The Diagnoses, Right and Wrong, of O.M.W. Sprague, One of America’s Premier Money Doctors During the Great Depression

O.M.W. Sprague was one of America’s leading money doctors during the Great Depression. He had impeccable credentials. He was the author of a leading textbook on money and banking, the first professor appointed to the Harvard Business School, and the author of The History of Crises Under the National Banking System, an often-cited classic. Sprague’s opinions were sought by the press, and he advised the U.S. Treasury. The paper describes how his analyses of earlier financial panics produced his prescriptions the Great Depression. While agreement among modern-day economic historians is not unanimous, Sprague seems to have missed the mark on three issues. (1) Today, most financial historians believe that the waves of bank failures should have been met with forceful lender-of-last resort actions by the Federal Reserve. Sprague disagreed. (2) Sprague endorsed the National Industrial Recovery Act, a measure that was soon abandoned and that has been criticized by modern-day economic historians. (3) Sprague resigned his Treasury position to protest the devaluation of the dollar because he believed that every effort should have been made to maintain the gold value of the dollar, a position inconsistent with the majority opinion of modern-day economic historians.