1. 1929 Crash, the Great Depression and New Deal

2. Build up to the Crash there were warning signs
Spring Markets (stocks) were jittery- world wide
March- Dow Jones drops but stabilizes (what is the Dow Jones Industrial Average? Dow Jones)
August- Federal Reserve (aka the Fed) raises the discount rate to 6% (very high for 1929) the discount rate is what the Fed charges to lend money to banks; raising the discount rate makes it more expensive to borrow money.
September 26- Bank of England raises rate to protect the gold standard. (this also makes it more expensive to borrow)

3. September 29- British Market plunges (large London investment house goes under- similar to Lehman Brothers failure in 2008)
Early October- British question the strength of US Stock Market; Wall Street Journal agrees
October 24 (Black Thursday)- market falls 11% during trading but recovers to close 2% down
October 28 (Black Monday)- market fall 13%, does not recover at close
October 29 (Black Tuesday)- Market crashes, the Dow Jones loses 90% of it’s value
Banks begin to fail, only able to pay customers $.10 on the dollar

5. A decade of excess comes crashing down
People used saving to buy stocks hoping to make big profits.
Business and farmers tool out bank loans to keep things going.
Factories produced products faster than people could buy them causing a slow down, workers got laid off

6. Farm failures

7. Closed Factories

8. Banks lose money Business and farmers couldn’t pay back loans.
Banks had trouble collecting their money.
Banks started going out of business

9. Causes of Easy Credit Uneven distribution of wealth
Overproduction of consumer goods
Buying stock on margin
Bank failures

10. Bank runs

11. When banks failed, people lost their life savings
Credit: Courtesy of Temple University, Urban Archives, Philadelphia, Pa
During the early years of the Great Depression, runs on deposits forced hundreds of banks throughout Pennsylvania to liquidate their affairs and close their doors. Allentown lost six of its ten banks, and in Philadelphia more than fifty banks, most of them small, also failed, taking with them all of their depositors" savings.

12. video
Crash of 1929 (PBS)

13. Monetary and Fiscal Policy
Monetary Policy- actions of the Federal Reserve to control the quantity of money in circulation
Fiscal Policy- federal government action in taxation, spending and public debt
Federal Reserve System- the central banking system of the United States; controls monetary policy

14. How the Fed works
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Interest rates control the amount of money available, or in circulation.
The lower the interest rate, more money is available and it allows more people and businesses to borrow money. Lower interest rates also make investing in the stock market more attractive.
Higher interest rates tighten the money supply, make it more expensive to borrow money and investing in stocks goes down. Investing in treasury notes and bonds goes up.

15. Why do we care?
During economic downturns (aka-recessions,) the Federal Reserve can help give the economy a “shot in the arm” by lower interest rates to help stimulate the economy. During the Great Depression, the Federal Reserve did not do this.

16. Hoover
President Herbert Hoover believed in a “hands off” approach to the economy
He believed in “rugged individualism”, people should help themselves in harm times.
People who lost their homes lived in “tent cities” made of scrapes of metal and any other materials they could find. They called these places Hoovervilles.

17. Hoovervilles

18. 1932 Election Franklin Delano Roosevelt wins the presidency

19. FDR

20. The New Deal Goals- Relief, Reform and Recovery
The 100 Days: the first phase of the New Deal in which his administration presented Congress with a broad array of measures intended to achieve economic recovery, to provide relief to the millions of poor and unemployed, and to reform aspects of the economy that Roosevelt believed had caused the collapse.

21. Bank Holiday
His first step was to order all banks closed until Congress, could pass legislation allowing banks that were stable to reopen; this “bank holiday,” as Roosevelt called it, was intended to end depositors’ runs, which were threatening to destroy the nation’s entire banking system. The bank holiday, combined with emergency banking legislation made people feel more secure about keeping their money in the banks.

22. Bank Reform
Emergency Banking Act: the law empowered the President through the Treasury Department to reopen banks that were solvent and assist those that were not.
Glass-Steagall Banking Reform Act:
Created the FDIC (Federal Deposit Insurance Corporation) which insured deposits, today up to $250,000.

23. Glass-Steagall
Glass-Steagall also said commercial banks could not make risky investments in the stock market with depositors money. (commercial banks and investment banks were separate, a virtual firewall was placed between the two.)
George Bailey-commercial Gordon Gekko-investment

24. Crash Courses The Great Depression New Deal

25. New Deal Programs Alphabet Soup
Emergency Banking Act/Federal Deposit Insurance Corporation (FDIC)
Right after taking office as President, FDR shut down all of the banks in the nation and Congress passed the Emergency Banking Act which gave the government the opportunity to inspect the health of all banks. The Federal Deposit Insurance Corporation (FDIC) was formed by Congress to insure deposits up to $5000

26. Get people working (no welfare or unemployment, no social safety nets)
Federal Emergency Relief Administration (FERA)
Led by Harry Hopkins, a former social worker, this agency sent funds to depleting local relief agencies. Within two hours, $5 million were given out. Mr. Hopkins believed that men should be put to work and not be given charity. His program also funded public work programs

27. This public work program gave the unemployed jobs building or repairing roads, parks, airports, etc.
This environmental program put 2.5 million unmarried men to work maintaining and restoring forests, beaches, and parks. Workers earned only $1 a day but received free board and job training. From 1934 to 1937, this program funded similar programs for 8,500 women.
Civil Works Administration (CWA)
Civilian Conservation Corps (CCC)

28. Indian Reorganization Act of 1934
National Industrial Recovery Act (NIRA) of June 1933
This act ended the sale of tribal lands and restored ownership of unallocated lands to Native American groups.
The decline in the industrial prices in 1930s caused business failures and unemployment. The NIRA was formed in order to boost the declining prices, helping businesses and workers. The NIRA also allowed trade associations in many industries to write codes regulating wages, working conditions, production, and prices. It also set a minimum wage.

29. Public Works Association (PWA)
Federal Securities Act of May 1933/ Securities and Exchange Commission (SEC)
Home Owners Loan Corporation (HOLC) / Agriculture Adjustment Administration (AAA)
The PWA launched projects such as the Grand Coulee Dam on the Columbia River.
This act required full disclosure of information on stocks being sold. The SEC regulated the stock market. Congress also gave the Federal Reserve Board the power to regulate the purchase of stock on margin.
In order to help people keep their houses, the HOLC refinanced mortgages of middle- income home owners. The AAA tried to raise farm prices. It used proceeds from a new tax to pay farmers not to raise specific crops and animals. Lower production would, in turn, increase prices.

30. Tennessee Valley Authority (TVA) (May 1933)
Works Progress Administration (WPA)
Farm Security Administration (FSA)
National Labor Relations Act (Wagner Act)
The TVA helped farmers and created jobs in one of America’s least modernized areas
This agency provided work for 8 million Americans. The WPA constructed or repaired schools, hospitals, airfields, etc.
The FSA loaned more than $1 billion to farmers and set up camps for migrant workers.
It legalized practices allowed only unevenly in the past, such as closed shops in which only union members can work and collective bargaining. The act also set up the National Labor Relations Board (NLRB) to enforce its provisions

31. Fair Labor Standards Act of 1938
Social Security Act
This banned child labor and set a minimum wage.
This act established a system that provided old-age pensions for workers, survivors benefits for victims of industrial accidents, unemployment insurance, and aid for dependent mothers and children, the blind and physically disabled.