Chapter 9 Notes McGraw Hill- Smith
I. THE STOCK MARKET
I. The Election of 1928
A. The 1928 election placed former head of the Food Administration and secretary of commerce, Herbert
Hoover, on the Republican ticket against Democratic candidate, Alfred E. Smith, a four-time governor of
New York and the first Roman Catholic to be nominated for president.
B. The issue of Prohibition played a major role in the campaign. Hoover favored a ban on liquor sales.
Smith opposed the ban.
C. Religious differences between the candidates had a major effect on the campaign. The Catholic issue
led to a smear campaign against Smith.
D. The Republicans took full credit for the prosperity of the 1920s, and Herbert Hoover easily won the
1928 election by a landslide.
Discussion Question
What were the major campaign issues in the election of 1928?
The Long Bull Market
How did speculation weaken the stock market? Speculation pushed prices up without regard to the actual value of a
company’s profits or sales. As stocks became increasingly overvalued, the market ceased to accurately reflect their true
worth.
A. The stock market was established as a system for buying and selling shares of companies.
A long period of rising stock prices is known as a bull market. Prosperous times during the 1920s caused
many Americans to invest heavily in the stock market.
B. As the bull market continued to go up, many investors bought stocks on margin, making a small cash
down payment. This was considered safe as long as stock prices continued to rise. If the stock began to
fall, the broker could issue a margin call demanding that the investor repay the loan immediately.
C. In the late 1920s, new investors bid prices up without looking at a company’s earnings and profits.
Speculation occurred when investors bet on the market climbing and sold whatever stock they had in an
effort to make a quick profit.
Why were stock market investors in the 1920s sensitive to any fall in stock prices?
II. THE MARKET CRASHES
The Great Crash
A. By late 1929, a lack of new investors in the stock market caused stock prices to drop and the bull
market to end.
B. As stockbrokers advised their customers of margin calls, customers responded by placing their stocks
up for sale, causing the stock market to plummet further. Stock prices fell drastically on October 29,
1929, Black Tuesday, resulting in a $10 to $15 billion loss in value. While this did not cause the Great
Depression, it did undermine the economy’s ability to hold out against its other weaknesses.
C. The stock market crash weakened the nation’s banks. Banks lost money on their investments, and
speculators defaulted on loans. Because the government did not insure bank deposits, customers lost their
money if a bank closed. Bank runs resulted as many bank customers withdrew their money at the same
time, causing the bank to collapse.
Discussion Question
How did the stock market crash weaken the nation’s banks?
The Roots of the Great Depression
Chapter 9 Notes McGraw Hill- Smith
Underlying Economic Problems
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Uneven distribution of income
Overproduction and under consumption
High tariffs and declining exports
Low interest rates
A. Efficient machinery led to overproduction, and Americans could not afford to buy all the goods
produced.
B. The uneven distribution of wealth in the United States added to the country’s economic problems. In
1929 the top 5 percent of American households earned 30 percent of the country’s income. More than
two-thirds of the nation’s families earned less than $2,500 a year.
C. Low consumption added to the economic problems. Worker’s wages did not increase fast enough to
keep up with the quick production of goods. As sales decreased, workers were laid off, resulting in a
chain reaction that further hurt the economy.
D. Many Americans bought on the installment plan, making a down payment and paying the rest in
monthly installments. Paying off installment debts left little money to purchase other goods.
E. The Hawley-Smoot Tariff intensified the Depression by raising the tax on imports. Americans
purchased less from abroad because of the high cost. In return, foreign countries raised their tariffs on
American products, causing fewer to be sold overseas.
F. Instead of raising interest rates to stop speculation, the Federal Reserve Board made the mistake of
lowering the rates. This encouraged banks to make risky loans and misled business owners into thinking
the economy was still expanding.
Discussion Question
How did the Federal Reserve Board help cause the Depression?
What do you think could have been done to prevent the financial crisis? stronger regulation of the lending sector;
stock market regulation; open, free trade; a safety net, such as FDIC insurance; greater distribution of wealth across the
population.
What do you think would be the correct response to such a crisis? immediate government investment in the
financial sector; stronger oversight and regulation; unemployment aid to people losing their jobs; low interest loans to
corporations and banks; the creation of agencies to protect and employ the American population.
Lesson 2
The Depression Worsens
A. By 1933 thousands of banks had closed and millions of American workers were unemployed.
Unemployed workers often stood at bread lines to receive free food or at soup kitchens where private
charities gave a free meal to the poor.
B. Americans unable to pay their mortgage or rent lost their homes. Those unable or unwilling to move
had a court-ordered eviction notice delivered by a court officer or bailiff who forced nonpaying tenants
out onto the street.
C. Many of the homeless built shacks in shantytowns, which they referred to as “Hoovervilles” because
they blamed the president for their financial trouble. Hobos, or homeless Americans who wandered
around hitching rides on railroad cars, searched for work and a better life.
D. As crop prices dropped in the 1920s, many American farmers left their fields uncultivated.
A terrible drought in the Great Plains, beginning in 1932, caused the region to become a
“Dust Bowl:
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Severe Drought Agricultural practices and severe drought turned the Great Plains into a vast “Dust Bowl.” Dust
storms forced farmers to abandon their land.
Chapter 9 Notes McGraw Hill- Smith

Okies These farm families—called “Okies” because many were from Oklahoma—often traveled west seeking work
in California.
E. Many Midwestern farmers and Great Plains farmers lost their farms. Many families moved west to
California hoping to find a better life, but most still faced poverty and homelessness.
Discussion Question
What happened to unemployed workers and Midwestern and Great Plains farmers during the
Depression?
Life Becomes Hard
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Skyrocketing Unemployment Unemployment grew rapidly, reaching some 25 percent by 1933.
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Hobos Some people who lost their homes began traveling the country as hoboes. They sought jobs with little
success as they wandered along the rail lines.
Hungry and Homeless Unemployed people could not buy food or pay for their homes. Many waited in bread
lines for free food, and evictions became common.
How did the Great Depression change life for average Americans?
How do you think your life would have been affected?
What effect did the Dust Bowl have on life in the Great Plains?
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Farmers in the region were unable to grow crops
so they and their families moved west, often to California, to seek work
People who remained faced damaging dust storms and poor cropland
Arts and Entertainment.
Escaping the Depression
A. Americans escaped the hardships of the Depression by going to the movies and listening to radio
broadcasts. Stories tended to be about overcoming hardships and achieving success.
B. Walt Disney produced the first feature-length animated film, Snow White and the Seven Dwarfs, in
1937. Other films, like The Wizard of Oz, Mr. Smith Goes to Washington, and Gone with the Wind,
contained stories of triumph over adversity and visions of a better life.
C. Families gathered around the radio daily to hear news or listen to comedy shows like George Burns or
a dramatic series like the Lone Ranger. Melodramas, called soap operas, became very popular with
housewives. Soap operas received their name because makers of laundry soaps often sponsored them.
Discussion Question
Why were movies and radio programs important during the Depression?
The Depression in Art
A. Homeless and unemployed Americans were the subjects of art and literature during the 1930s. Artists
and writers tried to capture the real life drama of the Depression.
Thomas Hart Benton and Grant Wood emphasized traditional American values in their art.
B. John Steinbeck’s 1939 novel The Grapes of Wrath told the story of an Oklahoma family fleeing the
Dust Bowl to find a new life in California. Steinbeck, like many writers of this time, wrote of poverty,
misfortune, and social injustice.
C. Novelist William Faulkner’s literary technique, stream of consciousness, revealed characters’
thoughts and feelings before they spoke—thoughts they dared not reveal. In his novels, he exposed
hidden attitudes of Southern whites and African Americans in a fictional Mississippi county.
Discussion Question
What was emphasized in the work of Thomas Hart Benton and Grant Wood?
Why might people have enjoyed lighthearted entertainment during the Great Depression?
Lesson 3
Chapter 9 Notes McGraw Hill- Smith
HOOVER’S RESPONSE
I. Promoting Recovery
A. In an effort to promote economic recovery, President Herbert Hoover held a series of conferences
bringing together the heads of banks, railroads, big business, labor, and government. Hoover received a
pledge from industry to keep factories open and stop cutting wages.
B. After the pledge failed, Hoover increased public works—government-financed building projects.
Hoover asked the nation’s governors and mayors to increase public works spending. At the same time,
however, Hoover refused to increase government spending or taxes. He feared that deficit spending would
actually delay an economic recovery.
C. Americans blamed the Republican Party for the Depression. As a result, in the midterm congressional
elections of 1930, the Republicans lost 49 seats and their majority in the House of Representatives.
Discussion Question
How did Hoover promote economic recovery?
Hoover’s Efforts
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“Rugged Individualism” The basic idea was that Americans fend for themselves no matter the obstacles.
Hoover believed that Americans could turn the economy around without government intervention. He tried to
work with business leaders and increased public works projects in an effort to spur economic recovery.
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Managing the Money Supply The Federal Reserve refused to increase the money supply for fear of inflation.
Instead, Hoover set up the National Credit Corporation (NCC) and Reconstruction Finance Corporation (RFC) to
provide loans to individuals and business. However, these programs did not have a broad or deep enough reach
to significantly help.
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Direct Relief Hoover believed that private charity and state and local governments—not the federal
government—should provide relief assistance. As these organizations began facing funding challenges, he signed
the Emergency Relief and Construction Act authorizing federal relief.
What steps did Hoover take to improve the economy?
He encouraged private relief and business support. He also established federal corporations to provide money for loans.
Eventually, he signed a bill authorizing direct federal relief programs.
Why do you think that Hoover’s efforts ultimately failed?
Background:
Hoover believed strongly that the federal budget must be balanced. To keep the government from relying on deficit
spending, Congress passed, and Hoover signed into law, the Revenue Act of 1932. This legislation drastically increased
taxes in an attempt to reduce the federal government’s deficit. The highest marginal tax rate, applied to the highest
incomes, was increased from 25 percent to 63 percent. The tax rates of all other income brackets were also increased.
II. Pumping Money Into the Economy (page 670)
A. President Hoover tried to persuade the Federal Reserve Board to put more currency into circulation,
but the Board refused.
B. Hoover set up the National Credit Corporation (NCC), which created a pool of money to rescue banks,
but it was not enough to help.
C. By 1932 Hoover felt the government had to provide funding for borrowers. He asked Congress to set
up the Reconstruction Finance Corporation (RFC) to make loans to banks, railroads, and agricultural
institutions. The economy continued to decline when the RFC was too cautious in its loan amounts.
D. Hoover opposed the federal government’s participation in relief—money that went directly to very
poor families. He felt relief was the responsibility of state and local governments.
E. In July 1932, Congress passed the Emergency Relief and Construction Act to get money for public
works and for loans to the states for direct relief.
Discussion Question
What actions did President Hoover take to try to pump money back into the American economy?
Chapter 9 Notes McGraw Hill- Smith
II. ANGER AND PROTEST
In an Angry Mood
A. By 1931 discontentment over the economy led to violence. Looting, rallies, and hunger marches
began. During a hunger march at the nation’s capital, police denied protestors food, water, and medical
treatment. Congress intervened, stressing the marchers’ right to petition their government. Congress
permitted them to march on to Capitol Hill.
B. Between 1930 and 1934, creditors foreclosed, or took possession of, almost a million farms. Some
farmers destroyed their crops, hoping the reduction in supply would cause the prices to go up.
C. In 1924 Congress enacted a $1,000 bonus to be paid to veterans in 1945. In 1931 a bill was introduced
in the House that authorized early payment of the bonus. In 1932 the
“Bonus Army” marched to Washington, D.C., to ask Congress to approve the legislation.
D. after Hoover refused to meet with the Bonus Army, and the Senate voted the new bonus bill down,
some of the marchers left. Some marchers stayed, moving into deserted buildings in Washington, D.C.
When Hoover ordered the buildings cleared, disputes between the remaining people and the police (and
later the army) resulted in several deaths.
American Response
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Hunger Marches Looting and protests over hunger took place during 1931 and 1932. Some 1,200 protesters
held a hunger march on Washington, D.C., in 1932.
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Farm Foreclosures Many farmers had low profits and high debts. Lenders foreclosed on mortgaged farms and
evicted families. Farmers destroyed crops in an unsuccessful effort to raise prices.
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The Bonus Army World War I veterans who were promised a bonus to be paid in 1945 demanded early payment
of the bonus. A group of veterans marched on Washington, D.C., in 1932 over the issue. The situation eventually
turned violent.
Why did the Bonus Army march on Washington? Many of the veterans were without work and were in desperate need
of their bonuses
Could the soldiers of the Bonus Army have used a different method to get what they wanted? Tried bargaining
or petitioning; others might say that they had little choice open to them other than direct protest
What positive things did Hoover do as president?