PPTHoover and Depression

8/14/2019 PPTHoover and Depression

1/33

Hoover and theGreat Depression,

1928-1933


2/33

1. The Election of 1928

Coolidge could have had the Republican nomination

for a third term but he refused, saying, when asked, I

do not choose to run.

The brilliant engineer Herbert Hoover, who served

as Coolidges businessman's Sec. of Commerce, was

quickly chosen by the nominating convention.

The Democrats chose the honest and sincere Alfred

E. Smith, the forceful and popular governor of New

York.


3/33


Smith conducted an energetic campaignand

denounced both prohibition and the

favoritism

of the Republicans to industrialists.

Hoover straddled the prohibition issue by

referring to prohibition as the noble

experiment.

Again the Republicans won anoverwhelmin


4/33


The country, still prosperous except for the farmers,

was in no mood to abandon the party that claimed

credit for the prosperous state of the economy.

Hoovers reputation for an engineers skill and

efficiency, his successful career, and his middle

western background, helped him win.

Smith, because of his Catholicism, his anti-prohibition

stand, and his Eastern big city background, could not

even win the discontented farmers of the Midwest.


5/33


For the first time since Reconstruction,the

states of Texas, Florida, Virginia, and North

Carolina, voted Republican.

The radio, widely used in the election

campaign for the first time, hurt Al Smithwith

his accent from the sidewalks of New York.


6/33

2. The Coming of theDepression The failure of the small recessions of 1924 and

1927

to develop into serious depressions caused business

world prognostications. They claimed that the wisdom of the businessleaders

had introduced a New Era of freedom from drastic

fluctuations in the business cycle.

This optimistic belief in permanent prosperitycaused

mad speculation in city real estate, particularly in


7/33

2. The Coming of theDepression The prosperity of the Twenties was limited in

scope,

unsoundly based, and more apparent than real.

Agriculture and some industries such as textiles andcoal mining remained chronically depressed.

The prosperity of business corporations, as reflected

by their growth and the rising prices of theirsecurities, was enjoyed by only a small segment of

the population.


8/33

2. The Coming of theDepression

It also caused extreme speculativeovervaluations of corporationsecurities and brisk trading in the

stock exchanges.

When Hoover took office in thespring of 1929, he declared the

soundness of the nations economy.

Very few expected the panic andcollapse in the economy that struck in

the fall of 1929.


9/33

3. The Federal Farm Board

To appease the unhappy farmers and head of more

radical legislation, Pres. Hoover called Congress in

special session to pass the Agricultural Marketing

Act of 1929.

This Act established a Federal Farm Board to

encourage farmers marketing cooperatives to

organize.

The Farm Board loaned money to the cooperativesto

promote the storage and orderly marketing of farm

roduce.


10/33

3. The Federal Farm Board

At the same time, it sought to discourage

production where surpluses had depressed

prices.

The Board itself purchased surpluses of cotton

and wheat to prevent price declines.

After two years and accumulated surpluses that

it could not market, the Board ceased

purchases, and wheat and cotton fell to new

low prices far below the costs of production.


11/33

4. The Hawley-Smoot Tariff

Hoover undertook tariff revision also at this

time, in an effort to help the economy.

By this act, the traditional log-rolling by

congressmen carried tariff rates to an all-time

high, even exceeding the high rates of 1922.

Leading economists urged Hoover to veto the

Hawley-Smoot Tariff, as the bill came to be

known.


12/33

The Hawley-Smoot Tariff

They pointed out that it would raise consumer

prices and promote inefficient businesses.

It would also injure farmers by limiting the

ability of foreign countries to buy American

exports.

And, it would bring reprisals from other

countries who stood to lose their market in the

United States.


13/33

The Hawley-Smoot Tariff

Unconvinced of all this, Hoover signed the bill

and soon these negative predictions were borne

out.

The tariff helped to create further barriers to

international trade and good will and thereby

contributed to the depression.


14/33

5. The Panic and theDepression Only a few observers cast doubts on the

soundness of the economy in the summer of

1929, but certain weaknesses were noted.

Too much money was being diverted to stock

market speculation.

Moreover, the building boom was declining,

surpluses existed in industry as well as in

agriculture.


15/33

The Panic and the Depression

To discourage speculation on borrowed

money, the Federal Reserve Board raised its

discount rate in the summer of 1929.

In October, the English did the same in order

to attract funds back home.

This touched off selling in the New York

Stock Exchange; within a month, stock prices

had declined about 37%.


16/33


In subsequent market breaks for the next three

years, prices reached new lows after temporary

recoveries.

Soon, all markets in commodities and real

estate reflected the onset of depression; the

depression became worldwide.

Unemployment in the winter of 1929-30mounted into the millions by the fall of 1930.


17/33


The extended depression, the worst in

American history, reached a bottom in 1933.

Recovery was not complete when severe

depression recurred in 1937.

Only the coming of World War II ended the

depression.

Hoover and the Great Depression


18/33

6. Causes of the Depression

Economists have come to agree upon the basic

causes of the Great Depression.

Among these were:

1) Over-expansion of agriculture and the

consequent chronic depression in the Twenties

eventually helped pull the rest of the economy

down with it.2) Over-expansion had occurred in industrial

capacity, particularly in the important automobile

industry.


19/33

Causes of the Depression

3) Labor-saving machines caused technological

unemployment; unemployment and underpaid

workers could not sustain the demand for

industrial goods.

4) Concentrations of money among wealthy

individuals and surpluses in business corporations

deprived farmers and workers purchasing power. 5) As in the prosperity phase of most business

cycles, the over-expansion of credit encouraged

speculation and over-investment.


20/33

Causes of the Depression

6) Installment buying of consumer goods introduceda

new factor creating wide swings and instability in

purchasing power. 7) The international trade decline due to tariff

barriers was another favor.

8) Over speculation in securities, land, and

commodities touched off the panic, and made the

depression worse than it might have been.


21/33

7. Hoovers Steps to Fight theDepression Hoover accepted the need, more than any

president before him, for government attack

upon depression.

His failure to act more vigorously may be

explained by his personal philosophy.

He expected measures of a voluntary nature by

business and labor and action by localgovernment to carry the burden of recovery

and relief.

i h h


22/33

Hoovers Steps to Fight theDepression

Not only that, but he believed that the depression

would be short-lived, and that prosperity was just

around the corner.

All of this justified, for him, the inaction that has

since been associated with his one-term presidency.

His belief that the causes of depression were

fundamentally international and that the burden ofintergovernmental debts was primarily responsible.

H S Fi h h


23/33


He, therefore, emphasized the need for

international solutions for the crisis.

Hoover at first held a series of conferences in

Washington to secure the voluntary

cooperation of business in maintaining wages

and continuing plant expansion.

He asked labor to spread the work byaccepting part-time employment so that

persons could stay on payrolls.

H St t Fi ht th


24/33


In 1930, Hoover asked Congress to appropriate

funds for public works projects.

He called on Congress to establish the

Reconstruction Finance Corporation to lend

money to state and local governments to create

jobs.

It would also lend money to banks, railroads,and other large corporations to prevent

bankruptcy and to help create jobs.

H St t Fi ht th


25/33


The Home Loan Bank Act of 1832 established

Home Loan Banks to refinance home mortgages for

individuals in danger of losing their homes by

foreclosure.

Hoover declared a one-year moratorium in 1931 in

the payment of international debts (those owed the

U.S. by other countries, ie., war loans to Europeancountries).

H ' St T Fi ht Th


26/33

Hoover's Steps To Fight TheDepression

However, Hoover opposed payment of the veterans

bonus, which would have both discharged this

obligation and created purchasing power among

many families.

H St t Fi ht th


27/33


The Bonus Army of unemployed veterans and

others that marched on Washington and

camped in the city were routed by the army on

Hoovers orders.

In the Norris-La Guardia Act (1932), the

Democrats joined Republican insurgents to

forbid the use of injunctions in labor disputes.


28/33


The midterm elections of 1930 gave the

Democrats control of Congress.

As the depression grew worse, it became clear

that the Republicans could not avoid blame for

the depression and that the Democrat nominee

would win.

This made for a lively convention for theDemocrats.


29/33

The Election of 1932

Al Smith expected Franklin D. Roosevelt to

nominate him again, but Roosevelt worked for

the nomination himself and won it.

John Nance Gardner of Texas ran for Vice

President with Roosevelt.

Meanwhile, the Republicans renominated

Herbert Hoover.


30/33


The victory of the Democrats reachedlandslide proportions.

The transition of the Presidency from

Hoover to Roosevelt left the country withouta vigorous hand to deal with thedepression.

During this interregnum, theuncertainty as to the policies of the newadministration created uncertainty andfear.


31/33


Withdrawal of deposits from banks brought on a

financial crisis and the depression touched bottom

when Roosevelt came into office.

The outgoing Hoover and the incoming Roosevelt

could not cooperate and each distrusted the other.

Hoover tried to commit Roosevelt to certainfinancial

policies but Roosevelt necessarily refused to reveal

his intentions until he had the powers of office.


32/33

9. The Twentieth Amendment

This so-called lame-duck amendment was

ratified in 1933 to keep members of Congress

defeated in the November elections from

having to legislate.

It abolished the short session of Congress that

met in December in even numbered years.

Lame duck congressmen were those whosewings had been clipped by defeat in the

election.


33/33

The Twentieth Amendment

The amendment specified that Congress

should convene on January 3rd and movedthe

date of the Presidents inauguration up to

January 20th.

Documents

PPTHoover and Depression