1930’s

I. President Hoovera. Business seemed sold, incomes were rising, and the chief

architect of Republican prosperity was about enter the White House in 1929. He was an engineer and businessman who had a reputation of accomplishing things. As a young college graduate, Hoover had managed a gold mine in the Australian desert and then gone to China as a mining expert. After that he got involved (successfully) with Burmese tin and Russian oil. He was a very capable man. When Wilson needed someone to help feed Europe’s starving people during and after the WWI, he chose Hoover.

b. He wasn’t like Harding or Coolidge though. He wasn’t simple and down to earth. He had the reputation of being stiff.

c. Forgotten in the coming months would be his credentials as a progressive and humanitarian president.

i. Hoover first entered government organizing food relief for Belgium in 1914. In 1917 he became the US Food Administrator when the US entered WWI. He had experience in government that was based around using the levers of power to stabilize prices, etc. He wasn’t completely hands off in terms of government control and regulation.

ii. He was planning a tax reduction for low-income brackets, shunned corrupt patronage practices, and hated Red Hunts. Defended his wife’s right to invite prominent blacks to the White House, and he sought more money for all-black Howard University.

iii. His election platform contained the central idea that Coolidge hadn’t done enough to support farmers.

1. Prices were to low-farmers were producing too much. The only segment of the economy that was hit by under-consumption. When he became president he passed the Agricultural Marketing Act. The Agricultural Marketing Act created a loan fund of 500 million to help farm cooperatives market products.

2. He proposed higher tariffs on imported farm products. This would result in the Hawley-Smoot

Tariff of 1930 which inadvertently continued the crisis.

II. Economic Crisisa. Most Americans had come to assume during the 1920’sthat

there would never be another depression. People that that American business had entered a New Era of permanent growth. Such talk promoted an array of get-rich-quick schemes.

i. Speculative mania fueled the FL real-estate boom (The Model T made it accessible). The boom collapsed in 1926 but the stock market took up the slack.

ii. In 1919, the "Great War" was over.  European countries were struggling, from all the deaths and the financial drain of funding the fight, but America was just entering a boom time.  Cities and towns across the country were connecting to electrical grids.   A new tax break from the Hoover Administration in 1929 gave middle and lower class people more in pocket money. Also, for the first time, people could buy on credit.  "Buy now, pay later" was a new concept at the time.  Suddenly cars, and other big-ticket items, were available for the non-wealthy. Charles Mitchell, president of National City Bank, remembered how Americans had supported their country during the war - by buying war bonds - and "spotted a lucrative gap" in the financial markets.   Now that the Great War was over, why not give those war-bond-buying investors a chance to keep buying bonds?  And ... why not add stocks to the mix?  Instead of supporting the war, they could support private industry - and make a profit, at the same time. What had once been risky, for individuals, now seemed like the thing to do. Mitchell opened brokerage offices throughout America.  People with some money (but not with financial savvy) could (and did) buy stocks. All of a sudden, the risks seemed small while the potential profits seemed huge.  Wow ... people began to think ... let's join the rush to buy what had once seemed out of reach.  And ... they did, just that.

b. Speculation

i. Scenario1. Imagine you are the owner of a large company (ABC

Pizza). You make amazing pizzas and want to expand. You need to buy another restaurant and more equipment. So you need money. Remember this is a time of high demand so everyone wants your pizza. You think you have a high chance of success. You borrow money from the bank, or borrow on the margin, to start building your new business. You buy all your equipment. Your business takes off and now people want a piece of the action as well. Your friends all contribute to help your business or invest in it. They own part of your business and this is called having stock. As the profits increase, because they contributed money they will also get a share in it. For example if your friend bought 10 shares of the business, and you have divided up the business into 100 shares, your friend would know own 10% of the business and you would have to give him whatever your business is worth if they decided they didn’t want to be an owner anymore. You might have decided to put your business into the market where lots of businesses have people buy parts/shares. That is called the stock market.

2. However, the prices of the goods keep increasing and increasing during this time. They were selling for much more than they were actually worth. The money that your friends make is called capital gain. People have to pay a lot of money for the pizza, but you’re making a killing!

3. Your friends decide to sell the stocks to someone else who wanted them. They are worth much more so now than they were in the beginning.

4. Your friends gain lots of money from the sale but are greedy to keep investing. They need a little more money to get started. The pizza stocks originally cost $100.00 and they had to borrow $90.00 and give a $10. Down payment. They stocks increase to $200.00! So they sell the stock pay back the $90. That they borrowed from the bank and still made $100.00 in profit! Now they want to invest more.

But they need more money. So they borrow more from a bank and give a small down payment. The profits soon start rolling in!

5. This type of market is called a bull market. However, it was soon to become a bear!

6. For some reason, prices stop to drop on the stocks. No one knew why. You and your friends see this. You have a lot of money invested. Your broker sees this to. If the prices of your investments drop, you’ll lose money. So, you decide to save as much money as possible. You want sell your stocks. You figure you’ll still make more money than you bought the stocks for-just like before. But everyone is now selling. They had the same idea as you. If everyone is selling, are people buying? No. Who are you going to sell your stocks to? Unfortunately, your broker beat you to it anyway. He sold the stocks. You had made a down payment of $10 on each stock. You no longer have a stock so you lost that $10. But remember you also borrowed money for the rest of the stock-each cost $100. You can’t pay back the bank who gave you the loan for $90 on each stock (the total amount minus the down payment). You still owe the money.

7. You figure you’ll just work some overtime. Wait, everyone just lost a ton of money and your pizza business just lost a ton of support. You have to reduce the prices of pizzas. People can’t pay the reduced amounts either. You aren’t making any money to support your staff so you need to lay people off. Well, that doesn’t help give people money to buy your food either. Your business folds! You are out of work!

8. Now you are broke. You have a car. A house. A nice fancy kitchen set. The bank wants its money. You start to sell your possessions.

9. However, even selling your possessions can’t earn you enough money to repay the bank. The banks close!

ii. It was easy to get rich quick in the 1920’s-all you needed to do was play the stock market. Until 1927, stock values had risen with profits but then they began to soar on

wings of fanciful speculation. Almost overnight the stocks seemed to double or triple in value. They were costing far more than the products/companies were worth. During the 1920’s, people began to buy things on credit. They would make a 10% down payment and borrow the rest from a broker. Prices would increase so even a 10% purchase allowed a generous profit. As people became comfortable buying stocks, speculation became comfortable, too.  When stories of overnight fortunes were reported in the news, regular folks wondered:  Why not me?As the boom market continued, people were increasingly willing to buy stocks with borrowed money.  The "buy now, pay later" method of credit was introduced to the stock market as "buying on margin."  The deal was to put some of the money down, then pay for the rest of the shares with profits when the paper was sold.  The concept works, provided that the stock prices keep going up. Buying on margin became so popular that by the late 1920s, "ninety percent of the purchase price of the stock was being made with borrowed money."  Not only that ... the U.S. economy had come to depend on that activity.  Before the crash, nearly forty cents of every dollar loaned in America was used to buy stocks.As more people bought stocks with borrowed money, the demand for stocks increased - as did the prices.  In 1928 alone, the stock market doubled.Applying the formula of the time, a person with $6,000 could buy $60,000 worth of stock because all one had to do was put down 10% of the purchase price.  With a market going ever upward, who would have thought about "paying the piper" - that is, the rest (90%) of the purchase price - in the event the value of the stock "tanked?"Recklessness became part of the national consciousness.  "The market takes care of things pretty well," so why not join in?Calvin Coolidge, then President of the United States, had

friends in the financial industry.  Regulations, at the time, were so minimal that "the street" could run itself. The close relationship between Wall Street executives, and federal government officials, allowed "the market" to be a law unto itself.  "The street" was like a large gambling casino "which was rigged by professional speculators.  As smaller investors gambled with their life savings, they failed to realize that the decks were stacked against them." In March of 1929, a new president - Herbert Hoover - was elected.  He did "nothing to reign-in this wild speculative fervor."  Even so, he was personally worried that the "bubble" might burst. Paul Warburg - in March of 1929 - worried that a collapse of the market could lead to a serious national problem.  He even used the word "depression" which could sweep across the whole country. Most people thought he was off-the-mark.  Some folks even "shouted him down." No one wanted to hear bad news when everything was going so well. When people - like Groucho Marx - questioned how prices could just keep going higher, they were told that America was now part of "a global market."  Some speculators - like Joseph Kennedy (the future President's father) - thought it was probably time to get out "when the local shoe-shine boy knows as much about the stock market" as he did.  Then ... after life had continued on its merry way for five years ... reality set in.

c. Declining economy 1927-1929i. Housing construction and automobile sales were meeting

demands now and not producing less than demand, business inventories rose, rate of consumer spending slowed. Production and employment were declining. But the stock market rose driven by excessive confidence and perennial greed.

d. Crash 0f 1929i. Early in 1929, the stock market had become a fantasy

world. Conservative financiers and d brokers counseled

caution but went unheeded. Hoover was worried too and discouraged speculation.

ii. September 4, the prices wavered and the next day dropped. It staggered on into October trending downward but with enough good days to keep hope alive.

iii. October 22 a leading ban president told reporters “I know of nothing fundamentally wrong with the stock market or with the underlying business and credit structure.”

iv. On the 23rd of October, 1929, share prices on the New York Stock Exchange started to plunge.  No one knew why.  No one knows what triggered the sudden loss of confidence which first surfaced near the end of trading on the 23rd of October, 1929.  A sharp fall in automobile stocks led to a frantic last hour. There were lots of sellers but very few buyers.  Within one hour, staggering numbers of shares were sold.

v. The next day - Thursday, October 24th - was the beginning of the crash.  That day is now remembered as "Black Thursday." As the market plummeted, stunned people tried to figure out what was going on.  Some individuals were getting totally wiped out, and police were sent-in to maintain order if things got out of hand. There was a wild scramble to unload stocks. Winston Churchill, who had also invested in the New York stock exchange, happened to be in New York at the time.  He was surprised things were as calm as they were. Winston Churchill lost a fortunate in the New York stock exchange crash.  He was not alone. When people lost confidence in the market, everything took a dramatic downward turn.  How could "the street" avoid a total financial meltdown? Lasted until word arrived that leading bankers had formed a pool to stabilize prices. Charles Mitchell met with some of the wealthiest men of America.  What could be done to support the stock market?  No one could have foreseen "the great crash."  They agreed to use $250,000,000 to support the stocks. Hoping the symbolic act would turn

the tide, these titans of industry were pleased when their strategy seemed to be working.  But ... things wouldn't stay calm for long.

vi. Thomas Lamont addressed the public, trying to assure everyone that the worst was over.  He was wrong. People who had purchased stocks on margin were suddenly required to pay unexpected (and huge) sums of money.  This had never previously happened - especially on such a large scale.  Brokerages were extremely worried that their loans would not be repaid, so they sent urgent notices to their customers.  People with margin accounts were told to deposit additional funds into their accounts, to avoid liquidation of their existing stocks.  Those stocks, of course, were worth far less at liquidation than they were worth at the time of purchase.

vii. For the rest of the week, stock prices steadied, but after a weekend to the situation over, stockholders began to unload their portfolios.

viii. On Tuesday October 29th the most devastating single day in the market’s history to that point, the index dropped another 43 points, almost 13 percent. The plunge in prices fed on itself as brokers sold the shares they held for buyers who failed to come up with more cash. During October, the value of stocks on the NY Exchange fell by an average of 37%. Stocks of the largest companies were being dumped - despite efforts by the leading bankers to prop-up the market.  

ix. For five years, the stock market had gone up ... and up ... and up - but during that week in late October, it went down ... and down ... and down.  Huge crowds of worried people gathered around the stock exchange. It wasn't just financial wizards who cared about "the market."  Individual investors had joined the professionals to capitalize on boom times.  People everywhere had borrowed money to make money.  Now they worried:  Had those actions been foolish? In five days, the gains of five

years were wiped out.  But the plunge did not stop there.  The freefalling market threatened the very foundation of America's financial security.

x. The federal government did little to help the sinking market in 1929.  Business and government leaders initially expressed hope. Hoover “the fundamental business of the country” was sound. By 1933, the value of the stocks was less than 20% of the value in 1929 (that’s 20 cents rather than 1.00) Almost everyone lost money.  At the end of five days, approximately $25 billion of personal wealth had evaporated.  To some, suicide seemed the only way out.  People who'd worked thirty or forty years, to amass a fortune, lost everything.  Even people who never invested in the market were also impacted.  Confidence in the economy at large deteriorated, and people began to think their money was no longer safe in their local banks.  Another panic began as people rushed to remove dollars from their deposit accounts.  If the banks had made bad choices, in their own investments, nothing was in place to protect individual depositors.  Federal-deposit insurance was unheard-of at the time. When banks were out of money, bank depositors were out of money.  A massive "run on banks" caused more than 2,000 institutions to fail in 1931. Many banks - like this one in Haverhill, Iowa - did not have enough reserves to stay in business.  Soon it, and others like it, became a place of billboards instead of a place of business. The American financial system was not just unstable.  It seemed worthless. The stock market crash did not create the Great Depression, but it set the whole process in motion.  All kinds of businesses - even solid ones - could no longer get loans.  This lack of credit caused businesses to lay-off workers or to close.  Bankruptcies followed, causing even more people to lose their jobs. The damage to Americans, as a whole, was unbelievable.  The events of

the crash, and the resulting great depression, are second only to the civil war in terms of national trauma. Lines of unemployed men were everywhere.  People who couldn't pay rent were evicted.  Families who couldn't pay mortgages were foreclosed.  Huts, made of cardboard boxes, were turned into dwellings.It was a terrible time.

xi. Incomes declined by more than half. Unemployment went from 1.6 million to 12.8 in 1933 about 1 out of 4 people.

xii. More than 9k banks closed. Hundreds of factories and mines hut down. Entire towns were abandoned and thousands of farms were sold to pay debts. The crash had revealed the economy’s structural problems

III. Causes and Contributions to the Crasha. Hawley Smoot Tariff

i. Carried duties to a new high. Average rate went from about 32 percent to 40 percent. More than 1,000 economists petitioned Hoover to veto the bill because, they predicted, it would raise prices to consumer, damage the export trade and thus hurt farmers, and provoke foreign reprisals. Events proved them right, but Hoover felt that he had to go along with his party in an election year. This proved to be a disastrous mistake, for it only exacerbated the growing economic depression.

ii. The tariff prevented foreign countries from selling their goods in the US. This meant they couldn’t make any money. The US was one of the largest consumers in the world and the lack of purchasing power created a wider depression that affected the entire globe. The allies from WWI couldn’t repay any war loans either.

b. Foreign crisesi. The Hawley Smoot Tariff

ii. Unpaid debts1. The economies of Europe were dismantled by WWI.

France and Britain were relying on reparation payments from Germany and credit from the US to get their economies started.

2. However, the allies borrowed nearly 10 billion dollars from the US, promising it back over a period of 62 years. France and Britain insisted that they

could only pay US if Germany paid its reparations. The European economies began to inflate their money system which meant their money was worth very little. And they couldn’t buy American goods. Combination of the speculation in the US, the tariffs, and the inflated global money all led to a worldwide depression.

3. When Germany failed to make a reparation payment to France in 1923, the French took action. They were worried that Germany was making friends with Russia and that the US and Britain were unreliable. They sent troops into Germany in the Ruhr Valley. They seized German factories and held German workers and their families for ransom demanding payment for reparations.

a. Germans were outraged and the Weimar government urged citizens to stay at home and refuse to work for the French. The government began printing more money, which lead to unprecedented hyperinflation and rendered the German currency almost worthless. But they declared the debt paid in

b. By September of 1924, the exchange rate was four trillion marks to the dollar! German families had to cart wheelbarrows full of cash to the store just to buy bread. Personal savings, life insurance policies, bond holdings, and pensions were wiped out instantaneously. People didn’t have enough money to keep up with the inflation that changed hourly. Given a paycheck for 5 million marks only to go to the bank and get charged 40 million just to transfer funds.

c. The country could not make the reparation payments and in the long run paid only a fraction of them.

d. In 1924, the Dawes Plan, by Charles G. Dawes vice president under Coolidge, helped stabilize Germany by providing for a reduction in reparation payments, a stabilization of German finances and the facilitation of German borrowing abroad. The next years saw a

period of economic growth and relative stability in both Germany and the rest of Europe. It was even allowed to enter the League of Nations in 1926. Things looked promising and stable. By 1929, Europe had reached its pre-war levels of industrial production. Banks were lending money to people at unimagined raters, productivity was so high. But with too much production in farms, prices dropped and left farmers with a lot of new debt for the new machines they had to buy. Established industries were also going bankrupt. The speculation, drought, and tariffs issues in the US were the trigger that helped collapse a promising future for Europe.

e. Unemployment was over 40% in Germany.f. Severe economic stress during the 1930’s hit

the entire globe as countries put tariffs in place to protect their own economies.

g. When multiple countries put these in place, countries were no longer buying from one another. It had the unintentional effect of limiting the market places and therefore money.

h. Lack of funds also meant the US couldn’t lend to European countries either. Not only was the US not buying European goods, but they weren’t lending to them either. Europe collapsed.

i. Hoover negotiated a moratorium on repayment but by 1932 most of the countries defaulted on the debts. Congress passed a law prohibiting private loans to any of the defaulting governments.

j. Britain and Belgium had to rely more heavily on their colonies in Africa and India as well as Britain’s Mandates in the Near East. Germany began to trade with Russia and Eastern Europe.

k. Unemployment was over 40% in Germany; French farmers barely could feed their own families let alone pay off debt; in Poland ¾ of a

million farmers lost their farms to debt. Dutch shipping industry declined by 2/3 in three years and some parts of coastal northern England and Scotland had unemployment rates of 90% or more. Governments cut salaries, but increased rents and taxes. Cut back on social services that health care and schools. Manufacturing output declined by nearly 40% between 1929-1933.

iii. Failure of Austria’s largest bank. 1. 1931, economic indicators were rising but the

failure of Austria’s largest bank triggered a financial panic in central Europe. Hoover proposed a one year moratorium on both reparations (cover damages) and war-debt payments.

iv. Removal of the Gold Standard1. The shortage of money drove Europeans to

withdraw their gold from American banks and dump American securities. They abandoned the gold standard and devalued its currency.

c. Poor performance of the Federal Reserve: The agency was created to prevent bank failure by keeping needy banks solvent. However it raised interest rates to cash-hungry banks rather than giving them ones at low interest rates.

d. Speculatione. Big Business and top earners

i. To many businesses during the boom years had maintained prices and take profits while holding down wages.? 1/3 of the nation’ income went to only 5% of the population! People put that back into factories rather than into people’s pockets-workers. So the balance between manufacturing and purchasing became uneven. It was softened by the use of instalment buying and credit.

f. Governmenti. Tax cuts also brought over saving.

ii. Growing money supply helped to lower money interest rates encouraging loans.

iii. Lax enforcement of anti-trust laws encouraged concentration, monopoly and high prices.

g. The Great Depression caused many suicides, massive unemployment, disrupted lives and destroyed fortunes. But:

i. What caused the Great Depression? ii. Why were so many people out of work?iii. Why were thousands of families forced to uproot and

migrate to places like California? iv. Did the stock market crash - of October 24, 1929 - itself

cause the " run on banks" a few years later?v. And ... why did the Great Depression last so long?vi. Knowledgeable people have debated these questions ever

since the Great Depression. Some economists conclude that wild stock market speculation contributed to the nightmare. (1929 headlines, from The New York Times, show economists were seriously debating the strength of the market in the days before the crash.)

vii. President Hoover thought the depression was caused by the disruptions of World War I, the poor structure of American banks and the failure of Congress to act on many of his proposals.

viii. Still others blamed Hoover himself, and the policies of his administration. At the time, people throughout the world cared more about finding ways to survive than they cared about finding reasons for the cause of the economic decline. Songs of the day, (like 1932's Brother, Can You Spare a Dime?  reflect anguish but other tunes (All of Me and On the Sunny Side of the Street ) demonstrate human resiliency.

IV. Results of the Crasha. As a result of the stock-market crash, and the ensuing great

depression, some rich people ended up in "the poor house."  Even those who did not lose personal wealth suffered psychological damage.  Franklin Roosevelt was elected in a landslide, and his first order of business was to restore confidence in the country's financial system.  New laws were passed to regulate banks and the stock market. An investigation into the crash produced 10,000 pages of

testimony.  Much of it blackened Wall Street.  Even respected banks, like J.P. Morgan, were tainted with the uncovered evidence. America's woes also spread to Europe.  Millions of Brits lost their jobs when manufacturing businesses closed.  Germans, trying to recover from the effects of World War I, also suffered. After an examination of the Great Crash of 1929, what comparisons can we make between what happened then and what happened in the recent "Great Recession?"  We can see, quite clearly, that "history repeats itself.  Human folly and greed are much stronger forces in financial affairs than reason and restraint."

b. Government intervention (introduced by Franklin Roosevelt's "New Deal") helped, but America remained in the grip of the Great Depression until 1941.

c. Not until World War II, when millions of men were drafted—and millions of women went to work in factories to support the war effort—did the United States emerge from its darkest economic downturn.

d. Human toll early 1930’si. 13 million out of work; many more worked fewer hours.

About 1 out of every four people. ii. Black and Mexicans usually first laid off. Factories shut

down, banks, closed, farms went bankrupt. Many found themselves homeless and penniless. Hungry people lined up at churches and soup kitchens.

iii. Local welfare agencies were swamped with appeals for charity and ran out of funds. Slept on park benches or in back alleys. Men “rode the rails.” They were called hobos or tramps. Rode from town to town looking for work.

iv. Hoover towns and “blankets” were used. People used tarpaper and galvanized iron, old packing boxes and abandoned cars. Called them Hooverville’s. A Hoover flag was an empty pocket turned inside out. By 1933 a million people in America are living in Hoovervilles!

v. In this depression, the poor and wealthy were suffering. By 1920, more than half the nation was urban! This was the first major urban depression. It hits city people harder if they don’t have food to eat.

vi. Farmers had a difficult time in the 1920’s. Crop prices remained low and so the farmer’s income was low. In the 30’s the prices of wheat and other grain dropped that is was below what it cost to grow them. By 1931 the government had quit buying surpluses ad watched prices slide. Wheat was selling a 17% of what is cost in 1919 and cotton 11%. Angry mobs stopped foreclosures and threatened to lynch bankers and judges. Farmers burned corn to keep warm and dairy farmers dumped milk into roadside ditches in an effort to raise prices.

1. Farmers didn’t understand crop rotation. Farmers would use up land and move on. This depleted the land. There seemed to be so much land in the US that people didn’t worry in the beginning. However, if soil is left desolate it can become hazardous. In the 1930’s, there was a massive drought. The drought dried up the land in the west and turned it into desert. The soil became dust. 20 miles off the cost sailors could see the dust. Farmers left their farms for the city.

V. Government efforts in Hoover’s administrationa. Hoover had said that he thought the economy was sound and no

one was starving in America. They thought a light correction of the market would help. Hoover did do more than any other president did in such dire circumstances. But he firmly believed in the limits of government. He thought that the country’s main need was confidence. He said on May 1, 1931 “we have passed the worst and with continued effort we shall rapidly recover.” Asked business and labor leaders to keep the mills and shops open, maintain wage levels, and not to layoff. Union leaders agreed to refrain from strikes.

b. He accelerated the building of public projects in order to provide jobs but state and local governments’ cutback which neutralized the federal government’s programs.

i. Set up the Reconstruction Finance Corporation (RFC) with 500 million from emergency loans to banks, life insurance companies, building and loan societies, farm mortgage associations, and railroads. I staved off some bankruptcies, but Hoover’s critics charged that it favored business at the expense of workers. Created the Glass-Steagall Act of 1932 eased availability of commercial loans and released about 750 million in gold. Federal Home

Loan bank Act of 132 created discount banks for home mortgages. July 21, 1932 he signed the Emergency relief and Construction Act which gave the RFC 300 million for relief loans to the states and 1.5 billion for state and local government construction projects and 322 million for federal public works.

ii. Government relief for farmers was abandoned however. By 1931 the government had quit buying surpluses ad watched prices slide. Wheat was selling a 17% of what is cost in 1919 and cotton 11%. Angry mobs stopped foreclosures and threatened to lynch bankers and judges. Farmers burned corn to keep warm and dairy farmers dumped milk into roadside ditches in an effort to raise prices.

c. People were scared that capitalism was failing. If capitalism failed, a revolution could be expected-like the one in Russia. The US could be susceptible to communism.

i. Mussolini had taken control in Italy already, Hitler was gaining power in Germany and Stalin was in control of Russia. Some in the US thought these leaders were great men. People didn’t realize the horrible atrocities that these men were capable of.

ii. Hoover didn’t quite understand the needs of ordinary people. He didn’t want to spend money on government programs to help people. If government money was to be spent it should go to businesses. (Hakim text-however, Hoover did do more to help the people than she is giving him credit for. Part of the problem was the market did need time. FDR’s programs even didn’t do as much as people thought.)

d. Bonus Armyi. After WWI the government had promised army veterans,

in 1924, a bonus. However the bonus wasn’t due until 1945. They had marched to Washington with their families to demand their bonus. In 1932, the House approved a bonus bill but when the Senate voted it down, most of the veterans went home. The rest, (20,000?) having no place to go camped in vacant government buildings and in a shantytown within sight of the Capitol. They didn’t have money so they slept in tents, empty buildings, in shacks etc. They were called the Bonus

Army. Some were Medal of Honor winners and had lost limbs.

ii. Congress bought tickets for them to go home. More left, but others stayed even after Congress adjourned hoping to see the president. Hoover wouldn’t see any of them and tried to get the police to chase them out. They wouldn’t go so Hoover sent in the army. When the soldiers saw the army patrols they cheered. They thought the troops were parading for them. They were wrong. The troops came with tear gas, guns and bayonets. Their leader was General Douglas McArthur along with George S. Patton Jr and Dwight D. Eisenhower... He had his troops tear down the shacks and burned them. People were hurt and a baby died-11 weeks old and born in the shanties.

iii. McArthur said the mob was about to seize control of the government and that the Bonus Army consisted of mainly communists and criminals but neither a grand jury not the VA found evidence to support that charge. This severely damaged Hoover’s reputation! People were looking forward to a new president.

iv. In the spring of 1930, the Republican Congress and administration cut taxes and appropriated over $500 million for stimulus construction projects.

e. However, many blamed Hoover for the coming crises of the 1930’s and the crash of 1929. Why?

i. His personality was not as charismatic as Harding. He was more like Wilson. He didn’t want to use government as the sole vehicle of change. Hoover only called a special session of Congress in the spring of 1929 (to pass the Republican platform). He didn’t call a special session for the rest of 1930 or 1931. It looked like neglect.

ii. He kept his high class life-style.iii. Vetoed direct aid to farmer and veterans. The bill was

passed anyway but he looked heartless.iv. The Bonus Army in Washington D.C. was a public disaster!

VI. FDR’s First Terma. Intro

i. FDR’s father remembered the civil war. The Roosevelts had connections back to the 1650’s with the arrivals of the Dutch in NY. The Delanos descended from a French Huguenot who arrived at the Plymouth Colony in 1621-a year after the Mayflower. Apparently he came seeking a

puritan girl who was also sought after by a couple other puritan men from England. Philippe de la Noye lost to John Alden and married a different English girl. He dropped the “ye” at the end of his name and became Delano. Most of them were Republicans (like Teddy) but FDR’s father was a democrat. FDR met Cleveland in 1887 when he was 5 years old. Cleveland was the first democrat president in 28 years.

ii. He grew up in a very privileged house with servants, cooks, drivers, gardeners, a laundress, and private tutors. They took vacations around the world. His parents gave him a strong religious faith. He was handsome and charming and attended a private boarding school when he was 14. He attended Harvard for college and Columbia Law School. He began to be active in helping those less fortunate appealing to segregated colleges to accept black students. Teddy influenced his life quite a bit. He would visit TR”s Long Island home in Oyster Bay and play with Teddy and his five children. He wanted to serve his country too.

iii. First he became a secretary of the navy (TR had that position too). IN 1920, he ran for vice president with James Cox against Harding and Coolidge. He married and had one daughter and four sons. He was a fine athlete.

iv. When he was 39 however, he contracted polio or Gullain-Barre Syndrome as more research has been done today finding that later was far more likely. It usually struck children but was hard on adults. He was crippled. At first he couldn’t move at all. But slowly he regained the use of his upper body. He would never run again and when he walked it was with heavy braces. Eleanor would compensate for his disability attending meetings and working with the public. He ran for governor of NY in 1928 and won. He was obsessed with gaining the highest office in the land and he was willing to sacrifice all else in his life-marriage, health, staff, friends-to that end. Occasionally inflated his own accomplishments and took credit for those of others. He had a talent for surrounding himself with capable people and getting the most out of them. He had determination to succeed, to overcome all obstacles, to triumph over despair and adversity and I the process achieve greatness.

v. Eleanor1. Long blond hair, blue eyes, shy, and serious. Her

father was a daredevil horseman and a man-about-town. Sweet natured and caring but an alcoholic.

2. She had a horrible awful terribly lonely childhood. She would accompany her father on walks in which he would get drunk. When she was eight her mother died and at nine her brother died. Then at age 19 her father died. She went to live with her grandmother who scared the children. A governess took care of the two children. But the governess didn’t like Eleanor and was mean to her. She was eventually sent away to school in England. She became a great leader in the school.

3. She later married and they had five children, three houses and a husband with a busy career. She stayed by his side to help FDR. She went out to coal mines and factories and workers’ meeting and told the people what the president was thinking. And became one of the most successful speakers of her day. She wrote a newspaper column and magazine column and books. Served food to the needy, read stories to poor children, visited hospitals, and spoke out for minority rights.

4. Her compassion resulted in part from the loneliness she had experienced as she was growing up and in part from the sense of betrayal she felt when she discovered in 1918 her husband was having an affair with her personal secretary.

5. She was an activist who redefined the role of presidential spouse. First woman to address a national political convention.

b. Campaigningi. He was the first to accept a party’s nomination in person.

That is where he stated “I pledge you, I pledge myself, to a new deal for the American people.”

ii. To dispel doubts about his health, he had a grueling campaign in 1932. He blamed the depression on Hoover and the Republicans. What impressed people was less the content of his speeches than the confidence of the man. Hoover by contrast had no confidence. He argued that the democrats ignored the international causes of the

depression and said Roosevelt’s reckless proposals would destroy the foundations of our American system. But people didn’t listen.

c. First 100 Daysi. During the last “lame duck” session, the unemployment’s

increased during the winter of 32-33. Bank after bank were closing and did not have adequate cash to repay depositors as people rushed to their own banks to remove their deposits. 4/5 of the nation’s banks were closed by the time Hoover left.

ii. Confronted with three things: reviving the devastated economy, relieving the human misery brought on by the depression, and alleviating the plight of farmers and their families.

iii. He called congress back into session from vacation. Put together a group of advisors called the “brain trust”. Many were college professors. They all had competing ideas about how to restore the economy. And others wanted welfare spending. He wanted to try to balance different approaches. He was willing to experiment with new programs and policies. But he brought no concrete agenda or even a long-range plan. “Take a method and try it. If it fails admit it frankly and try another.” He liked to say “I have no expectation of making a hit every time I come to bat. What I seek is the highest possible batting average.” The New Deal was a series of trial and error actions.

iv. “Only thing we have to fear, is fear itself.”v. First they sought to remedy the financial crisis and to

provide short-term emergency relief. Second they tried to promote industrial recovery through increased spending. Third they attempted to raise commodity prices (and thereby farm income) by paying farmers to reduce crops and herds.

1. Declared a four day banking holiday his second day on the job. It took congress only 7 hours to pass the Emergency Banking Relief Act which permitted sound banks to reopen.

2. March 12, 1933 first “fireside chat”. Insisted that it was safer to “keep you money in a reopened bank than under the mattress.” The nest day deposits exceeded withdrawals. By March 15, most of the

nation banks were open once again. He ended the banking panic. He next slashed military pensions and government payrolls and urged congress to pass the 21st amendment wot end prohibition.

3. Congress passed more than a dozen of Roosevelt’s major proposals during the first 100 days.

4. Reorganized all farm credit agencies into the Farm Credit Administration (FCA). Authorized extensive refinancing of farm mortgages at lower interest rates.

5. Home Owner’s Loan Act provided a similar service to city dwellers through the new Home Owner’s Loan Corporation which helped to refinance homes. T slowed the rate of foreclosures. (oddly Hoover had tried to get congress to pass that) FDIC in insure personal bank deposits up to 5k.

6. Got rid of the gold standard.vi.

d. New Deali. First they sought to remedy the financial crisis and to

provide short-term emergency relief. Second they tried to promote industrial recovery through increased spending. Third they attempted to raise commodity prices (and thereby farm income) by paying farmers to reduce crops and herds.

ii. Providing Work1. Did away with most child labor, regulated the stock

market, made bank deposits safe, helped make employers pay fair wages to employees, encouraged workers’ unions, limited hours of work, helped farmers, brought electricity into rural area, and gave Americans an old-age pension policy called “Social Security.” He made the government an active participant in the citizens’ lives. These were old Progressive ideas in a new package. They had already been tried in Europe.

2. He sent young people out of doors to work. Paid them to plant trees, build parks, and fight fires. Paid painters to paint murals, writers to write books, and musicians to play and create music.

3. He didn’t want the dole and so provided work based programs instead. He called the dole a “narcotic, a subtle destroyer of the human spirt.”

4. SECa. Securities and Exchange Commission Formed

to regulate the stock market5. FDIC

a. Federal Deposit Insurance Corporation Insured bank deposits

6. CWAa. Civilian Works Administration Lasted less than

a year, but employed more than 4 million men and women Opera singers were sent to the Ozark mountains; teachers kept rural schools open; Native Americans restocked the Kodiak Islands with snowshoe rabbits.

b. Highway repairs, improving airports and schools.

c. This program put people directly on the government payroll at competitive wages. More than 70k gathered before sunrise on opening day in Chicago-winter of 1933.

d. He dissolved the program in the spring of 1934 when costs began to skyrocket. Afraid of causing dependency. By April 4 million were once again out of work.

7. CCCa. Civilian Conservation Corps Gave jobs to more

than 2 million out of work young men in the nation’s parklands. They built roads, trails, cabins, planted trees, taught farmers how to control soil erosion, fought fires and campgrounds. Many are still in use today.

b. For young working-class men aged 18-25 with little educational or vocational background.

c. They worked under military discipline and provided perhaps the more direct analogue of war in the whole New Deal. The CCC camps were racially segregated and thus no many enrolled.

8. FERAa. Federal Emergency Relief Administration

b. Federal and state working together. State construction of over 5,000 public buildings and 7,000 bridges, organized adult literacy programs, financed college education for poor students, set up daycare centers for low-income families. Helped local agencies dispense food and clothing for the needy.

9. WPAa. Works Progress Administration. Provided

useful jobs. The built highways, cleared slums, and labored in rural areas. Writer were paid to write regional guidebooks and compile oral histories. Painters painted murals in public buildings, musician organized orchestras; actors brought play to communities that had never experienced lie theater. Between 1935-1939 the WPA gave work to 8.5 million people!

b. Replaced the FERA. Looked like people were “leaning on shovels,” as work was needed quickly. Created the Federal Theatre Project, Federal Art Project, and Federal Writer’s Project. Provided work for students, set up technical training programs, aided jobless youth. LBJ, 27 years old, directed one of the National Youth Administration branches in Texas and Nixon, at Duke University, found work through the local NYA at 35 cents/hour.

c. Expired in 194310. PWA

a. Public Works Administration Built New York’s Triborough Bridge and Lincoln Tunnel; Oregon’s Coastal Highway; Texas’s ort of Brownsville; the road between key West and mainland Florida; and the University of New Mexico’s library.

11. TVAa. Tennessee Valley Authority Began as a

federally directed experiment in regional planning. The TVA built five dams along the Tennessee River and provided cheap electric power, flood control, soil conservation efforts,

forestry efforts, fertilizer experiments, and irrigation water to seven states. The dams would flood and create lakes.

b. Gave electricity to the South for the first time!12. SSA

a. Social Security Act Established old-age pensions, unemployment benefits, and welfare benefits for the elderly, children, and the handicapped.

iii. Agricultural Segment1. Many farmers could not afford to plant or harvest

their crops after 1929. The Agricultural Adjustment Act (AAA) of 1933 sought to help rise commodity prices by paying farmer for cutback in production. The money was raised by a commodity tax on factories that used the farm products (cotton, textiles, meat-packing…) The Commodity Credit Corporation (CCC) gave loans to farmers to keep their products in warehouses off the market. Once prices rose the government would be repaid.

2. Farmers were encouraged to burn crops and kill livestock!

3. Income did increaseiv. Economy

1. National Industrial Recovery Acta. Created the PWAb. National Recovery Administration (NRA)

i. Stabilize business sector by reducing competition through the implementation of codes that set wages and prices, and second, to generate more purchasing power by providing jobs, defining labor standards, and raising wages.

ii. Set 40 hour work weeks, minimum wages and prohibited child labor under 16.

iii. Signs appeared in windows advertising employers support for the NRA.

iv. After a while, small companies complained that the large businesses dominated the markets. The price fixing robbed small produces the chance to

compete. The wage codes also excluded agricultural and domestic workers.

v. It was generally deemed a failure and ended in 1935. But still left a mark for standards in the workplace.

e. Criticism i. As the crisis pass the spirit of unity relaxed and criticism

began. The downward slide had been halted but unemployment remained high. Still 20 %. The dramatic growth of executive power and the emergence of welfare capitalism.

ii. Senator Huey P. Long Jr. He used bribery, physical intimidation, and black mail to achieve his end in Louisiana. But the results were so favorable that his constituents didn’t notice.

1. Share Our Wealth program: wanted to confiscate large personal fortunes and guarantee every family a cash grant of 5,000 and every worker an annual income of 2,500. The figures didn’t add up.

2. Francis F. Townsend: wanted old age pensions3. FDR moved further left with his ideas.

iii. Business leaders and the wealthy resented their loss of status with the growing power of government and labor. Called Roosevelt a traitor to his own class. Many thought some of his laws where communistic. But he said “I am fighting communism…I want to save our system, the capitalistic system… [but it requires a more equal] “distribution of wealth”.

f. Second New Deali. Wagner Act: allowed unions to bargain and prohibited

employers from interfering with union activities. ii. Social Security Act

1. Pension fund for retired people over the ae of sixty-five. Begging in 1937, employers and workers contributed payroll taxes to establish the fund. Benefit payment s started in 1940 and averaged $22. Per month. Roosevelt stressed that it wasn’t supposed to cover all expenses for a retiree. It was the only government pension program in the world financed by taxes on the earnings of current workers. Most other countries funded such programs out of general revenues. It was a single

fixed rate tax. Hurt the poor. Excluded 9.5 million workers: farmers, domestic servants, self-employed (mainly blacks).

2. Revenue Act of 1935.a. Soak-the-Rich tax; raised tax rates on income

above 50k.3.

VII. Human Hardshipa. Still in 1939, some 9.5 million or 17% were still unemployed.

Prolonged economic hardship created personal tragedies and tremendous social strains. Theft soared, begging and prostitution increased.

b. Men left their wives out of shame. 1.5 million Husbands had left home by 1940! That’s almost 1 out of 5. Marriages declined by ¼. Many decided not to have children. 1 out of 5 children was hungry. Some left home and became “tramps” on railroads.

c. Dust Bowli. Uprooted farmers and families formed migratory stream

rushing from the South and Midwest toward California.ii. Lumped together as “Okies” most were from Arkansas

Texas and Missouri. 800k left and head to the Far West. Not all were farmers and many were professionals. White, in 20-30’s. Some traveled on trains or busses, others hopped a freight or hitched a ride, and most rode in their own cars. Took 4-5 days.

iii. Most settled in San Joaquin Valley the agricultural section of the state. They competed with local Hispanic and Asians for seasonal work as pickers in the cotton fields or orchards of large corporate farms. They lived in tents or crude cabins. Sanitation was poor.

iv. Those that stayed retained their “hillbilly ways.”d. Minorities

i. FDR didn’t tackle racism issues for fear of alienating his base. Many of the New Deal programs were for whites only. The FHA reused to guarantee mortgages on houses by blacks in white neighborhoods. CCC and TVA were segregated.

ii. The first land that farmers would destroy would be those of sharecroppers.

iii. Mexican workers were denied access to programs when they were unable, for a variety of reasons, to provide proof of citizenship. Deportation was called upon in order to

avoid paying for the costs for providing them with public services and relief.

VIII. FDR second Terma. 1937-1940b. He changed the fabric of voters during this election. Middle

and lower class voters and minorities (for the first time) supported the democratic ticket.

c. Democrats also dominated in the Congress.d. The election of 1936 had been a mandate for even more

extensive governmental action but the SCOTUS stood in the way.

e. By the end of 1936, the SC had ruled against the New Deal in 7 out of the 9 major cases he reviewed. Others were pending.

f. Roosevelt decided that he would change the court by adding to its number! Which only the congress can do. In 1937 there were 9 justices on the court. On February 5, he sent a plan to Congress. He wanted to create up to fifty new federal judges, including six new Supreme Court justices and diminish the power of the judges who had served ten or more years or reached the age of seventy! However, it simply wound up insulting people-even the most liberal of the SC judges who was the oldest. Eventually the courts reversed itself on important New Deal legislation so Roosevelt lost his desire to change the courts. He also appointed more liberal justices during his term. But it tarnished FDR and the Democratic Party.

g. Created the Fair Labor Standards Act of 1938i. Employees in enterprises that operated in or affected

interstate commerce. Set a minimum wage of 40 cents an hour and a maximum workweek of forth hours. Prohibited child labor under the age of sixteen, and in hazardous occupations under eighteen.

IX. Labor Issuesa.

X. Problems in the late 30’sa. Recession caused by the collecting of SS money which left little

disposable income.b. Congress voted 3.3 billion more for public works. But the

recession only stabilized, the economy didn’t improve.XI. Achievements and Legacies of the New Deal

a. Setbacks

i. Southern democrats were now more closely becoming conservative Republicans as they didn’t have much in common with organized labor and blacks.

ii. In 1938, the bipartisan conservative opposition stymied a bill which would have let Roosevelt reorganize the executive branch.

iii. Committee on Un-American Activities was begun and it launched a crusade against communists. He began to label New Dealers as Red dupes.

iv. Roosevelt once again attempted to nominate his own supporters in the Democratic Party as the election of 1938 drew near (for mid-terms). Backfired like his court packing plan. He tried once more to put a plan through that would reorganize the executive branch-after that his domestic innovations feebly ended.

b. The power of the national government was vastly enlarged by the end of the 1930’s. Hope had been restored to people who had grown fatalistic. It was more than just bigger government-it revived public confidence and was a significant change from the older liberalism embodied in TR and Woodrow Wilson. The former progressives wasn’t to ensure that people had equal opportunity by government regulation. FDR wanted government not just to respond to social crises but take help to avoid them. The welfare and benefit programs ensured a minimum level of well-being for all Americans.

c. The New Deal had stablished minimum qualitative standards for labor conditions and public welfare and helped middle class Americans hold on to their savings, their homes, and their farms. The protection afforded by bank deposit insurance, unemployment pay, and SS pensions would come to be universally accepted as a safeguard against future depressions.

d. FDR was a pragmatist. He kept what worked and discarded what did not.

e. Unemployment fell from 25% in 1933 to 14% in 1937. However, it did not see a continual drop in unemployment. Historians are unsure how much the New Deal programs helped to stimulate the economy and what actually helped to bring the US out of the depression.

i. Thousands of people were employed and grateful for the work and the New Deal created useful infrastructure such as roads, bridges, and parks. This might continue to conception that the New Deal helped.

ii. Hoover saw terrible banking crisis. FDR’s bank holidays and creation of a federally backed depositor’s insurance is help to stabilize the economy.

iii. FDR’s SEC also forced uniform standard to help eliminate questionable practices and risky companies.

iv. These programs provided relief and hope but did they do enough to overhaul the depression and reduce the unemployment rate? Historians differ.

1. Many use WWII as the solution. a. “In a short time the increase in spending

[in1938] reversed the economy’s decline, but the [1937] recession and Roosevelt’s reluctance to adopt the massive spending called for in Keynesian theory forestalled the achievement of full recovery by the end of the decade. Only during WWII would full production and full employment be achieved.”

b. Others think that the war brought only a redirection of energy but that the redirection didn’t bring any economic gains with it. Unemployment did disappear but other economic factors weren’t so good. No one was investing in the stock market, making private investments, and personal consumption was still low.

c. Good things that the war brought:i. Increase in employment and good

industrial outputd. Continuing economic concerns:

i. No one was investing in the stock market, making private investments, and personal consumption was still low.

e. Economic advanced that were unrelated to the war.

i. improvement in the economy by the end of the war

2. In conclusion, the war brought jobs and the economy did see an improvement by the end. However, there were still low economic indicators all throughout the war. Did the war stimulate the economy by the end?