The Hoover Administration Background:

raised in Iowa by aunt and uncle

Stanford graduate

engineer; self-made millionaire

believed in “rugged individualism” and laissez-faire economy

made reputation with Belgian Relief Fund and Food Administration; Secretary of Commerce under Harding and Coolidge

Causes of the DepressionEconomic depression had several causes

1. Overuse of credit; many people went bankrupt when jobs were lost.

2. Overproduction of goods, caused by credit buying; when buying stopped, inventories built up and people were laid off.

3. “Buying on the margin” – buying stock with only 10% down; when market fell, loans could not be repaid

4. Suspect banking practices, leads to bank failures when market crashes

Causes of the Depression (cont.)

5. Too little money put into circulation by the Federal Reserve.

6. Massive farm problems; prices too low, foreclosures high

7. Tariffs too high between US and Europe; could not trade excess goods

8. Expectations of a downturn in the economy; when market started going down, people overreacted.

October, 1929“Black Thursday”- Oct. 24th, market falls at a

record pace

“Black Tuesday” – Oct. 29th, market falls almost to zero; billions of $$ lost, millions lost life savings

The Depression BeginsCharacteristics of the

Depression:

homelessness, unemployment, despair

Unemployment reaches 25%

The Depression BeginsHoover sticks to laissez-faire as

the depression worsens; blamed for inaction

Unemployed line up for few available jobs

“Hoovervilles”

Charity lines

Hoover’s InactionHoover opposes all government aid, favors

private charity; why?

Seen as uncaring and aloof

Nation begins to demand action from government

The Reconstruction Finance Corporation Hoover finally responds by creating the Reconstruction

Finance Corp. (RFC); first “New Deal” style agency

Designed to aid banks, businesses, and local govts. with low interest loans to generate activity

RFC first agency designed to aid businesses; a prototype for FDR’s New Deal agencies later

The “Bonus Army”July, 1932: WW I veterans march on Washington

to demand early payment of promised war bonuses; Hoover rejects their demands. Why?

The “Bonus Army”

Marchers refuse to leave, camp out in Capitol

“Army” ordered to leave DC

The “Bonus Army”Hoover orders Gen Douglas

MacArthur to remove Bonus Army camps; riots follow

Hoover blamed for the violence

1932 ElectionHoover reluctantly renominated; Democrats

nominate NY governor Franklin D. Roosevelt

1932 ElectionFDR campaigns on optimism and govt. action

on economy; wins in a landslide, worst defeat for an incumbent ever

Franklin D. RooseveltBackground:

TR’s 5th cousin and nephew-in-law

former state legislator, asst. Secretary of the Navy

1920 VP candidate

NY governor

FDR and PolioContracted polio in 1921; left

paralyzed; spent rest of life in rehab

Created illusion of “walking” by leaning on people, podiums, etc. Why?

“The Hundred Days”March 4, 1933: the inaugural speech of FDRThis is pre-eminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great nation will endure as it has endured, will revive and will prosper.

So first of all let me assert my firm belief that the only thing we have to fear. . .is fear itself. . . nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

“The Hundred Days”Emergency powers granted to

FDR; employed the “brain trust” to take on problems of the Depression

First crisis: the failure of the banks and “bank runs”

“The Hundred Days”

FDR declares a “Bank Holiday”, closes banks for a week to stop the bank runs

First “fireside chat” to explain govt. actions

Bank runs end

Glass-Steagall Act:

creates the FDIC

The First New Deal (1933 – 35)

No set plan, experimented with new programs to solve the Depression

“Relief, Recovery, Reform”

Focused on jobs and

temporary relief

The New Deal

First New Deal Programs:

Civilian Works Administration

Civilian Conservation Corps

Public Works Administration

CWA

CCC

PWA

The New Deal

Economic Reforms:

The Securities and Exchange Commission

The Wagner Act

Joseph P. Kennedy, first head of the SEC

Strike at Ford Motor Co, 1937

The New Deal

The Dust Bowl: agriculture in the Midwest and Plains catastrophic; foreclosures, drought cause dust storms

Hardest hit states: Kansas. Oklahoma, Texas. Nebraska

The New DealThousands move west

The migration of the “Okies”

Impact on economy

Passage of the

Agricultural Adjustment Act (AAA)

Designed to aid farmers by paying some not to plant/limit livestock

The New Deal

The center of the New Deal:

the National Industrial Recovery Act

The National Industrial Recovery Act (NIRA)

Most ambitious overhaul of the economy since WW I; used similar methods

Attempt to organize economy into partnerships of management, labor, and govt.

Creates “Codes of Fair Competition”

Administered by the National Recovery Administration

The National Industrial Recovery Act (NIRA)The Codes:

anti-laws suspended, allows for cooperation within industries to set prices, wages, and production

creates National Labor Relations Board to mediate disputes

minimum wage set

bans child labor

allows for unionization

sets maximum hours to 32 per week

The New DealSmall businesses were exempt but encouraged to show their participation by posting the NRA sign; govt. uses WW I-style propaganda campaign to promote Act

Problems with the ActAct fell short of accomplishing goal:

some businesses did not maintain the Code

hurt smaller businesses, could not compete

many saw it as socialism and too pro-labor

May 1935: Supreme Court declares it unconstitutional

The End of the First New DealReforms have mixed results on the economy

Positive:

some improvement in employment, economy

relief to most in need

optimism returns as government attempts aid to people

Negative:

depression still present

growing opposition from liberal and conservative forces

Supreme Court strikes down many New Deal programs; i.e. NIRA, AAA

Opponents of FDRFather Charles Coughlin: radio

priest, criticized FDR for being too “socialist”

Dr. Francis Townsend: advocated $2,000 annual pension for elderly; led to creation of Social Security Act (1935)

Beginning of the “Second New Deal”

Opponents of FDRSen. Huey Long (D-LA)

criticized FDR for not going far enough in reforms

“Share Our Wealth” – confiscate all fortunes over $1m and redistribute it to all; guarantee of $5,000 yearly income

Assassinated in Baton Rouge, Sept, 1935

The Second New Deal (1935 -37)Focused on reforms and long-

term securityi.e. Social Security; the Wagner Act

Centerpiece: the Works Progress Administration (WPA)

Designed to create large-scale public works projects and provide employment to thousands

Largest peacetime govt. expenditure

The WPA

Major works projects

Largest program to date

Employed thousands

WPA and the Arts

Art, literature, and music projects included in the WPA; first govt. support for the arts

Kansas Cityfrom Politics, Farming, & the Law

Thomas Hart Benton,1936

WPA and the Arts

The Annual Moveby Otis Dozier, 1936

Construction of the Dam

by William Gropper

Construction of the Dam

by William Gropper

Women of Flint, MIby Joseph Varak

Women of Flint, MIby Joseph Varak

Travel Guides sponsored by the WPA

Role of Eleanor Roosevelt

Acted as FDR’s “eyes and ears”; major influence on New Deal proposals

Led to inclusion of blacks in govt. programs; also created the WPA programs supporting the arts

Controversial First Lady due to her active role in FDR administration

1936 ElectionFDR beats Alf Landon of Kansas like a red-

headed step-child

FDR vs. the Court

“Nine old men”

Supreme Court biggest obstacle in implementing New Deal legislation

FDR tries to add six more Justices to create a Court more favorable to his proposals

FDR vs. the CourtPublic reacts very unfavorably to plan; FDR loses popularity

FDR stays with plan despite loss of support

FDR vs. the CourtFDR eventually withdraws plan, but too late to

regain support for more New Deal plans

Court begins to support New Deal programs, but the New Deal era comes to an end

The Legacy of the New DealPositive:

provided relief and temporary jobs for millions

kept US from embracing radical movements; restored confidence in America

ended laissez-faire as govt. policy

Negative:

only partially solved the Depression

led to govt. deficits in peacetime

led to growth of “Big Govt.”