Chapter 25 Summary
The Depression and the New Deal
Section One – The Great Depression
The Stock Market
 As the economy boomed in the 1920s, the stock market
took off
 Market Mania - Lots of people (grocers, plumbers,
waiters, etc.) were buying as much stock as they could
thinking the economic boom would last forever.
The Boom
 Stock Exchange – organized system for buying and
selling shares in corporations
 By 1929, roughly 10% of Americans owned stocks
 Buying on margin – some investors, who lacked the
money to pay for stocks, borrowed money from stock
brokers to make their stock purchases. As long as
prices continued t go up, the buyer could sell later,
pay back borrowed amount, and keep the profits.
The Crash
 Late September, 1929 – some investors begin to sell
off stocks, resulting in dropping stock prices.
Brokers then demanded repayment from those people who
bought on margin.
 Prices continued to drop until October 21, but experts
told people not to worry.
 Black Thursday (October 24, 1929) – Investors panicked
and dumped stocks cheaply
 Black Tuesday, October 29, 1929 – 16 million shares
exchanged hands and prices plummeted
 The New York Stock Exchange closed for a few days
following this to prevent more panic selling.
The Great Depression
 GNP (Gross National Product) went from $104 billion In
1929 to $58 billion in 1932
Causes of the Great Depression
 Overproduction – factories were producing so many
goods that they were making far more than they were
selling. This leads to a surplus, causing companies
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to lay off workers. These unemployed workers then cut
back on spending, further harming the economy
Gap Between the Rich and Poor – In 1929, 33% of the
wealth was in the hands of less than 1% of the
population. 75% of Americans lived at or below the
poverty line.
Credit Crisis – Consumers were buying goods on credit.
When they lost their jobs, they were unable to pay
back their debts.
Bank Failures – Banks make money by lending out money
people put into savings accounts. They might pay 2%
interest to someone on a savings account and turn
around lend that persons money to someone else at 8%
interest. The 6% difference is how the banks make
money. Before the Depression, banks lent loans out to
almost anyone. However, when customers defaulted (did
not back back) these loans during the Depression, the
banks ran out of money. Therefore, when people came
to take money out of their savings account, there was
no money to give them.
International Depression – Other countries also were
suffering from the Depression and so their was no
international markets for U.S. goods. In addition,
Congress passed the Smoot-Hawley Tariff in 1930. This
high tariff caused other countries to raise tariffs on
U.S. goods, stopping much foreign trade.
Unemployment – In 1932, 25% of Americans were
unemployed and the unemployment rate stayed around 20%
for the rest of the decade. Unemployed people tend to
cut spending, further hurting the economy. Long lines
gathered at soup kitchens and desperate people began
selling apples or shining shoes in the streets.
“Hoovervilles” were a group of homes constructed of
cardboard and left over materials the homeless made to
live in.
Hoover and the Crisis
 President Hoover thought that the economic crisis was
temporary and that recover was just around the corner
 Laissez-Faire - Hoover wanted people to solve their
own issues and did very little at first
 Charities, churches and volunteers stepped up to
provide assistance when possible, but the needy
outnumbered the help available
Government Action
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Public Works Projects - In 1931, Hoover realizes he
needs to do something and authorizes spending on pubic
works projects. The federal government paid for
construction of highways, parks, and libraries
Reconstruction Finance Corporation (RFC) – lent money
to businesses for local programs but this was too
little, too late
The Bonus Army
 WWI veterans were supposed to receive bonuses in 1945,
but vets were suffering from the Depression and wanted
them early.
 Bonus Army - The veterans went to Washington, D.C. to
demand their money and lived in Hoovervilles while
there.
 When Congress voted against giving the soldiers their
money, most left. However, about 2000 stayed in the
Hooverville camps and police were called in to force
them out. The Bonus Army fought back and two people
were killed
 Hoover calls in the army, who used tear gas on their
own vets. Americans around the country were horrified
that the govt. attacked its own veterans of war. This
was the last straw for Hoover.
Section Two – Roosevelt’s New Deal
Franklin D. Roosevelt
 FDR was chosen as the Democratic candidate in the
election of 1932.
 FDR pledged a “New deal for American people.”
 FDR was TR’s cousin and from a wealthy NY family
 Married to TR’s niece Eleanor Roosevelt, one of the
best First Ladies of all time
 Stricken with polio in 1921 and was paralyzed in both
legs – this was kept as quiet as possible.
 Elected governor of NY in 1928
 Wanted to solve problems of Depression with bold moves
(opposite of Hoover, who thought things would fix
themselves)
 Hoover was the Republican candidate but people were
blaming him for the Depression
FDR Takes Charge
 FDR wins election of 1932 in a landslide
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Inauguration speech – “The only thing we have to fear
is fear itself.”
Saw his primary goals as putting people back to work
and helping banks
Bank Holiday – orders banks closed for four days to
give time to figure out what to do.
Emergency Banking Relief Act – help banks reorganize
and open safely.
Fireside Chats – radio broadcasts of FDR that gave
people idea he was talking directly to them – Made
govt. transparent and seemed like govt. cared as
opposed to Hoover Administration.
The First Hundred Days
 FDR set out to make as many changes as he could during
his first 100 days in office to show people he was
going to help and to earn their trust
 People were amazed at the amount of programs FDR put
in. This made people very optimistic
The New Deal Takes Shape
 New Deal - new laws that were passed by FDR. They
affected banking, public works, the stock market,
industry, agriculture, the poor, and conservation.
 Alphabet Soup – because of all of the acronyms of
FDR’s programs,
 Civilian Conservation Corps (CCC)– 3 million people
hired to plant trees, build levees for flood control,
and improve parks
 Federal Emergency Relief Administration (FERA) – gave
money to states to help those in need
 Agricultural Adjustment Act (AAA) – sought to raise
farm prices and control production of farm goods.
Paid farmers to NOT grow crops in some fields. This
lowered supply and drove up prices. Farmers incomes
rose 50% during the first three years of the New Deal,
but Supreme Court ruled the AAA unconstitutional for
invading the reserved powers of the states in U.S. vs.
Butler (1936).
 Tennessee Valley Authority (TVA) – sought to bring
electricity to rural Tennessee and control flooding by
building hydroelectric dams in the area
 National Industrial Recovery Act (NIRA) – Used to
control businesses (socialism). This act abolished
child labor and created a federal minimum wage.
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Public Works Administration (PWA) - hired people to
build roads, shipyards, hospitals, and schools.
Federal Deposit Insurance Corporation (FDIC) – Created
to insure bank deposits to eliminate the issues that
led to the Depression
Securities and Exchange Commission (SEC) – punishes
dishonest stockbrokers and speculators
Assessing the Early New Deal
 The New Deal did not fix the Great Depression – people
were still unemployed and farmers continued to
struggle.
 People began to believe that the nation could pull out
of the Depression – optimism replaced pessimism
 Many people questioned if the government was going to
far. Others thought it wasn’t going far enough.
Section Three – Life During the Great Depression
Hard Times in America
 Thousands of people sent Eleanor Roosevelt letters
during the Depression talking about their troubles.
 Women went to work to support their families
 Clothing was repaired rather than replaced, people
made own food (bread, canned fruit and veggies)
 Eleanor Roosevelt acts as husband’s eyes and ears.
 Hobos – people (mostly men) who illegally boarded
trains to travel fro town to town to find work. These
people developed their own symbols to communicate with
each other.
The Dust Bowl
 Dust Bowl – area including western Kansas, Oklahoma,
Texas, eastern Colorado and New Mexico that received
very little rain during the 1930s.
 Black Blizzards - Drought blew the topsoil away in
huge dust clouds that buried crops and homes in drifts
as high as 6 feet.
 Okies - 40,000 farmers leave the Great Plains, mostly
headed for California to become migrant workers
The Plight of Minorities
 Minorities were especially hard hit during the
Depression as they started with very little money.
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Rural South – 50% of Blacks in the South were
unemployed as farm prices crushed the farm industry
400,000 Blacks move to Northern cities to try to find
work without much luck
Indian New Deal – halted sale of Indian Reservation
lands and FDR hires 77,000 Native Americans in the CCC
Entertainment and the Arts
 Radio provided free entertainment (presuming you had a
radio)
 Movies were enormously popular. *5 million people
went once per week as people went to escape their
troubles
 Snow White – came out in 1937
 Wizard of Oz – 1939
 Grapes of Wrath (1940) was about a family escaping the
Dust Bowl
 Gone with the Wind (1939) was about coping during the
Civil War
 Dorothea Lange – took photographs of people struggling
during the Depression (Migrant Mother)
Section Four – Effects of the New Deal
Critics of the New Deal
 The business world (Republicans) felt FDR was spending
too much on the New Deal and wanted a more laissezfaire handling of businesses
The Second New Deal
 By the mid-1930s, the Depression still had not ended,
so FDR sought new ways to fix the economy
 Revenue Act (1935) – Taxed wealthy Americans and
corporations
 Works Progress Administration (WPA) – employed 2
million people fro 1935 to 1941 building/repairing
airports, public buildings, roads, bridges. WPA
members also recorded folktales and songs, Slave
narratives, and painted murals
 Social Security Act (1935) –
o Taxed workers and employers to create a pension
for retired people
o gave unemployment insurance to those who had lost
their jobs
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o Aided people with disabilities, elderly poor, and
children of non-supportive parents
o Created the federal welfare system
National Labor Relations Act (1935) – guaranteed
workers the right to join a union and collectively
bargain
Fair Labor Standards Act (FLSA) – banned child labor
and created a minimum wage of 40 cents and hour
The Supreme Court
 Those opposed to the New Deal began to challenge its
laws in court
 Many laws were declared unconstitutional
 The issue of election of 1936: Did Americans support
FDR and the New Deal? He won 61% of the vote
FDR’s Court Packing Plan
 FDR is concerned the Supreme Court will take away the
New Deal
 Asks Congress to increase the number of Justices from
9 to 15 so that he could pick six new Justices that
would support the New Deal Jamestown’s Robert H.
Jackson helped create this idea
 Congress feels that would upset the system of checks
and balances and refuses to “pack” the Court full of
FDR supporters