Building Trust: The Power of Clarity

President Franklin D. Roosevelt’s Fireside Chats are one of history’s most successful examples of using language to win public trust. In the depths of the Great Depression, FDR calmly addressed the public, which was shocked by bank failures across the country.  For his all-important first “chat,” FDR called on one of his closest advisors, Harry Hopkins, for a way to explain the crisis (and its solutions) to a desperate and terrified public.

Hopkins is best known as the designer of many New Deal programs. Under his leadership, relief programs such as the Federal Emergency Relief Administration (FERA), the Civil Works Administration (CWA), and the Works Progress Administration (WPA) provided income, independence, and restored dignity to millions of American families suffering during the Great Depression. What is less known about Hopkins, however, is that he played a crucial role in crafting the simple language used throughout Roosevelt’s public addresses, or that he was Roosevelt’s primary collaborative partner for the pivotal Fireside Chat that helped end the 1933 Banking Crisis.

Let’s examine FDR’s first presidential Fireside Chat for leadership tools we can apply today. Our role model, Harry Hopkins, shows us how to use clarity and transparency to explain a complex and emotional subject, and the trust such an approach can garner.
 
THE CHALLENGE
The Great Depression, which began with the stock market crash of 1929, significantly weakened the American economy. As businesses failed, Americans began to fear banks would lose what little money they had left, and people rushed to withdraw their funds—which is known as a bank run. These mass withdrawals, combined with unregulated and risky actions that left banks vulnerable to financial shocks, created a cascade of failing banks, and the banking industry collapsed. In an attempt to restore stability, Roosevelt declared a nationwide “bank holiday” on March 6, 1933, temporarily closing all banks to prevent further bank runs. During the bank holiday, Roosevelt’s administration crafted the Emergency Banking Act, which provided a framework for reopening financially sound banks, and reorganizing or permanently closing those that could not be saved. The question was, would the destitute American people trust what little money they had in a banking system that had so recently failed?
 
REBUILDING TRUST: The First Fireside Chat
With healthy banks scheduled to reopen on March 13, a lot was riding on Roosevelt’s March 12 radio address. Hopkins understood that success hinged on accessibility, and he provided Roosevelt with a detailed outline, distilling complex financial information into plain and familiar language.

Working closely from Hopkins’s notes, Roosevelt demystified how banking worked.

First of all, let me state the simple fact that when you deposit money in a bank, the bank does not put the money into a safe deposit vault. It invests your money in many different forms of credit... In other words, the bank puts your money to work to keep the wheels of industry and of agriculture turning around. A comparatively small part of the money you put into the bank is kept in currency—an amount which in normal times is wholly sufficient to cover the cash needs of the average citizen…

…and what caused the banks to fail.

What, then, happened during the last few days of February and the first few days of March? Because of undermined confidence on the part of the public, there was a general rush by a large portion of our population to turn bank deposits into currency or gold—a rush so great that the soundest banks could not get enough currency to meet the demand. The reason for this was that on the spur of the moment it was… impossible to sell perfectly sound assets of a bank and convert them into cash, except at panic prices far below their real value.

Perhaps the most crucial aspect of Hopkins’s guidance was the emphasis on transparency. He worked with Roosevelt to craft simple language that exposed the corruption at the heart of the crisis: Some of our bankers had shown themselves either incompetent or dishonest in their handling of the people's funds. They had used the money entrusted to them in speculations and unwise loans. Then he helped Roosevelt explain what the American people could expect as banks reopened.

​The new law allows the twelve Federal Reserve banks to issue additional currency on good assets and…the new currency is being sent out… in large volume to every part of the country… As a result, we start tomorrow, Monday, with the opening of banks in the twelve Federal Reserve Bank cities… This will be followed on Tuesday… by banks already found to be sound… On Wednesday and succeeding days, banks in smaller places all through the country will resume business… It is necessary that the reopening of banks be extended over a period… to enable the Government to make common sense checkups… I hope you can see from this elemental recital of what your government is doing that there is nothing complex, or radical in the process.

By using plain, jargon-free language, Hopkins helped Roosevelt demystify the crisis and explain his ideas in a way that was less intimidating to a frightened nation. His advice to emphasize transparency had the immediate effect of restoring the public’s confidence in the Roosevelt administration and gave the American people confidence to invest in the newly rehabilitated banking system. Sixty million people listened to the radio address, and the next day, newspapers around the country reported long lines of people waiting to put their money back into the banks.

​Hopkins’s clear, honest communications had created the strong, emotional connection and trust Roosevelt needed to lead the country out of crisis. We, as leaders, can learn a lot from this straightforward approach.

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