Hoover and the

Great Depression,

1928-1933
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 Coolidge’s 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.
1. The Election of 1928
• Smith conducted an energetic campaign
and
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 an
overwhelming
1. The Election of 1928
• 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.
• Hoover’s reputation for an engineer’s 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.
1. The Election of 1928
• 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 Smith
with
his accent from the sidewalks of New York.
2. The Coming of the
Depression
● 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 business
leaders
had introduced a “New Era” of freedom from drastic
fluctuations in the business cycle.
• This optimistic belief in permanent prosperity
caused
mad speculation in city real estate, particularly in
2. The Coming of the
Depression
● The prosperity of the Twenties was limited in
scope,
unsoundly based, and more apparent than real.
• Agriculture and some industries such as textiles and
coal mining remained chronically depressed.
• The prosperity of business corporations, as reflected
by their growth and the rising prices of their
securities, was enjoyed by only a small segment of
the population.
2. The Coming of the
Depression
• It also caused extreme speculative
overvaluations of corporation
securities and brisk trading in the
stock exchanges.
• When Hoover took office in the
spring of 1929, he declared the
soundness of the nation’s economy.
• Very few expected the panic and
collapse in the economy that struck in
the fall of 1929.
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 cooperatives
to
promote the storage and orderly marketing of farm
produce.
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.
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.
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.
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.
5. The Panic and the
Depression
• 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.
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%.
 The Panic and the Depression
• 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 1929-30
mounted into the millions by the fall of 1930.
The Panic and the Depression
• 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
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.
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.
Causes of the Depression
– 6) Installment buying of consumer goods introduced
a
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.
7. Hoover’s Steps to Fight the
Depression
• 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 local
government to carry the burden of recovery
and relief.
 Hoover’s Steps to Fight the
Depression
• 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 of
intergovernmental debts was primarily responsible.
 Hoover’s Steps to Fight the
Depression
• 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 by
accepting part-time employment so that
persons could stay on payrolls.
 Hoover’s Steps to Fight the
Depression
• 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.
 Hoover’s Steps to Fight the
Depression
• 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 European
countries).
 Hoover's Steps To Fight The
Depression
• However, Hoover opposed payment of the veterans’
bonus, which would have both discharged this
obligation and created purchasing power among
many families.
 Hoover’s Steps to Fight the
Depression
• The Bonus Army of unemployed veterans and
others that marched on Washington and
camped in the city were routed by the army on
Hoover’s orders.
•In the Norris-La Guardia Act (1932), the
Democrats joined Republican insurgents to
forbid the use of injunctions in labor disputes.
8. The Election of 1932
• 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 the
Democrats.
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.
The Election of 1932
• The victory of the Democrats reached
landslide proportions.
• The transition of the Presidency from
Hoover to Roosevelt left the country without
a vigorous hand to deal with the
depression.
• During this “interregnum,” the
uncertainty as to the policies of the new
administration created uncertainty and
fear.
The Election of 1932
• 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 certain
financial
policies but Roosevelt necessarily refused to reveal
his intentions until he had the powers of office.
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 whose
“wings had been clipped” by defeat in the
election.
The Twentieth Amendment
• The amendment specified that Congress
should convene on January 3rd and moved
the
date of the President’s inauguration up to
January 20th.