Chapter 33
Financial Problems leading to Depression
 Lack of Profit in key industries (railroads, textile, steel)
 Fall in Housing market (usually indicates down turn in economy,
effects many other industries)
 Farmers (most hard hit) planted a lot during WWI b/c it
was needed but after war have lots of surplus less
demand.
 Many farmers can’t pay bills and lose farms
 Consumers have less to spend (lose job can’t buy other
things, domino effect)
 Living on Credit (only paying off interest, don’t have free
money to buy other things)
 Uneven Distribution of Income (rich get richer, poor get
poorer, large income gap)
Election of 1928
Herbert Hoover (Republican)
VS
Alfred Smith (Democrat)
Hoover Wins!
Stock Market: Wins and Woes
 By 1929, economists say watch out for stock
market but many don’t listen (did so well in the
early ’20s)
 Dow Jones Industrial Average (measure of stock
market’s health) rising higher and higher in the
1920’s
Bull Market (period of rising stock prices)
 Many buying and buying stock but doing so on
margin and speculation (buying on chance of
making it rich but no assessment of risks)
 Leads to………
BLACK TUESDAY, OCT 29, 1929
Stock Market crashes
People lose confidence and begin to sell
stocks rapidly, prices fall
Short term cause of the Great Depression
Million and within a few months billions
lost
Domino effect again (economy is all
interconnected)
GREAT DEPRESSION 1929-1940
CAUSES of Great Depression
Tariffs and war debt policies that cut down
the foreign market for American goods
Hawley Smoot Tariff (1930) highest ever
Crisis in farm sector
Availability of easy credit
Unequal distribution of Income
Hoover’s thoughts on the Depression
 Herbert Hoover thought it was job of the gov’t help
different groups work together not get directly
involved
 Promoted “rugged individualism” people succeed
through their own efforts
 Against any form of direct federally funded relief,
though private charities and local governments
should handle it
 Believe handouts weaken people, make them
dependent and lazy
Hoover’s 1st Actions
Met with heads of business, banking, and
labor ask them to find solutions and act in
ways that would not make situation worse
Doesn’t help
1930 election Democrats win big, shows
public dislikes Hoovers response (or lack
there of)
Hoover’s 2nd Steps
 Federal Home Loan Bank Act: (1932) lowered
mortgage rates for homeowners and allowed
farmers to refinance their loans and avoid
foreclosure
 Reconstruction Finance Corporation (RFC): (1932)
authorizes up to $2billion for emergency financing
for banks and other companies.
 Believed money would cause a trickle down effect
Bonus Army
 Made up of 10,000-20,000 WWI veterans
 Marched to Washington, DC in support of Patman’s
Bill (allowed gov’t to give WWI veterans a bonus for
their service in the war)
 Senate votes down bill, about 2000 men refuse to
leave Bonus Camp
 Hoover authorizes 1000 soldiers to clear army out,
does so very violently
 Ruins Hoover politically
Election of 1932 and FDR
 Election of 1932:
 Hoover (Rep) vs Franklin Delano Roosevelt (Dem)
 FDR Wins!
 Elected in Nov, does not take office until March 1933
 In down time forms “Brain Trust”, group of advisors
made up of professors, lawyers, etc to help him
develop policies
Depression Changes lives
Shantytowns
Hoovervilles
Soup kitchens
Bread lines
Dust Bowl
Large Drought in Mid-West during early
1930’s
Land exhausted due to over production
Drought and wind, little hold soil in place
Causes many to leave and look for work,
farms lost
“Okies”
Effect on Families
Men, leave to look for work
Hoboes
Women, less work available, make do for
family with less
Children
Lack of health care, due to lack of money
Schools close
Orphans
The New Deal
Calls his program the “New Deal”
Fireside Chats
Focuses on the 3R’s
Relief, Recovery, and Reform
Hundred Days:
March 6-June 16, 1933
Passes more than 15 pieces of major legislation
Helping the Banks
Bank Holiday (shuts them down)
Emergency Banking Act (federal gov’t can
inspect banks for success)
Glass-Steagall Act
Establishes FDIC
Federal Securities Act
Corporations must provide complete reports
and stock information
Alphabet Soup: New Deal Plans
 Agricultural Adjustment Act (AAA)
 Tennessee Valley Authority (TVA)
 Civilian Conservation Corps (CCC)
 National Industrial Recovery Act (NIRA)
 Civil Works Administration (CWA)
 National Recovery Administration (NRA)
 Home Owners Loan Corporation (HOLC)
 Federal Housing Authority (FHA)
 Federal Emergency Relief Administration (FERA)
Other Plans and Disagreement
 Unhappiness with deficit spending, FDR sees as
necessary evil, others see as bad policy
 Supreme Court rules NIRA and AAA
unconstitutional, gives executive branch too much
power
 Court Packing
 FDR wants to increase number of Supreme Court justices
by 6
 Does not pass
Second Hundred Days
 Started in 1935, builds off programs set up in 1st
Hundred Days
 Economy doing better but still not back to normal
 Roosevelt re-elected in 1936
 **Of note, election of 1936 was first time majority of
African Americans voted Democrat and not Republican
and first time labor unions gave united support to a
presidential candidate.**
Help for Farmers
Thousands of farmers lost their homes
and land
AAA unconstitutional so gov’t creates: Soil
Conservation and Domestic Allotment Act:
pays farmers for cutting production and
rewards farmers for practicing good soil
conservation techniques
1938 Congress approves the 2nd AAA,
same as first but with minor changes
More ABC Soup…..
 Works Progress Administration (WPA)
 Goal is to create as many jobs as fast as possible
 1935-1943 spends $11billion to give jobs to more than 8 million
people
 Built roads, airports, public buildings, sewing groups, etc
 National Youth Administration (NYA), created specifically
to provide education, jobs, and recreation for young
people
 Provides financial aid but student must work part time at the
school
More programs……
 Wagner Act: allows collective bargaining for labor unions
 Fair Labor Standards Act: set max work hours per week
(44) and sets a minimum wage (.25), sets work rules for
those under 16
 Social Security Act: 1935
 Old Age Insurance for retirees 65 and older, supplemental
retirement plan
 Unemployment Compensation
 Aid to families with dependent children and the disabled
Roosevelt Recession
Despite FDR’s best efforts (and spending)
Depression does not go away after 1st
term
Unemployment 25% 1932 to 15% 1937
“Roosevelt Recession”- 1937
Social Security cuts pay
Risk of Spending and cut backs
Economics according to John Maynard
Keynes
The Truth:
NEW DEAL HELPS EASE BURDEN OF
GREAT DEPRESSION BUT DOES NOT
SOLVE PROBLEM. WWII GETS US OUT
OF GREAT DEPRESSION. WAR
SOLVES UNEMPLOYMENT
PROBLEM..DOMINO EFFECT
National Debt soars!
Critics of the New Deal
Too Much Spending and Waste with little
accomplishments
Socialism
Increased Debt
“Case of the Gimmies”