Murray N. Rothbard, From Hoover to Roosevelt: The Federal Reserve and the Financial Elites (2002)

This posthumously published chapter of A History of Money and Banking in the United States interprets the transformation of American monetary institutions through competing financial coalitions. Its principal narrative runs from the Federal Reserve’s establishment through the Banking Act of 1935; an epilogue follows the Morgans’ partial recovery through wartime diplomacy and Bretton Woods. Rothbard’s organizing claim replaces party competition with an account of business networks, institutional control, and state-supported cartelization:

This chapter is grounded on the insight that American politics, from the turn of the twentieth century until World War II, can far better be comprehended by studying the interrelationship of major financial groupings than by studying the superficial and often sham struggles between Democrats and Republicans.

The central antagonists are the House of Morgan and the Rockefeller–Harriman–Kuhn, Loeb alliance. Their rivalry is neither absolute nor immutable: both supported the Federal Reserve and Progressive industrial cartelization, while individual bankers changed affiliations and coalitions shifted with policy. Rothbard reconstructs these connections through corporate directorships, legal representation, family relationships, political patronage, and appointments. Such affiliations provide his explanatory framework, although their existence does not by itself establish every causal claim he advances.

The opening section identifies the New York Federal Reserve Bank under Benjamin Strong as the chief locus of early monetary power. Washington’s Federal Reserve Board contained a more mixed constituency. Morgan influence extended through Strong’s personal relationships and through the Coolidge and Hoover administrations; the 1924 election, with Morgan-connected candidates on both sides, exemplifies the limited explanatory value Rothbard assigns to party labels. He connects Strong’s monetary expansion to Morgan’s British interests, particularly Britain’s return to gold at the overvalued prewar parity in 1925. American inflation allegedly helped sustain this arrangement by preventing British gold losses:

Benjamin Strong was the Morgans’ architect of a disastrous policy of inflationary boom that led inevitably to bust.

This is the chapter’s Austrian economic premise: credit expansion produces unsound investments whose eventual liquidation cannot be avoided. Rothbard consequently rejects both Hoover’s distinction between productive industrial credit and supposedly unproductive stock-market credit, and the familiar portrait of Hoover as a passive defender of laissez-faire. Hoover’s wage support, public works, cheap-money measures, and pressure on lenders appear instead as precedents for the New Deal.

The detailed account of Eugene Meyer connects depression intervention to institutions inherited from World War I. Meyer’s War Finance Corporation moved from wartime finance into export subsidies and agricultural relief; its personnel and organizational arrangements subsequently supplied a model for the Reconstruction Finance Corporation. Rothbard treats this continuity as evidence that emergency agencies preserve and enlarge their functions. The RFC’s loans protected banks and railroad creditors, including Morgan and Kuhn, Loeb, while local bankers acquired public authority over lending decisions. Depression mobilization reproduced the language and arrangements of wartime economic management.

Alongside this institutional genealogy, Rothbard disputes the Friedman–Schwartz explanation of monetary contraction. He emphasizes Federal Reserve securities purchases, reduced interest rates, and attempts to increase reserves. Depositor withdrawals, gold outflows, bank failures, and accumulating excess reserves frustrated those efforts. For Rothbard, contraction therefore reflects distrust of an unsound banking system rather than an absence of expansionary intent. His evidence distinguishes reserve creation from the resulting money supply; his stronger claim that intervention itself aggravated distrust and prolonged depression remains an argumentative interpretation.

The Roosevelt sections explain the departure from gold through a widening coalition of agricultural producers, retailers, manufacturers, silver interests, and anti-Morgan financiers. The Committee for the Nation demanded higher prices and freedom to inflate domestically. Morgan interests also accepted departure from gold, but sought renewed international exchange-rate stability. Roosevelt’s rejection of stabilization at the 1933 London conference marks the victory of monetary nationalism over that objective. Rothbard thus distinguishes disagreement over international restraints from a simple division between supporters and opponents of inflation.

Banking and securities legislation then becomes an instrument for restructuring financial competition. Winthrop Aldrich’s acquisition of control at Chase and cooperation with the Pecora investigation helped weaken Morgan influence. Rothbard interprets compulsory separation of commercial and investment banking, deposit insurance, restrictions on deposit interest, and securities regulation as mutually reinforcing cartel arrangements. He argues that hard-money critics Carter Glass and H. Parker Willis joined this coalition because their “real bills” doctrine misidentified the source of inflation:

Contrary to Willis, the problem was not that the banks were buying corporate securities or lending money to the stock market; the problem was that the banks were inflating credit, period.

The distinction separates Rothbard’s opposition to fractional-reserve credit expansion from proposals merely to restrict its destinations. His treatment of SEC regulation likewise emphasizes cooperation with established exchanges, investment bankers, and accountants: public supervision could strengthen incumbent professional and commercial organizations rather than simply oppose business.

Marriner Eccles and Lauchlin Currie supply the concluding institutional transformation. The Banking Act of 1935 consolidated Washington’s authority over open-market policy, subordinated regional Reserve Banks, and broadened rediscount eligibility. Rothbard links Eccles’s expansionist ideas to his banking, sugar, and construction interests, while quoting Willis to stress continuity beneath the transfer of power:

There was no change in the conception or notion of centralization, but only in the agency or personnel through which such centralization should be put into effect.

The epilogue qualifies the Morgans’ defeat: international stabilization and wartime planning restored their influence, before they became junior partners in a Rockefeller-led establishment. The chapter’s relevance lies in its sustained integration of monetary doctrine with institutional power and business rivalry. Its polemical judgments demand scrutiny, but its central conceptual move is clear: financial reform redistributes authority among private coalitions while enlarging the state’s capacity to organize credit and competition.