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Curtis Eriksmoen, Published November 10 2013

Did You Know That: FDR chose ND native to steer nation through banking crisis

Following the collapse of Wall Street in 1929, a banking crisis arose that contributed to the ruination of the American economy. When Franklin Roosevelt became president in March 1933, he believed that the man best able to steer the banking industry through the “worst financial crisis in U.S. history” was a former North Dakota native, J.F.T. “Jefty” O’Connor.

O’Connor was a lawyer who served two terms in the state Legislature and had run for the offices of governor and U.S. senator. Not only was O’Connor the first choice of Roosevelt to serve as comptroller of the currency, he was also his second and third choice. O’Connor twice turned down the president before accepting on the third request.

Following two narrow defeats against Lynn Frazier in which O’Connor received 49 percent of the votes in the race to become North Dakota governor in 1920 and 48 percent of the votes to become U.S. senator in 1922, he remained active in the Democratic political arena.

O’Connor strongly opposed the Nonpartisan League because of radical/

socialist views held within it. Another group he detested was the Ku Klux Klan. In the 1920s, the Klan was growing in North Dakota, especially in his home community of Grand Forks.

At the 1924 National Democratic Convention held in New York City, O’Connor was asked to give the seconding speech for presidential candidate William McAdoo, who had served as treasury secretary during Woodrow Wilson’s presidency. Another presidential candidate was Al Smith, a Catholic who was opposed by the KKK. Although it was unsolicited, McAdoo was endorsed by the Klan, and “he did not condemn the endorsement.” However, O’Connor did, and in his speech, he “declared in loud and clear tones, ‘I condemn the order known as the Ku Klux Klan.’ ” With that, a roar went up from many of the delegates. “The cheering was loud and was kept up for a fairly long period.”

Although McAdoo did not receive the nomination, he was impressed with O’Connor and named him as a partner of his Los Angeles law firm.

At the time, McAdoo had one other partner, William H. Neblett, who he had brought aboard the previous year. According to the book “Progressives at War” by Douglas Craig, the main clients of McAdoo, Neblett & O’Connor (M, N & O) in 1925 were the Bank of Italy, Piggly Wiggly, the Georgia and Florida Railroad, and friends from the Democratic Party who had large investment holdings, like Bernard Baruch.

In 1929, the stock market crashed, and the following year, O’Connor left the firm to form a partnership with ex-Judge C. J. Mulvane.

Joining O’Connor and Mulvane later in 1930 was an old friend, A. Guy Divet, who had been a lawyer in Fargo and Wahpeton, N.D. Although Divet was a Republican, he backed O’Connor in his bids to be elected governor of North Dakota and a U.S. senator.

Because of the Great Depression, a banking crisis existed in America. In 1932, voters elected Franklin Roosevelt as president, and when he took office in March 1933, he wanted a comptroller of the currency who had sound economic policies and could properly regulate the banking industry. To Roosevelt, that man was O’Connor.

After accepting the president’s offer, O’Connor was sworn in as comptroller on May 11, 1933.

When O’Connor began, he found that 1,417 national banks “were found to be insolvent” and owed their depositors an aggregate of more than $2 billion. Those banks were closed, and he would not allow them to reopen until significant approved changes were made. To assist the insolvent banks, he reorganized them and infused new capital through local or federal sources.

In many cases, O’Connor engineered mergers with stronger banks, and for those banks that were beyond saving, he installed an orderly liquidation process. He also set up a plan for the examination and monitoring of state banks and an insurance guarantee deposit that culminated with the establishment of the Federal Deposit Insurance Corp. on Jan. 1, 1934.

Another situation arose that concerned the president, and he turned to the former North Dakotan for his assistance. Early in 1934, author Upton Sinclair announced that he was running for the position of governor of California on the Democratic ticket. Sinclair was an avowed socialist and was very popular.

Roosevelt considered Sinclair to be an “interloper” and “urged O’Connor to run for the governorship.” In March 1934, at the California Young Democrats Convention, O’Connor “received the endorsement of the group by an overwhelming vote.” He then found out that McAdoo had given his support to George Creel, and O’Connor withdrew from the race. In the primary, Sinclair easily defeated Creel.

O’Connor resumed his work as comptroller until January 1938, and what he accomplished was remarkable. The banking industry was put on a solid footing, and of the $2 billion of insolvent deposits, 75 percent was repaid.

In 1938, Roosevelt once again urged O’Connor to run for governor of California, and he agreed. Because the incumbent, Frank Merriam, a Republican, had become highly unpopular, many prominent Democrats expressed an interest in seeking the nomination, including one of O’Connor’s former partners, William Neblett. Culbert Olson, a lawyer and former U.S. senator, won the primary and defeated Merriam in the general election.

On Aug. 28, 1940, President Roosevelt nominated O’Connor to be a federal judge on the U.S. District Court for the Southern District of California, and the Senate approved.

O’Connor died on Sept. 28, 1949.