Depression Diary, Part 4

Benjamin Roth was born in New York City in 1894 and moved shortly thereafter to Youngstown, Ohio. He received a law degree and moved back to Youngstown after serving as an Army officer during World War I. When the stock market crashed in 1929, he had been practicing law for approximately 10 years, largely representing local businesses. After nearly two years, he began to grasp the magnitude of what had happened to American economic life, and in June 1931, he began writing down his impressions in a diary that he maintained intermittently until he died in 1978. His perceptions and experiences have a chilling similarity to our own era, and The Big Money believes that Roth's words—though they are 75 years old—have much to teach us today; we'll be serializing several excerpts.

This is the fourth installment. For more, click on the first, second, and third parts.

August 20, 1931. The Allied Council—the charity organization of Youngstown—has been busy during the depression handing out grocery orders. When I came to work this morning I counted about 50 of them coming down the steps that lead to the office. The elevator man tells me this happens every day and that people start drifting in at about 7 a.m. Many of them look well fed and are probably taking advantage of the situation. The city is planning a bond issue to provide for relief needs this winter. Hold-ups and killings are becoming frequent and it becomes dangerous to walk the streets after dark.

August 20, 1931. This morning a client 65 years of age came into the office and we had a long talk about his personal affairs. He had been in the liquor business and in 1921 when prohibition put an end to his activity he had accumulated about $200,000 in liquid cash. He is now broke except for some worthless real estate. He became a prey to high pressure salesmen of worthless stocks, tried one business after another, speculated in real estate and in many ways tried to make more money quickly. We discussed 7 or 8 other men to whom the same thing happened. Not one was able to hold his money. They were good saloon keepers but had not learned how to keep their money or to make it work for them. They knew absolutely nothing about sound investment and were not satisfied with a moderate return of 4 percent or 5 percent. I asked him what he would do again in the same circumstances. With tears in his eyes he said he would preserve and protect the principal at all regards. He would invest safely for a small but certain return. On $8000.00 a year he could have lived well in Youngstown and he and his family would have had the peace of mind that financial security can bring. He was particularly rabid against his investments in real estate.

August 21, 1931. The Union Savings Bank of Warren closes its doors today. It was one of the oldest in the community. People seem to have lost all confidence in banks and are quietly withdrawing their funds and putting it in safety vaults.

August 22, 1931. Things are happening fast and the people are getting more demoralized each day. Two more large commercial banks in Warren and one savings and loan co. closed their doors. [My brother] Nate [a lawyer in Warren] got back from his vacation yesterday and said his personal account was tied up, and also a commercial account he uses in his business and consisting of money that belongs to clients. His personal account was not much but the other was more substantial.

This morning about 100 men were standing in line before the Allied Council headquarters waiting to get grocery orders. The line grows longer each day.

August 22, 1931. There is a quiet but steady stream of depositors at every bank in Youngstown this morning, withdrawing their funds. The closing of banks in Toledo and Warren received much publicity and distrust of banks is growing like a cancer. It is a movement which feeds on itself and is hard to stop.

Even the strongest banks can’t keep this up long. They do not have enough cash to pay everybody. Much of their funds are invested in railroad bonds and other securities which were once considered gilt-edged but are now selling below par so that the bank cannot afford to liquidate. Investments like mortgages are frozen tight. There is clearly something wrong with our banking system which permits such a situation to come about. It is hard to rent a safety box today because there has been such a demand by hoarders.

August 25, 1931. I talked today to Serena Shlesinger who works for the Allied Council. She tells me they had 750 applicants for charity on one day of last week and had 300 on another day.

Everybody is afraid of the banks. Both in Warren and Youngstown the depositors are withdrawing money – the thing simply cannot go on. I tried to warn W---- who is a large depositor but he laughed at me.

(Photograph from the Franklin D. Roosevelt Library, courtesy of the National Archives and Records Administration.)