Lippmann dismissed the candidate, before his nomination, as "a pleasant man who, without any important qualifications for the office, would very much like to be President," but who was "no crusader … no tribune of the people."

Yet Roosevelt had more executive and political experience than Lippmann allowed, having served as Wilson's assistant secretary of the Navy for eight years, and as governor of New York since 1929. And FDR the future New Dealer was very much in evidence on the stump. While still aspiring to the nomination, he made his appeal for "bold, persistent experimentation" in combating the Depression. He also denounced, as squarely as his cousin had, "that small group of men" whose ideas about national well-being were "tinctured by the fact that they can make huge profits from the lending of money and the marketing of securities." Roosevelt became something more important than a crusader—he emerged as a national leader.

Roosevelt's experimentalism in the White House irked those on the left who thought it affirmed his allegiance to the capitalist status quo, as well as those on the right who thought it made him the avatar of anti-American collectivism. His political shrewdness confounded even some of his supporters. The establishment in 1934 of the Securities and Exchange Commission fulfilled Theodore Roosevelt's idea of protecting investors from monied predators, while also reducing the chances of another Wall Street upheaval. Yet surprise and dismay greeted FDR's appointment of the wealthy arriviste Joseph P. Kennedy as the SEC's first chairman. "Why did you pick that crook?" someone asked. "Takes one to catch one," Roosevelt replied. (Kennedy did an excellent job, winning praise for his reforms.)

In his classic study "The Coming of the New Deal," the historian Arthur M. Schlesinger Jr. succinctly described FDR's mission: "To save capitalism from the capitalists." That mission had been Theodore Roosevelt's as well. And until the Age of Reagan dawned in the 1970s, the underlying principle of the Rooseveltian mission—that left unchecked, the system could self-destruct—came as second nature to American policymakers. Then, after years of regressive tax cuts and deregulation, followed by the advent of the Newt Gingrich congressional Republicans, those principles began to fade—despite the stupendous costs of the savings and loan crisis of the 1980s, the Enron meltdown of 2001 and other depredations by capitalist buccaneers.

The sudden intrusion of reality in 2008 has been politically costly for John McCain. Supposedly chastened by his links to the S&L debacle, McCain had fashioned a reputation for independence and toughness, and proclaimed his admiration for TR. Yet to secure the nomination of a badly fractured Republican Party, McCain embraced Ronald Reagan's political legacy of tax cuts and small government—exactly as the Age of Reagan was coming to an end. Although he has tried to switch gears since the financial crisis hit by denouncing Wall Street greed and proposing government intervention, McCain's outrage is less than Rooseveltian, and his continued recital of Reaganite dogma makes him sound archaic, like a golden-oldies act. His running mate, although youthful and spirited, seems caught in the same time warp.

Last week in Toledo, Ohio, Barack Obama, after more than a year of campaigning, offered a specific plan of action for economic recovery and rescuing the middle class. He has even been willing to embrace proposals, such as Hillary Clinton's moratorium on house foreclosures, which he disdained during the Democratic primaries. It was an encouraging first step.

Yet Obama must adjust swiftly on other fronts as well if he is fully to update the Rooseveltian legacy.

The symbol of change has shown himself to be changeable, and there is plenty he can alter. Franklin Roosevelt, for example, was an unashamed politician from the anti-Tammany wing of the New York Democratic Party, one who made no bones about his love of party as well as politics, and who eventually redefined the very meaning of partisanship with his New Deal policies. Obama, on the contrary, has touted a fuzzy postpartisanship and promised to end "politics as usual" in Washington. If he is to be more Rooseveltian, he will need to master the arts of transactional politics (and not "transformational" posturing) at both ends of Pennsylvania Avenue, take his inevitable place as Democratic Party leader (especially if the Democrats win large congressional majorities) and assume responsibility as such.

There are also lessons that Obama can learn from the example of Theodore Roosevelt. Obama has thus far enjoyed what looks like an extremely lucky career in politics. The only truly difficult battle he has fought until now was with Hillary Clinton for the nomination, a contest he won only barely. When his campaign against John McCain ran into trouble, the financial collapse completely altered the electoral calculus. Through it all, Obama has been able to be very much the detached, cool customer, the same man who, in his brief time in the Senate, showed no zeal for risky political conflict.

Theodore Roosevelt sometimes had a weakness for tough-guy bombast and braggadocio. But he also knew, from experience as well as temperament, that a successful president cannot always be cool, detached and Olympian, let alone bipartisan, and that events will force him to take risks. To transcend what he called "the twister pride of cynicism," Roosevelt proclaimed in 1910 it is not enough to be thoughtful or even popular; it requires becoming what he called the man "in the arena, whose face is marred by dust and sweat and blood," who fights with the certainty that, even if he fails, "his place shall never be with those cold and timid souls who neither know victory nor defeat." Should Barack Obama become president next January, as now looks almost certain, he will be the man in the cruel arena whether he likes it or not.