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 Glass-Steagall Act Federal Securities Act 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”