100 Days

“He’s the absolute right commander in chief . . . You know whether it was Lincoln, Roosevelt. And, I would say Obama, you couldn’t have anybody better in charge.”
-Warren Buffett, January 19th, 2009 on Dateline

President Obama was inaugurated as the 44th President earlier today and he will be entering office with some of the highest expectations of any incoming President. This is both a blessing and a curse. The naysayers obviously argue that he can only fail given the high expectations that come with being compared to some of the most prominent Presidents in history, as Warren Buffet compares him to above. On the flip side, he has the approval rating, and thus the mandate, to accomplish a great deal in his first 100 days in office – a time period which often marks the success or failure of a President’s term.

Keith and I have spent the last few months reading, discussing and referencing Franklin Delano Roosevelt. In many ways, he is the most appropriate Presidential comparison for President Obama. FDR gained the Presidency in a time of severe economic crisis and inherited the office from a predecessor, President Hoover, that was broadly unpopular.

FDR is one of the more widely studied Presidents in history and while conventional wisdom has concluded that he was a great President, that conclusion is certainly open to debate. The success of FDR’s first 100 days is less open for debate and will provide a framework to evaluate Obama’s early success. If we were to characterize the template of success from FDR’s first 100 days in three words, they would be communication, action, and flexibility.

FDR’s inaugural speech had one of the now most frequently quoted lines from any inaugural speech:

“Let me assert my firm belief that the only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyzes needed efforts.”

Ironically, the power of this line was not recognized until well after the speech was given and the major newspapers of the day did not even highlight this line in their reporting of the speech the next day. Nonetheless, the speech was raved about by the papers and introduced an engaging Presidency that was in sharp contrast from the Hoover Presidency. FDR spoke openly with the media, on good terms, and, even more importantly, communicated directly with the U.S. people primarily via the radio through his Fireside Chats.

The power of communication is obviously difficult to quantify, but can be seen in the numbers of opinion polls and the actions of the public. FDR’s second major speech was his first Fireside Chat. The subject of this speech was the run on the banks that was occurring in the U.S. at the time. In the speech, FDR attempted to explain, in simple terms, the importance of the banking system and in keeping your funds in the bank. In the following line he also went so far as to shame citizens who withdrew money from the banks:

“I can assure you, my friends, that it is safer to keep your keep your money in a reopened bank than it is to keep it under the mattress.”

With this speech, and the confidence it once again gave people in the banking system, FDR reopened the banks the next day and the banking system broadly saw a massive inflow of deposits.

Undoubtedly Obama has among the more impressive oratory skills of any politician we have ever seen on the national stage and his inaugural address from just hours ago will be one that will be reflected on for month and years to come. Beyond this first speech, a significant indication of Obama’s initial success as President will be the willingness of American consumers to reassert their confidence and engage in commerce in the coming months as they did with FDR by putting their money back into the banking system.

Once inaugurated, FDR did not waste his popularity or the political capital that the election had bestowed on him. In his first 100 days, from roughly March 9 to June 16th, 1933, FDR sent an unprecedented number of bills to Congress, which all passed easily. Among the major bills that were passed by Congress during this time period were the bill that created the Federal Emergency Relief Administration, the Civilian Conservative Corps, the Reconstruction Finance Corporation, and the Tennessee Valley Authority. Congress also gave the Federal Trade Commission broad new regulatory powers and provided mortgage relief to millions of farmers and owners.

While there are parallels between 1933 and 2009, we are not nearly in the state of economic crisis that faced FDR as he entered his Presidency. Most notably in 1933, the bank system was effectively frozen, unemployment was near 25%, and GNP over the course of three years had fallen by close to 25%. Clearly, President Obama does not face an economic crisis of the same magnitude that enabled FDR to get broad legislative support for his initiatives, but Obama’s recovery bill, The American Recovery and Reinvestment Bill of 2009, which now amounts to over $825BN seems likely to get passed in the first few weeks of his Presidency.

The final key component to FDR’s success in his first 100 days was a willingness to be intellectually and ideological flexible in looking for and adopting solutions to the economic crisis. As Margaret Ferguson of the Indianoplis Star recently wrote:

“ Roosevelt's greatest strength was that he offered solutions but avoided ideological grandstanding. If a program failed, Roosevelt did not hesitate to reject it and move on.”

Obama has already shown a flexible willingness to work across party lines, which has been emphasized by consistent outreach to his former Presidential Rival, Senator McCain.

It seems likely that Obama’s predecessor, President Bush, saved Obama the unpopular requirement of bailing out the nation’s banking system, although there is some likelihood, at least based on how the stocks of Citigroup (down -18% as of 3pm today) and Bank of America (down -21% as of 3pm today) are trading, that more capital is required. Generally speaking though, Obama now has the opportunity to implement change, which is manifested in his recovery plan to promote a more broad based consumer led recovery, but he has retained the flexibility to tweak this plan as needed.

In his first week of office, FDR left the White House, partly as a shot at his predecessor Hoover who famously told FDR that the President visits no one, and paid a call on retired Supreme Court Justice Oliver Wendell Holmes on the occasion of his 92nd birthday. According to his former clerks Tommy Corcoran and Donald Hiss, Holmes told the President:

“You are in a war, Mr. President, and in a war there is only one rule, “Form your battalion and fight.”

President Obama has followed this advice well. He has formed a solid economic battalion in the way of Summers, Geithner, and Volcker (to name three) and is charging forward with a large and broad based recovery plan. Even the most partisan of Republicans will have a hard time not supporting President Obama over the next 100 days.

Daryl G. Jones
Managing Director