When Franklin D. Roosevelt assumed the presidency in March 1933, the United States was facing an economic emergency that some observers considered more serious than war. The nation was plunging deeper into the Great Depression, prompting real fears that representative democracy might not survive the mass hunger, unemployment, and desperation of the era. However, Roosevelt was not looking to destroy American capitalism; he was actively trying to save it from itself. “To preserve,” FDR later reflected, “we had to reform”. Recognizing that the status quo of the economic system needed to be made humane, fair, and honest, the Roosevelt administration launched the “Hundred Days,” an astonishingly productive legislative period that fundamentally reorganized the American political economy.
To correct the speculative excesses that had caused the 1929 stock market crash, the New Deal erected a robust new architecture of financial regulation. Following the explosive Pecora Hearings, which exposed the malfeasance of Wall Street’s elite, Congress passed the Glass-Steagall Act in 1933. This landmark legislation severed commercial banking from investment banking, mandating that banks could either take deposits and make loans or merchandise securities, but they could no longer do both. The law was designed to restore sobriety to American finance and prevent banks from repackaging bad loans into bonds and fobbing them off onto unwary investors. Furthermore, the administration championed the Securities Act of 1933 and the creation of the Securities and Exchange Commission (SEC) in 1934 to regulate the stock exchanges. These truth-in-securities laws demanded full disclosure from corporations, effectively replacing the old standard of caveat emptor (let the buyer beware) with caveat vendor (let the seller beware).
Beyond financial markets, the New Deal sought to balance the scales between massive corporations and ordinary workers. Through the passage of the National Labor Relations Act of 1935, better known as the Wagner Act, the federal government explicitly guaranteed workers the right to organize into unions and imposed a legal responsibility on employers to engage in collective bargaining. This legislation repudiated decades of anti-union hostility and unleashed a massive wave of unionization across American industries, empowering the middle class to demand a fairer share of the nation’s economic output.
Despite his massive popularity and the passage of these sweeping reforms, Roosevelt quickly collided with the conservative majority on the Supreme Court. Heavily influenced by Lochner-era doctrines of “substantive due process,” “liberty of contract,” and a rigid interpretation of the Commerce Clause, the Court’s conservative bloc viewed the New Deal as an unconstitutional infringement on states’ rights and private property. Between 1933 and 1936, the Court struck down acts of Congress at ten times the traditional rate, leaving the centerpieces of the New Deal—including the National Recovery Administration (NRA) and the Agricultural Adjustment Act (AAA)—in ruins. Roosevelt bitterly complained that the justices had created a “no-man’s-land” where no government, whether state or federal, possessed the authority to function.
Following a historic landslide reelection in 1936, Roosevelt decided he possessed the mandate to break this judicial blockade. In February 1937, he unveiled a bombshell proposal to expand the size of the Supreme Court. Taking advantage of the fact that the Constitution does not specify the exact number of Supreme Court justices, Roosevelt’s plan asked Congress to add one new justice for every sitting member over the age of seventy, which would have allowed him to immediately appoint up to six liberal justices and expand the Court to fifteen. To disguise his ideological motives, Roosevelt claimed the “Nine Old Men” were overwhelmed by congested dockets and that the judiciary needed the “infusion of new blood” to speed up the administration of justice. The “court-packing scheme” triggered fierce, across-the-board opposition from the press, Republicans, and many of FDR’s fellow Democrats, who decried it as a “bloodless coup d’état” and a dangerous step toward dictatorship.
Ultimately, Roosevelt’s controversial plan died in the Senate, but it succeeded in its broader objective of pressuring the Court to abandon its obstructionism. In the spring of 1937, Justice Owen Roberts broke with the conservative bloc, joining the liberals to uphold a state minimum wage law in West Coast Hotel Co. v. Parrish. This historic pivot—forever known as “the switch in time that saved nine”—was followed by decisions affirming the constitutionality of both the Wagner Act and the Social Security Act.
The Supreme Court’s capitulation marked the death of Lochner-era jurisprudence and a monumental shift in American law. The justices discarded the restrictive distinction between “direct” and “indirect” effects on commerce, acknowledging that the federal government’s power to regulate the national economy was virtually without limit. By abandoning its defense of pure laissez-faire capitalism, the Court ensured that the New Deal’s vast regulatory apparatus would survive, cementing a new social contract that protected workers and constrained corporate monopolies for decades to come.