Southern farmers’ postbellum fortunes, due to the gold standard and a reliance on questionable private credit, were at the mercy of volatile global cotton prices. Independent farmers could fend off high interest rates and scarce money when prices were high, but low prices threatened white and Black farmers with foreclosure and destitution. Southern politicians, fearing the distress caused by wild swings in commodity prices throughout the postbellum era, favored the creation of the Federal Reserve in 1913 to ameliorate some of the distress by ensuring farmers’ access to credit. However, they deemed further reforms necessary after the early 1920s crash and extended swell in cotton prices returned many southern farmers to the indigence of the 1880s and 1890s.
We explore how Southern congressmen, under pressure from constituent farmers, became disillusioned with the Federal Reserve as it was perceived to be prioritizing the recovery of the gold standard and reparations over the interests of domestic farmers. Congress, due to being caught within the Fleming-Mundell Trilemma, proposed several legislative initiatives aimed at redressing the perceived deficiencies of the Federal Reserve during the 1920s and 1930s that set the stage for the New Deal’s most enduring agricultural legislation. These initiatives included attempts to create cheap and reliable credit for farmers, such as expanding the Federal Land Banks, abandoning the gold standard, and creating a parallel credit arm inside the Department of Agriculture. In doing so, Southern politicians sought to achieve a degree of agency over global prices. Drawing on original research performed at Congressional archives across the U.S. South, in the spirit of Julian Zelizer’s approach to the post-war welfare state, we seek to recover a forgotten observation by Arthur Schlesinger that Congress “on crucial occasions” was the New Deal’s policymaking engine, as opposed to the Executive Branch and so-called “Brain Trust.”