One of the least-covered aspects of the recession of 1937 is the then-new monetary law under which the country was operating. Marriner S. Eccles of Utah had agreed to be Federal Reserve chairman, but only on condition that President Franklin D. Roosevelt oversee passage of, and sign, new legislation redefining the Fed's job.

In 1935, at a luncheon of the National Republican Club in New York, Theodore Roosevelt, the son of the late president, criticized his cousin Franklin and predicted that the new law, the Banking Act of 1935, was another step toward dictatorship.

Another critic, Thomas F. Woodlock, an editor at the Wall Street Journal, worried about the Fed gaining a new power: the ability to change the ratio of reserves it required member banks to keep on hand. He was also appalled that member banks would be permitted to lend on real-estate mortgages.

Woodlock said that of all the New Deal measures, the new Fed law was "the most dangerous in its possible consequences."

This language was extreme. But the Fed did indeed play around with its new toy and raised the share of money the banks had to set aside. Some scholars blame the Fed's increased reserve requirements for the "depression within the Depression."

(Amity Shlaes, a Bloomberg View columnist, oversees the Echoes blog. The opinions expressed are her own.)

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