powers to oversee credit and the money supply. Learning from its mistakes, the Fed was to use these powers very effectively in the stock market crash of 1987. That is why today, only 14 years later, that crash is nearly forgotten.

The national banks lost their power to issue notes, and the Federal Reserve became the sole supplier of paper money—except for the Treasury’s onedollar silver certificates, circulated until the 1960s. The Fed was also given increased power to regulate interest rates, including margin requirements on Wall Street.

The Glass-Steagall banking act of 1933 forced the great Wall Street banks, which were often conveniently blamed for all the economic troubles, to become either depository banks or investment banks. In other words, it separated the banking business from the securities business. J. P. Morgan and Company, which remained a depository bank, was forced to spin off Morgan Stanley as an independent investment bank and would never again have the extraordinary power it had possessed.

And Glass-Steagall established the Federal Deposit Insurance Corporation, to insure bank deposits up to $5,000 (now $100,000). The purpose was to remove any incentive for depositors to panic and suddenly withdraw funds based on rumors of impending bank failures. It has certainly been a success—the country has not experienced a serious banking panic since. But it also, in the long term, made banks less cautious about where and to whom they loaned money. This would have severe consequences half a century later, when the savingsand-loan industry vanished in a sea of red ink, and the federal government had to pay depositors billions.

Wall Street brokerage firms as well came under federal regulation for the first time, with the establishment of the Securities and Exchange Commission, intended to curb the excesses that had plagued Wall Street in the 1920s. The New York Stock Exchange had become one of the most important financial institutions in the country, but it had remained, in both form and substance, a private organization, run for the benefit of its members.

This had led to many abuses, as the members, operating on the floor of the exchange, formed pools and otherwise manipulated stocks at the expense of the general public. Roosevelt appointed Joseph P. Kennedy, himself a major stock speculator in the 1920s, as the SEC’s first chairman. Many thought this meant the fix was in, but Kennedy proved an able choice and got the SEC off to a good start. It was the commission’s third chairman, however, William O. Douglas (who later sat on the Supreme Court for more than 30 years), who instituted major reforms and persuaded the Stock Exchange to write a new constitution. That transformed it into a quasi-public institution, one far better able to meet the public needs than ever before.

The labor movement was also transformed by the New Deal. In the prosperous 1920s, membership in labor unions had shrunk considerably. Then, as the Depression deepened, the

conflict between labor and capital intensified. The Roosevelt administration was strongly on the side of organized labor, and in 1935 the National Labor Relations Act reshaped the situation.

It guaranteed the right to organize and bargain collectively and outlawed many practices companies had been using to prevent union activity. The country’s largest industries were unionized in the late 1930s, although not without considerable resistance and some real violence. On Memorial Day 1937, police fired on demonstrators outside the Republic Steel plant in Chicago, killing 10 and wounding 84.

By the end of the New Deal era, organized labor had become a major part of the economy, with political influence to match. By the 1940s, more than a third of America’s workers would be unionized.