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1932 › Franklin D. Roosevelt (Democratic) › Regulation of securities issuance and exchanges
No implied government approval of foreign bond sales; officials will not try to move stock prices
pledge_forwardspecific_pledgecandidate_directevidence A Banking & FinanceCorruption & Reform similar solutions · similar reasoning
Solution
Two executive policies requiring no legislation: (1) end the practice by which international bankers sell foreign securities on the implied understanding that the State Department has passed on them; (2) high officials of the next administration "will neither by word nor by deed seek to influence the prices of stocks and bonds."
Rationale
Administration statements "that have had no relation to the scientific information which it possessed" shook public confidence; restored confidence in the Executive's statements "is indispensable."
Statements (3)
I promise you that it will no longer be possible for international bankers or others to sell foreign securities to the investing public of America on the implied understanding that these securities have been passed on or approved by the State Department or any other agency of the Federal Government.
I assure you that high public officials in the next Administration will neither by word nor by deed seek to influence the prices of stocks and bonds.
My job will be to prevent a recurrence of this incident, to prevent the hard-earned dollars of American investors from being frittered away in foreign fields, with the encouragement of the Federal Government of the United States, and with profit only for certain international financiers whose greed exceeds their patriotism.
Follow-through
keptcontested among sources
The administration sponsored the Foreign Bondholders Protective Council (October 1933) to handle defaulted foreign bonds as a private body without government guarantee, and the Securities Act denied any implication of federal approval of new issues. Roosevelt's own daily gold-price announcements in late 1933 moved markets, a practice critics called exactly what Columbus had forsworn.
Mechanisms
| Date | Type | Name | Effect | Consistent? | Source |
|---|---|---|---|---|---|
| 1933-05-27 | statute | Securities Act disclaimer of federal approval | Of course, the Federal Government cannot and should not take any action which might be construed as approving or guaranteeing that newly issued securities are sound in the sense that their value will be maintained or that the properties which they represent will earn profit. | yes | Message to Congress on Federal Supervision of Investment Securities. |
| 1933-10-20 | other | Foreign Bondholders Protective Council | Private council; no State Department passing on foreign issues. | yes | Statement on the Formation of an Organization to Protect Holders of Foreign Securities. |
Assessments
The implied-approval practice ended; the gold-buying program is the arguable exception.
Other positions on this issue
- Federal regulation of securities and commodity exchanges, interstate holding companies and interstate utility rates — Franklin D. Roosevelt, 1932 specific_pledge
- Require full public disclosure on all offerings of stocks and bonds — Franklin D. Roosevelt, 1932 specific_pledge
- No federal 'blue sky' law — securities regulation belongs to the states, and the President should not police booms — Herbert Hoover, 1932 directional_stance
- Keep federal regulation of securities marketing and interstate utilities, vested in independent tribunals under definite standards subject to court review — Alf Landon, 1936 directional_stance
1932-fdr-no-official-market-tipping · created by claude-fable-5-1 · review: unreviewed