Herbert Hoover, Republican, 1929-1933 How did President Hoover react to the stock market crash on Wall Street? Well, he was a mining engineer . . . As every mining engineer knows, mining is a risky business. It is inherently dangerous. Miners die in roof falls, fires, explosions, and are asphyxiated by methane gas. And as every stockbroker knows, the stock market is a risky business. It is inherently risky. It is a form of gambling - and investors risk losing their shirts everyday. So President Hoover regarded the stock market crash as the equivalent of a mine explosion. Horrible, but inevitable.

Predicting the Past – Warm Up What did President Hoover do for Wall Street? What did he do for Main Street?

Five Wrong Actions – and one right action

The Budget Hoover balanced the budget. He cut government spending.

Taxes Hoover raised taxes. In 1932, the Republicans raised taxes: To balance the budget, President Hoover raised taxes. Back then, only the rich (1%) and the tiny middle class (15%) paid taxes. The working class (84%) paid no income taxes at all. In 1932, the Republicans raised taxes: The top tax rate was raised from 25 to 63%. In 1936, the Democrats raised taxes: The top tax rate was raised to 79%.

Tariff Hoover raised tariffs Europe stopped buying U.S. goods In 1930, the Hawley-Smoot Tariff was the highest tax on imports in U.S. history. This tariff helped spread the Great Depression to Europe. The high protective tariff produced retaliatory tariffs in other countries, strangling world trade. Europe stopped buying U.S. goods From 1929 to 1932, international trade fell by 67%.

Gold Standard Hoover remained on the gold standard A shortage of money Every dollar bill was backed by gold in the U.S. Treasury. As a result, the federal government could not print more money than there was gold. A shortage of money From 1929 to 1932, the money supply contracted by 30%. Businesses could not get bank loans, so they went bankrupt.

The Interest Rate Hoover raised the interest rate A shortage of money Under Hoover, the Fed raised the prime interest rate. A shortage of money From 1929 to 1932, the money supply contracted by 30%. Businesses could not get bank loans, so they went bankrupt.

One Right Action! There is one thing the President Hoover did right: The RFC. That program constituted “government intervention in the economy.”

The Reconstruction Finance Corporation (RFC) In 1932, three years into the Depression, President Hoover finally did something that was right. He launched the Reconstruction Finance Corporation (RFC). This was the only law that President Hoover and the Republican Congress ever passed to deal with the Great Depression.

Federal Spending Under the RFC, President Hoover and the Republican Congress decided to bail out Big Business. The federal government loaned $2 billion to banks, insurance companies, and railroads. The federal government also loaned money to states overwhelmed with the needy. But it was too little, too late . . . By 1932, many businesses had already gone bankrupt.

Herbert Hoover, Republican, 1929-1933 President Hoover was the scapegoat for the Great Depression. Right or wrong, the American people blamed him. When the unemployed lived in makeshift communities of cardboard shacks down by the railroad tracks, they nicknamed them “Hoovervilles.”

What happened to Herbert Hoover after he left the White House? Predicting the Past – Exit Ticket What happened to Herbert Hoover after he left the White House?