Gilbert's Depot, a Notable North Dakota Building

First published online December 4, 2008
While visiting Grand Forks a couple of months ago I drove by my favorite building, Gilbert’s Depot. It’s made of stone in a region that uses mainly wood and brick.  The restoration done in 1986 has held up well, creating a fine albeit different impression from the one architect Cass Gilbert created in 1891.  I suspect Gilbert would not be surprised that his depot--designed to inspire a sense of permanence--has actually achieved that quality.   His minimalist early period depot has faced formidable floods and, for awhile, was even a down-at-heel eyesore. 

(The following was first published in the Grand Forks Herald, May 2, 1985)

Photograph courtesy of Myra Museum, Grand Forks, ND

Grand Fork’s train depot:  An echo of another era
By Carol Wallwork                

Burlington Northern Railroad has a white elephant on its hands:  the Grand Forks Depot.

The railroad wants $55,000 for the building alone.  Railroads rarely sell land, and it will cost considerably more to restore it, within reason, to its former glory.

So for now, this once finest representation in Grand Forks of the Richardsonian Romanesque architectural style sits empty.  This dilemma reveals much that plagues building restoration.

If the building were located in Boston or even Indianapolis, it would easily be worth the asking price.  But in this region it is difficult to find a tenant eager for just a 20-year lease.  While BN sits on its asset, Grand Forks is unable to use one of its most notable buildings.

The depot is made of a peach-gray Kettle River stone.  It is one of a handful of stone buildings not only in the city but the region.  It cost a whopping $100,000 in 1891 and was designed by Cass Gilbert early in his career.  Gilbert went on to become one of America’s most successful architects, his crowning achievements:  the Minnesota State Capitol in St. Paul and the U.S. Supreme Court Building in Washington DC.  And still, despite street diversions since it was built in the early 1890s, Gilbert's depot has a most uncommon regional building characteristic: a sense of presence on its site.  This is not so much the noble intention of its architect as the sheer logistics of train tracks and their demand for space.

This building represents not only the difficulties of building restoration but also exemplifies fundamental facts about architecture:  the needs of the people who built it, their values and skills, and their power to pull off the first two.

Trains are one of the most romantic and sophisticated technological forms ever created, and their accompanying architecture reflects the train culture’s rise to power and its subsequent decline and usurpation by the automobile.

In 19th-century America, the train culture ruled.  Deals were made, empires won and lost, and the Soo Line, the Great Northern, the Sante Fe and many more railroads rapidly dotted cities and towns with one of the most delightful of architectural accomplishments, the train depot.

But railroad depots didn’t just spring into existence.  Not until Henry Hobson Richardson, a great corpulent Boston architect, turned his skills to the lowly railroad depot in the early 1880s did the architectural world take it seriously.  Up until then, depot design was ‘fit’ only for engineers to fiddle with and often looked like houses.  American architects were too busy designing chateaus and palaces and Queen Anne retreats for the likes of the Vanderbilts, Astors and the Mellons.

Richardson influenced the heart of countless American cities and towns that developed around their downtowns.  Richardson ranks with the company of Frank Lloyd Wright and Louis Sullivan as one of America’s most influential and gifted architects.  He restored that all-but-forgotten practical early American habit of using indigenous materials in his structures.  The amount of marble imported into America in the 19th century could probably have create a small mountain range.

Richardson spent the Civil War in Paris, studying at the Ecole de Beaux-Arts, before he was made destitute by the war’s effect on his Louisiana-family’s fortunes.  In France he discovered the Romanesque.  After the war, he returned to Boston, where he slowly established his architectural reputation.  Boston is enriched by the remaining depots and libraries designed by Richardson.
North Dakota is enriched by his influence on Gilbert, the designer of Grand Forks Great Northern depot.

Gilbert was a hotshot young architect, one of the earliest graduates of the new Massachusetts School of Architecture, in Boston.  Richardson’s influence was inescapable.  Gilbert apprenticed in the premier architectural firm of McKim, Mead & White.  Gilbert worked closest with the firm’s most talented partner, Stanley White.

Early in his career, he became affiliated with one of the most successful corporations in the country, the Great Northern Railway, which later merged with the Northern Pacific to become the Great Northern.  It is greatly to the Great Northern’s credit that it regarded its influence on the Plains as justifying an architect of Gilbert’s caliber.  By the time Gilbert designed the Grand Forks Great Northern depot, Richardson was dead.

Gilbert’s Grand Forks depot exemplifies the most understated point in his career.  Gilbert went on to design the more showy Fargo Northern Pacific depot; and the grandiose but finely balanced State Capitol in St. Paul, modeled after St. Peter’s Basilica in Rome.  It has the second largest unsupported dome in the world. 

His most modernist achievement was the 57-story Woolworth Building in New York City.  Its high-tech steel frame has the most Gothic-style facade of any  skyscraper, and was the tallest building in the world until the Chrysler Tower stole that distinction in 1927.  The Supreme Court Building in Washington DC was his last major commission before his death, in 1934, one year before it’s completion.  Built during the Great Depression it was possibly the only public building to come in UNDER budget, $93,532.03 less than the $9,740,000 allocated.

Gilbert’s been accused of retreading tired Renaissance design themes that his avant-garde contemporaries were abandoning.  But critics could never find fault with his dazzling command of proportion, form and overall design.  His later baroque exuberance offers a robust contrast to much 20-century architecture.

His Grand Forks depot has known sunnier times.  When it was built, the first of its two stories was graced with a pent roof that jutted out to offer passengers protection from the weather.  In the center, on the street side of the hexagonal hip roof, was a large, square clock tower, topped with a recessed pyramidal roof.

How the depot lost its clock tower is a matter of debate.  One story has it that a bigwig Great Northern official checked the clock, which was wrong, and missed an important meeting-or train.  His angry reaction led to the ‘axing’ of the tower in retribution.  A railroad official’s account says the tower was removed because it was unsafe.

Gilbert’s depot created, like the Romanesque style it was modeled after, the impression of stability and permanence.  It was no doubt a reassuring beginning to immigrarnt settlers starting their new life in the Red River Valley.

It reveals Richardson’s influence in its rough-faced stone and its almost minimalist but strong design.

Today, the pent roof, the chimney stack and the clock tower are gone.  What remains still makes an impression.  But like an old exiled Russian count working as a waiter in a two-star Parisian restaurant, the old days were definitely kinder.

(The following was first published in the Grand Forks Herald circa summer 1986)

Photo Shoen Associates, circa 1986

GF architect brings depot to new life
By Kevin Bonham

…When architect William Schoen of Schoen Associates and two partners finish restoring The Depot in August, the $500,000 investment will put a new shine on a remarkable Grand Forks building.

The Gift

 

First published online November 16, 2009

Four p.m. February 1, 1999 I was driving east in northern Virginia,  50 miles west of Washington DC.  I’d just had a meeting at the remote FEMA compound on The Mountain, near the West Virginia border. 

While driving through the wintery foothills of the Blue Ridge, the radio announcer interrupted programming, “Paul Mellon, one of America’s wealthiest men--philanthropist, art collector, thoroughbred horse breeder and son of Andrew Mellon--has died at his farm  in Upperville, Virginia.  He was 91.”  I'd never heard of him.

As if scripted, there I was, driving through Upperville, past the stone Anglican church, 17th century pub, dry stone walls framing meadows well-stocked with fine horseflesh, clad in Tartan blankets.

Not until years later did I learn more about Paul Mellon’s father Andrew and how instrumental he was in shaping the face of American capitalism, industry, banking, art museums, The Mall, Washington DC’s Federal Triangle, plus the surprising limits of his deep pockets in the 1930s. 
___________________________________________________________________

Andrew Mellon was born in Pittsburgh in 1855, educated at Western University of Pennsylvania, his father was a successful investment banker, from County Tyrone, Ireland.  With his father, brother plus longtime business partner Henry Clay Frick, Andrew built one of the most powerful industrial empires of 20th century America. Their empire included the Aluminum Company of America, Bethlehem Steel, early investment in Spindletop (the Texas oil gusher that opened up the Gulf Coast oil industry) railways, construction, banking and insurance.

He was a financial genius and from written accounts by his children and others, an emotional cripple.  His sensitive son Paul said his father was a lot like Soames Forsyte, the frigid art collecting banker of John Galsworthy’s Man of Property, first book of The Forsyte Saga.

This cautious industrialist’s one spontaneous act in life was his choice of mates in 1900, at age 43.  He asked Nora McMullen to be his wife.  She was 19.  Their union was disastrous, ending in divorce in 1910.  they had two children, Ailsa and Paul.

      Bethlehem Steel Works, a watercolor by Joseph Pennell,
             depicting Bethlehem Iron Company in May 1881  image: Wikipedia

He took his bride from her home in Hertfordshire, England to live in sooty Pittsburgh.  Upon disembarking from the train she said, “We don’t get off here?  You don’t live here?”  The marriage was an oil and water affair, his family unemotional, cold, introverted; hers outgoing, affectionate, vibrant.

When his personal life was at it’s most wan he turned to art collecting, around 1904.  Unlike most dilettantes  he had a personal fortune coupled with astonishing  business acumen.  He amassed one the finest private art collections in the world. By the early 1920s he shared with friends his intent to establish a national gallery.

President Harding chose Mellon as Secretary of Treasury.  in 1921 the U.S. was recovering from the 1918 Spanish flu (650,000 dead) World War I (116,000 U.S. dead, 205,000 injured) a post-war depression with 20% unemployment and a federal deficit of $6.3 billion, inflated by war spending.

Mellon reduced the deficit to $4 billion by 1922.  He stayed on at Treasury for Presidents Coolidge and Hoover.  Under his stewardship by 1928 unemployment was down to 1.6%, the lowest ever recorded, and the economy booming. 

Black Tuesday-October 29, 1929-changed everything, including Andrew Mellon’s standing in America.  The Roaring Twenties gave way to the seeming collapse of the American financial system, coupled with a severe drought and horribly misunderstood farming practices on the Great Plains.  Free-wheeling capitalism was out, government salvation in.

Mellon did not endear himself to his fellows when he sanguinely commented that the Depression was a “mere 15 minutes in the history of the United States.”  Cold comfort for goodly chunks of whole states’ population who’d lost farms, income, even a guarantee of the next meal.

When son Paul attended Cambridge University in England in the early 1930s, Mellon left Treasury and was appointed Ambassador to England.  We’ll never know if the Great Depression would have been less disastrous had Mellon stayed on as Franklin Roosevelt’s  Secretary of Treasury.  Instead, Mellon spent the last 3 1/2 years of his life defending himself against tax evasion charges brought by FDR’s Justice Department.

The pinnacle of Mellon’s art collecting was his 1930-31 purchase from the the USSR of some of the greatest masterpieces of European art.  The Russian government was in dire economic straights, justifying the sale of a chunk of the tzars’ art collection from the State Hermitage Museum.  They’d little need for Western art while trying to industrialize the communist state.  Although a year later, when the news came out, Stalin put the breaks on any more sales of Hermitage art.

The Alba Madonna by Raphael was regarded by noted a British art connoisseur as finer than any works then extant in all of Great Britain.  Mellon paid over $1 million for it, the largest sum ever paid to date for a painting.  He also purchased half of the Hermitage’s 50 greatest paintings, for close to $7 million.  

In 1936, in the midst of his trial, Mellon sent FDR a request:  ‘Would President Roosevelt approve the donation of his art collection to the USA, including a suitable building on the Mall to house the collection?’

Roosevelt accepted, “...I was completely taken by surprise but was delighted by your very wonderful offer to the people of the United States.  This was especially so because for many years I have felt the need of a national gallery of art...”

I suspect the most joyous part of Mellon’s last year of life was spent working with architect John Russell Pope, on the design for the museum.  They decided sandstone would not do. The final design was a sleek neo-classical structure of Tennessee marble.  It cost $10 million, an additional $2 million for the marble alone.

Pope had worked with Mellon before.  He designed the National Archives in the Federal Triangle, built in the late 1920s, under Mellon’s direction.  The project included the creation of a federal building complex and Constitution Avenue.  It was during this period that Mellon became smitten with the spot where the National Gallery of Art would be built,  Constitution and 4th St. NW.

In The Forgotten Man Amity Shlaes describes the philosophy behind Mellon’s gift.  “He was not trying to bribe the government, or even placate it.  He was trying to outclass it.  For years he had tried to show, through business, that the private sector could give to the people, just as government could, and sometimes more.”

Andrew Mellon died August 27, 1937.  He was 82 and did not live to see the completion of the museum.  You’d be hard pressed to find his name there.  I’ve lived near Washington DC for the past 17 years and found the story of his gift while researching the Great Depression.  Also of note:  his collection is not all together, but organized by period and style, mixed in with donations and purchases since it’s inception, further blurring his stamp.

In our age of self-promotion and aggrandizement its stunning to glimpse a time when the opposite was the norm.  Andrew Mellon was shy, reputed to be miserly and cold in temperament.  Yet he gave, quite possibly, one of the most generous gifts to a nation anyone has ever bequeathed, while the government of that nation was waging war against his life's work.  He gave us the past as well as a place to share our future, in that universal language that reaches out to the troubled and untroubled alike: art.

____________________________________________________________

December 1937, three months after his death, Andrew Mellon was found not guilty of defrauding the United States of tax revenue.

The National Gallery of Art opened March 17, 1941.
____________________________________________________________

Sources:
-Mellon, An American Life by David Cannadine 2006

-The Forgotten Man by Amity Shlaes 2007

-Rising to Harding’s Level, column by M. Charen Jewish World Review Oct. 2009

Home Sweet Home, part 2

                         -Our lives begin to end the day we become

                                    silent about things that matter                                                  -Martin Luther King 

First published online April 26, 2010
In September 2008 President Bush informed shocked Americans that the banking system was near collapse. Congress hastily passed a $700 billion bailout called Toxic Assets Relief Program (TARP) to ‘salvage‘ the system.  No Congressional inquiry has occurred to date on lawmaker involvement in the meltdown.
                                     ___________________

It’s hard to imagine how difficult it used to be to buy a house. To acquire a home mortgage before 1938* banks required 50% down and the balance paid off within 5 years, an elusive task.  Savings and loans (S&L) existed since the 1830s but they had no depositors’ insurance so a crash or panic could wipe out everything. The creation of the insurance business as we know it began after the 1666 Great Fire of London and became a crucial component of growing wealth.  Not until Franklin Roosevelt (FDR) was it applied to home mortgages.

FDR passed the 1933 Glass Steagall Act to encourage public trust in banks again by insuring bank deposits up to $40,000, managed by the Federal Deposit Insurance Corporation (FDIC).  A vital provision of this act was closing loopholes that weakened the system, such as the prohibition of banks from owning other financial companies. 

If a bank or S&L controlled where and how its depositor’s money was invested what was to stop that bank or S&L from creating its own construction business, or travel agency, or buying its own Lear jet?  Remember the Glass Steagall Act-it comes back with a bang in Part 3.

Fannie Mae Invents the Home Mortgage Market

FDR’s 1938 Federal Housing Administration’s (FHA) Fannie Mae radically changed the meaning of home.  This federally backed insurance plan provided mortgage lenders protection on 20 year loans of up to 80% of the purchase price, with low interest, that were fully amortized, meaning gradually writing off the initial cost of the loan.

Thus began an experiment in expanding working class home ownership.  Fannie Mae helped millions become property owners for the first time, vesting them in the market economy.  While Europe created public housing projects, the U.S. government encouraged home-ownership,* up from 40% to 60% by 1960, using strict borrowing rules, specially by today’s standards.  The only deviation was for the 1944 GI Bill’s returning veterans.  Qualified veterans received low interest, zero down payment home loans.

Fannie Mae was authorized to issue bonds--a certificate issued by government or a public company promising to repay borrowed money at a fixed rate of interest for a specified time period--and use the proceeds to buy mortgages from local S&Ls.  The rules were sound including:
1. Borrowers must reside no more than 50 miles away from S&L offices
2. Regulation Q: Interest rate would be a minimum amount over the prime rate--the lowest rate of interest on commercially borrowed money.

Meddling-President’s Johnson, Nixon & Carter

In 1968, in tandem with civil rights legislation, Fannie Mae was split in two:  Ginnie Mae would cater to poor borrowers like vets and Fannie Mae became a privately owned government sponsored enterprise-GSE, which could buy conventional as well as government guaranteed mortgages.

In 1970 Congress created Freddie Mac as a government sponsored enterprise (GSE), to buy mortgages on the secondary market, pool them and sell them as mortgage-backed securities on the open market.  Although not backed by the U.S. government, Freddie Mac has special authority to borrow from the U.S. Treasury.  Freddie Mac’s purpose was to lower loan rates.  If you bought a home before 1970 you probably sent your monthly mortgage payment to the same lender for the life of the loan.  Not any more.

By 1977 Congress further adjusted FDR’s Fannie Mae formula.  The Community Reinvestment Act (CRA) mandated American banks lend to poorer minority communities.  ‘Sounds good on paper for it tried to address the smaller percentage of home ownership among some minority communities.  But Congress began pushing banks to weaken requirements for home loans, rules that had kept the mortgage market solvent since 1938. 

The CRA coincided with Savings and Loan (S&L) deregulation that allowed S&L members to invest in commercial property, junk bonds, stocks, credit cards, private housing, whatever, to anyone, anywhere.  Prior to deregulation S&Ls could only loan money for personal mortgages to account holders living within 50 miles of an S&L office.  That was the deregulation part.  The financially criminal part was the federal government continued to guarantee those loans--up to $100,000, raised from the $40,000 established in 1938.

Overnight lenders no longer feared losing their shirts if they didn’t screen out bad loans--they weren’t on the hook anymore, the taxpayers were.  This legislative tampering caused the collapse of the S&Ls by the 1980s.  Powerful politicians like the Clintons and John McCain were tainted with blowback.  The whole debacle ended up costing taxpayers over $1 trillion, according to some sources, the largest fraud in U.S. history.  Unfortunately we hadn’t seen anything yet.

Conclusion

I began my research with the premise Big Government is always too cumbersome and partisan to effect positive change.  Then I read about the 1933 Glass Steagall Act and the creation of Fannie Mae.  Unfortunately these laws should have had a unmitigated qualifier:  Not to be tampered with in ANY WAY after 1944. The Constitutional framers somehow understood that any federal infringement on the free market would always end badly.  They were right.  It was FDR's federal bureaucracy that adopted home ownership as an ideal, an ideal that morphed into a hydra of different federal agencies propping up the whole ownership scaffolding.  Which means everyone has paid a LOT more for our higher levels of home ownership than it could ever be worth.

In Part 3 you will see how the best intentions of government descended into the worst partisan politics. Republicans and Democrats administrations were equally engaged in removing vital Wall Street restraints that have catapulted our financial system to the brink of collapse. 

*U.S. Census home ownership rates from 1900 to 2000.

  Next: Roots of Hope:  Systemic collapse

____________________________________________________________________

 
Sources:
The Housing Boom and Bust by Thomas Sowell, 2009
The Ascent of Money by Niall Ferguson, 2008
A Patriot’s History of the United States by Larry Schweikart, 2004
End of Wall Street by Roger Lowenstein
A Colossal Failure of Common Sense-The Inside Story of the Collapse of Lehman Brothers by Lawrence G. McDonald

Systemic Colapse, Part 3

Congress accelerates meddling

The late 1970s were marked by double-digit interest rates, wage and price restrictions plus an OPEC oil embargo by the newly created Middle Eastern cartel. American business was at a standstill, unemployment skyrocketing. Congress devised a plan to encourage business.  This Pollyanna--or criminal--solution set the stage for our present meltdown.  Economist Thomas Sowell calls such short-sighted plans first stage thinking--creating a solution to a problem while refusing to understand how a plan will function in practice.
 
Modifications of Community Reinvestment Act (CRA) 

& Repeal of the Grass Steagall Act

The S&L meltdown ended up costing taxpayers over $1 trillion, according to some sources, the largest fraud in U.S. history. But we hadn’t seen anything yet.
By the early 1990s, while Congress half-heartedly sorted out the S&L scandal (translation: arranging for tax payers to foot the bill for the mess) Wall Street was busy inventing derivatives -- the bundling of good-and bad-loans together then marketing them as AAA investments to be sold on the world market.  Made possible by yup, more deregulation. 

During the 1990s congressional tinkered with the rules of CRA, further easing restrictions on minorities acquiring mortgages.  But it was the repeal of the 1933 Glass Steagall Act that unleashed Pandora’s Box.  That law separated banking for investments.  It's repeal by Clinton's Republican lead Congress allowed commercial and investment banks, securities firms and insurance companies to consolidate, forming conglomerates if they so chose.  Remember one of the reasons FDR passed the 1933 Glass Steagall Act: to prevent banks from investing its depositors money in riskier schemes.

Congress still guaranteed certain loans up to $100,000!  A startling aspect of congressional meddling was its collegial bipartisanship. Both parties voted for these insanely risky laws.  Congressman key to the Glass Steagall repeal were Republicans Phil Gramm and Jim Leach, plus Democrats Chuck Schumer and Chris Dodd.  Both Schumer and Dodd are still employed on the public's dime.

Congress drops home mortgages off a cliff

 Add to this toxic brew the most irresponsible legislation ever passed, affecting the home mortgage market: the 2003-American Dream Down Payment Initiative (ADDPI) in which lenders were encouraged not to press low income borrowers for full documentation for home loans.  The ADDPA authorized HUD to make home loan down payment grants to minority buyers while encouraging Fannie Mae and Freddie Mac to support the sub-prime market. 

This madcap legislation was passed in a Republican controlled Congress under President Bush. If banks didn’t comply regulatory agencies could prohibit those banks’ involvement in the really lucrative stuff, like bank mergers, overseas financing, etc. 

ADDPI created the market for sub-prime loans, tailor made for ADDPI-- people with spotty credit histories.  Applicants didn’t have to prove they had an income, or even a history of solvency.  They’d get the teaser low-interest mortgage rates for the first year or two then WHAM!  When the real interest rates kicked in the monthly mortgage payments could double. The coda to all this Congressional ‘banking’ legislation was the September 2008 worldwide sub prime mortgage collapse.

“I do not want Fannie and Freddie to be just another bank,” Senator Barney Frank said in 2003, “I do not want the same kind of focus on safety and soundness,” Frank emphasized, according to Roger Lowenstein in his 2010 book, The End of Wall Street.  Frank focused on the political expedient of thousands of new minority home buyers. 

A lingering recession/depression is the result of this congressional permission allowing Wall Street and Main Street freelance with American taxpayers signed up as the bailout go to if insolvency ensues.  Alas this has had devistating results for U.S. financial solvency and now world banks.  These legislative acts and deregulation have created a vast list of minority casualties who’renot only at risk of losing their dream homes but are saddled with toxic mortgages and destroyed credit.  It’s the opposite of Fannie Mae’s mission to engage working class home buyers in the market ecconomy.  These toxic loans are held by banks now labeled by big government as ‘too big to fail.’ 

On September 7, 2008, the Federal Housing Finance Agency (FHFA) announced a federal takeover of the financially rocked Fannie Mae and Freddie Mac, the most sweeping government interventions  in quasi-private financial markets in decades. Fannie Mae and Freddie Mac’s investment grade was lowered to Baa3, the lowest grade credit rating.

Conclusion

 When I first started researching the 2008 sub-prime mortgage meltdown I didn’t expect to find any government program that actually helped large swatches of the population--and was solvent. Early Fannie Mae was both. 

Unfortunately big government couldn’t leave well enough alone.  There are simple lessons to be learned from this--big government, like big banks, can't be trusted with something as complex as the world's largest (so far) economy. 

The Administration is now crafting legislation to reform banking with many of the same government and banking players who were in charge of the 2008 banking meltdown--Federal Reserve Chairman Bernanke, appointed in 2006, Treasury Secretary Geithner, Senator Dodd, chairman of the Senate banking committee and Representative Frank, chairman of the House financial services committee, a curious list of policemen.  If these men were in the private sector they'd probably be sharing a prison wing with Bernie Madoff.

Sources:

The Housing Boom and Bust by Thomas Sowell, 2009
The Ascent of Money by Niall Ferguson, 2008
A Patriot’s History of the United States by Larry Schweikart, 2004
End of Wall Street by Roger Lowenstein, 2010
A Colossal Failure of Common Sense: the Inside Story of the Collapse of Lehman Brothers by Lawrence G. McDonald, 2009

Roots of Hope Thorns of Reality, part 1

By the late 19th century the federal government began dabbling with regulating the U.S. economy with the railroads and anti-trust laws.  By 1913 the Federal Reserve (Fed) was created during President Wilson’s administration.  The Fed did little during the 1920s bull market but galloped in like calvary during the Great Depression.  What follows is an economic synopsis of that time, connecting the dots to today’s economy:


      The Great Depression was the worst economic calamity in history.
      It began in late October 1929.  By 1932:
                  -The stock market had lost 89% of its value
                  -25-33% of the workforce was jobless, 40% in some states
                  -Worldwide trade dropped by 67% due to tariffs, 
                  -Only the planned Russian economy was unaffected
                   -First hyper-regulated depression=longest, most severe one


A devastating aspect of the Great Depression was the collapse of so many, primarily American, banks.  In 1913 the Fed was created by President Wilson to halt the boom/bust cycles of the industrializing economy.  One of its functions was to adjust the money supply in emergencies.


Contrary to common belief after the 1929 crash President Hoover used a heavy federal hand to try and control the crisis, such as raising the sales tax to the highest rate ever to balance the budget. By 1933 President Franklin Roosevelt (FDR) continued Hoover’s policies.  FDR increased the income tax rate on wealthy from 59% to 75%, further constricting investment capital.  FDR used record-breaking deficit spending for public works projects, modeled on  English economist J.M. Keynes’s belief that government spending could correct an economic downturn, instead of trusting the market to correct itself.


Unemployment stayed in the double digits all during the 1930s.  Not until the U.S. entered World War II, when the government redirected it’s war against wealth creation to the war against the Germans and Japanese, did the economy rebound.

Milton Friedman & Anna Schwartz’s ground breaking analysis


Before the 1929 crash, and more so afterwards, the Fed constricted the money supply.  The Fed feared the 1920s bull market was due to irrational exuberance instead of genuine expansion of the most invention-rich period in history--cars, airplanes, phones, electrification, radio, a new, consumption economy. Unemployment in the 1920s was at its lowest rate ever, 1.2%.


However, many Fed board members suspected bank loans were being used on the stock market instead of business investment for job creation, hence their pre-crash, misguided tightening of the money supply.  After the crash the Fed’s tight money supply was a fatal blow to banks, for people were trying to withdraw life savings only to find no money, exacerbating consumer anxiety, accelerating more bank failures.


Further complicating the picture, the Smoot Hawley Tariff bill was working it’s way through Congress before the crash.  It proposed raising tariffs to near record levels, an economic downer in the best of times. The bill passed in 1930, spurring an international backlash of tariffs, further crippling the free exchange of goods and jobs.  Also, whether or not the U.S. would stay on the gold standard became an issue that’s too involved for this discussion. It certainly didn’t help matters though. 


In 1957 Milton Friedman and Anna Schwartz published A Monetary History of the United States, contributing to Friedman receiving a Nobel Prize in Economics, 1976.  The book’s most startling conclusion was the Federal Reserve’s ‘inept or inflexible monetary policy in the wake of October 1929 turned a correction into a depression.’  Friedman/Schwartz conclude the Fed should have drastically increased the money supply from 1929 onwards, rather than contracting it.  A startling conclusion for it countered most established academic thought that FDR’s policies were essential to the U.S. surviving the Depression


             Results of the Fed’s lethal contraction of the money supply (-33%
             from 1929-1932):
            -$1.2 billion moved from banks (and investment in jobs) to mattresses
            -$15.6 billion decline in bank deposit
            -$19.6 billion decline in bank loans=19% of Gross Domestic Product


The reason no one talks about the similarly dramatic stock market crash of 1921 is because we came out of it naturally, within a year. The same elastic rebound occurred in the October 1987 crash, which also rebounded within a year. 


Next:  The Democratization of home ownership,  Roots of Hope, Thorns of Reality.
______________________________________________________________________

Sources:
The Housing Boom and Bust by Thomas Sowell, 2009
The Ascent of Money by Niall Ferguson, 2008
A Patriot’s History of the United States by Larry Schweikart, 2004

The Law of Unintended Consequences

   (First published online August 6, 2009)
About a year ago I was shopping at IKEA and bought a two-pack of the more expensive, energy-saving, compact fluorescent light bulbs. When I got home I popped them into two matching IKEA lamps on either side of our living room couch.  Hmmm.  Not impressive.

The new energy saving and the classic Edison incandescent bulbs are both technically 60 watts but the new bulbs radiate less light while 'warming up.'  Needless to say I wasn't eager to buy more.


Then while researching clear glass incandescent bulbs online the other day I hit upon another downside of the new bulbs:  An increased risk of mercury poisoning if they bulbs break for they release mercury vapor and powder. The Environmental Protection Agency’s clean up protocols are formidable and disconcerting:  http://www.epa.gov/cfl/cflcleanup.html


Step 1-Have people & pets leave the room--then what? Get the robot in to do the following:  Open a window and leave room for 15 minutes or more.  Shut off the central heating or ac.  Not easy to do in the north land in winter or the Gulf Coast in summer.  And that’s the easy part.  Five additional steps follow, none of them typical light bulb cleanup.


My only knowledge of mercury poisoning are the 1970s photos of Minamata Bay, Japan, taken by photographer activist Eugene Smith, documenting industrial mercury poisoning of the fisheries there, including catastrophic teratogenic nervous system abnormalities in children.  Mercury contamination has also been linked to the uptick in Alzheimer’s disease rates. 


Mercury is the most dangerous substance in the world second only to nuclear contaminants.  I’m not a chemist but it appears a major source of mercury contamination are effluents from existing coal-fired power plants.  So the need to reduce such contamination is a given, a formidable & as yet unrealized achievement.  So why are we rushing to pile on an additional source of mercury contamination?

The 2008 Energy Bill passed by Congress mandates all light bulbs use less electricity by 2012.  The compact fluorescents are the only light bulb that meets these specifications.  However, 100% of compact fluorescent light bulbs are made in China.  Today standard light bulbs are made in Mexico and Italy. 

As a consequence of our increased demand for ‘green
light bulbs’  there’s  a terrible increase in mercury poisoning of Chinese workers.  China no longer allows pregnant or breast feeding women to work ‘where mercury is present.’


In China “tests on hundreds of employees have found dangerously high levels of mercury in their bodies...many requiring hospital treatment,” Sunday Times, May 3, 2009.  http://www.timesonline.co.uk/tol/news/world/asia/article6211261.ece 


This is NOT my idea of green, nor yours, I’m sure.  A less risky approach would be an individual goal to start by reducing light bulb use by one hour per day, until we can find genuinely green methods of reducing pollution.


We have two whippets in our house, plus a three-year old.  You may not realize that whippets aren’t like most dogs.  If they need to get from point A to B, they take the shortest route, which may involve leaping over couches, small tables, or even badly placed lamps. A small child isn’t in the same league but you get the picture.  Both animals and children can be seriously hazardous at the best of times.  Our mercury bulbs have been removed and I've taken them to the recycling bin specially created at Ikea just for these bulbs, all jumbled together in a cardboard box.

A little precarious me thinks.  My husband suggested we just put the bulbs in the ceiling fixtures, covered by glass.  I’m not as sanguine.  We aren’t always at home while other family members are.

Additional details about the new incandescent bulbs:

This law does not just affect a few light bulbs.  The whole lighting industry is being overhauled.  The lighting manufacturers are on board with these dramatic changes.  I lived in England when the government changed the currency from the old pound, shilling & pence to the new decimal system.  EVERYTHING cost at least 25% more because no one fully understood the new system-except, ironically, me.

-In 2009 I bought two new strings of Christmas tree lights at Target.  When I got them out in December 2010 the wire works needed a new fuse.  Uh oh.  I found new fuses at Target but they didn't fit my year old, now out-of-date light strings.  The "old" fuses are now, alas, unavailable.  I bought two more strings of bulbs.  Here we go again. 

-All new lampshades are designed to attach to the lamp instead of clipping onto the light-bulbs.  Those type of lampshades are no longer made.  If your lamp doesn't accommodate such a style it's now obsolete.

-While remodeling our bathroom two years ago I found a $10  fixture that held 4-40 watt bulbs.  Recently I tried to find the same one for another bathroom but it's no longer made.  A new model holds 6 light bulbs and cost $30.  However the maximum wattage per bulb is only 25 watts.  So to get the same amount of light (rather 10 watts less) costs $20 more for the fixture plus six bulbs instead of four.  How is this saving the planet again?

In the mid-1980 we repainted our whole house in Galveston, TX which was built in the 1930s.  At the time, we didn’t realize we’d probably been exposed to lead paint.  Lead was added to paint to increase its durability, retain freshness and speed drying.  Lead was banned as an additive to paint in 1977 (1920 in France).  There are continuing reports that older houses still expose children to lead paint toxins.

If you drive by a bridge that looks curiously tented while workmen repaint it, they’re shielding the environment from lead contaminants.*  I know this because my brother Mark was in charge of repainting a major bridge crossing the Mississippi River, near St. Louis, at St. Charles.  It arched so high over the river I was intimidated just to drive over it.  He wore this very sturdy harness device to catch him if he slipped.  The Mohawk Indian painters hired from New York practically danced on the iron beams, harness-less.  'Talk about hard to supervise.


The mercury light bulb boondoggle feels similar to the leaded paint calamity.  Except the medical research documenting the devastating effects of lead poisoning was not widely understood.  Now we know with certainty the harmful effects of mercury poisoning.   But still we’re risking exposure to a now terrible--KNOWN--contaminant. 


Also unlike lead paint or radioactive contaminants, how can you tell if the house you buy, or rent, or the daycare, schools, offices, or Ikea's light bulb bin, hasn’t had multiple mercury bulb breakages, improperly cleaned up?  Is there a mercury counter out there, like a Geiger counter?
http://baredevelopment.com/docs/epa_limit_exceeded.htm
http://www.sciencedaily.com/releases/2006/10/061026101406.htm
Mercury trivia:
       -Mercury, Roman name for Hermes, god of many trades
       -Mercury: one of the nine planets
       -Mercury -element- also called quicksilver; symbol Hg


*Lead is a dangerous substance. It is especially damaging to children under age six whose bodies are still developing. Lead causes nervous system damage, hearing loss, stunted growth, and delayed development.  It can cause kidney damage and affects every organ system of the body. It also is dangerous to adults, and can cause reproductive problems for both men and women.

One myth related to lead-based paint is that the most common cause of poisoning was eating leaded paint chips. In fact, the most common pathway of childhood lead exposure is through ingestion of lead dust through normal hand-to-mouth contact during which children swallow lead dust dislodged from deteriorated paint or leaded dust generated during remodeling or painting. Lead dust from remodeling or deteriorated paint lands on the floor near where children play and can ingest it.  What might we learn in years to come about all the ways mercury can contaminate our environment?