Of shakedowns and slush funds.

June 21, 2010, 10:22 am

In response to the Mississippi River flood of 1927, the administration of Calvin Coolidge dispatched Herbert Hoover to serve as what we would nowadays call the “czar” of the flood relief effort. Among other tasks, Hoover set about raising money for a cleanup and reconstruction fund. From John M. Barry, Rising Tide:

On May 24, he [Hoover] called a meeting of thirty Memphis bankers and businessmen at the Peabody and told them their quota was $200,000…. Those assembled shifted uncomfortably. One man protested. Suddenly, Hoover began to curse, his words as rough as those he had used decades before to miners a thousand miles from civilization. Then he made a simple promise. About 25,000 black refugees were in camps in Memphis. It was 2 P.M. He gave them to 5 P.M. that day to deliver pledges for the money. “If not,” he warned, “I’ll start sending your niggers north, starting tonight.”… By five o’clock he had his $200,000. (367-368)

Now, that’s a real shakedown (unlike those described here): Hoover threatened to accelerate the great migration of African Americans out of the South, depriving local business of needed labor, if he didn’t get subscriptions to his relief funds. And he got those subscriptions from Memphis businessmen who bore no direct responsibility for the catastrophe.

But here’s the other thing: the funds were designated for lending based on standard criteria for lending, i.e., available collateral. “[H]is massive financing effort accomplished next to nothing,” Barry writes (377), because little—maybe 5%—of the money ever got disbursed.

So there’s getting the money and there’s getting it out to where it can do some good. Hoover was aggressive about the former and lackluster at the latter. Let’s see what happens with the current efforts.

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