A history of trust and confidence
Historian Sean Wilentz
TEXT OF STORY
Kai Ryssdal: The FDIC is maybe the government agency we're most worried whether about we should trust or not. But if you really want to explore the idea of trust in modern government and financial institutions in this country, you have to go back a ways -- to the guy who figured out why we needed the FDIC and massive government intervention in the first place.
Franklin D. Roosevelt: My friends, I want to talk for a minutes with the people of the United States about banking....
FDR gave his first fireside chat eight days after he was inaugurated.
Sean Wilentz: He was able, in his fireside chats in particular, to give Americans a sense not only that the only thing they had to fear was fear itself, but that there was somebody in the White House who understood what they were up against and he was going to do something about it.
Princeton historian Sean Wilentz will be our guide through this short primer on trust and confidence in this country.
Wilentz: By the time we got out of World War II and when an entire generation or American men and women came back wanting what was called normalcy -- things had been so abnormal for so long -- so under those conditions and amid the economic boom of the 1950s and early 1960s, faith in the financial order, trust in the corporate structure was reinforced.
Still, for all that trust, people were plenty nervous. A Gallup poll in August of 1946 showed 60 percent of the country was expecting another Great Depression within the next 10 years. What they got instead was 20 years of unprecedented economic prosperity and then a decade of political turmoil.
Wilentz: Vietnam and Watergate combined managed to blow the center out of the American political system in both political parties and that level of mistrust generalizes out so that basically anybody in public life is not to be trusted.
With that as backdrop then, let's skip right over Richard Nixon saying he's not a crook and Jimmy Carter promising he'll never lie to us and interest rates shooting up to the high teens by the middle of 1981 and cut right to the spring of last year and Ben Bernanke, the chairman of the Fed, trying to predict the future.
Ben Bernanke: The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.
"Contained," he said. Sure, it was tricky for the Fed chairman to know exactly how the subprime crisis would play out, but we all trusted him. Investors sure did. The Dow hit its record six months after he gave that testimony.
Wilentz: For complicated, extremely complicated global, economic and political worlds such as what we live in today, I mean, unless you can be sure that the person you're talking to is going to deliver on what he or she says he's going to, you're not going to be able to do anything.
And then there's this, drawn from the headlines a week ago, a press conference by Treasury Secretary Henry Paulson:
Henry Paulson: This action plan provides a coherent framework that will direct our individual and collective policy steps to provide liquidity to markets, strengthen financial institutions, protect savers and enforce investor protections.
So how do you trust somebody when you have a hard time figuring out what they're saying?
Wilentz: Well, that's a big problem, and yes, I think one of the problems that we have today is that -- well, it's two-fold -- one is that I don't think that the policy makers entirely understand what's going on, but they certainly do a less than admirable job of explaining what they do understand. So people are petrified at the moment.
I asked Wilentz whether it's possible to get trust and confidence that's gone back and he said sure, all it would take is someone who could do what FDR did.