Great Depression and New
Deal (1929-1941)
Causes of the Great Depression
 Wall Street Crash
-- Prices had increased 18 mo. Straight
-- DOW reached all-time high of 381 in Sept.
1929.
-- Black Tuesday = unexpected volume of
selling (Oct. 24, 1929)
-- Friday = Group of investors bought stock
hoping to stabilize market.
-- Monday = Sell off continued
-- Black Tuesday = Bottom fell out.
-- September DOW = 381 pts. ; November = 198;
-- 1932 = DOW = 41pts.
Causes of the Crash
 Uneven distribution of income = wealthiest 5 %
controlled 33% of all income
 Stock Market speculation
-- “playing” the market
-- buying and selling for quick profit
-- buying on margin = borrowing money to invest
with.
 Excessive use of credit
 Overproduction of consumer goods = lower prices and
lower profits.
 Weak farm economy = surplus of ag products = lower
prices and lower profits
 Government policies = high tariffs and little regulation
 Global Economic Problems = Exports were down
Effects
 Gross National Product (GNP) = (value of
all the goods and services produced in a
year) fell from $104 billion to $54 billion in
4 years.
 National income declined 50%
 20% of all banks closed wiping out the
savings accounts of 10 million people.
 25% unemployment
 Republican party lost power (“Do nothing”
Hoover)
 Power of the Fed Government increased =
more regulations
Hoover’s Response
 Thought downturn would be short
lived (history of “panics”)
 Urged voluntary action and restraint
-- businesses to maintain wage levels
-- unions not to strike
-- private charities to increase giving
 Believed that relief should come from
the state and local levels.
Hoover (Cont.)
 Hawley-Smoot Tariff (1930)
-- Highest tariff in history
-- Reduced trade world-wide (Europeans
responded
with their own tariffs)
-- Global economy sank deeper into the
depression.
 Debt Moratorium (1931)
-- led to loan defaults and lack of money in
banks
 Federal Farm Board = temporarily held surpluses to
stabilize prices
 Reconstruction Finance Corporation
 Gave government loans to key industries
(railroads, banks, life insurance)
 “trickle down” theory
 Seen as a tool for the rich
Anti-Hoover Backlash
 Farmers banded together (unsuccessful)
 Bonus March
 1,000 WWI vets marched to Washington DC
 Demanded immediate payment of deferred
bonuses
 Thousands more moved into makeshift
“Hooverville”
 Hoover ordered break-up of settlement (tanks
and tear-gas used)
 Hoover was viewed as heartless and uncaring
1932 Election
 Republicans nominated Hoover
 Democrats chose FDR
 Roosevelt promised a “new deal” to help America and
a repeal of prohibition.
 Roosevelt provided few details as to what the New
Deal would involve.
 Democrats won in a landside (controlled both Houses
and the Presidency)
 Hoover spent next four months as a “lame duck”
 Inauguration wasn’t until March (changed to January
by the 20th Amendment)
 Requested to meet with Roosevelt during that period
but Roosevelt refused to meet.
 Depression worsened due to political uncertainty
FDR –The Man
 Wealthy NY family (cousin to Theodore Roosevelt)
 1920 nominee for VP (lost badly to Harding and
Coolidge)
 Paralyzed from polio (1921); Kept this from the public
throughout his political career. (Press also did not
report it)
 Warm personality, gifted speaker, inspirational leader.
 Elected Governor of NY (1928)
 Married to Eleanor Roosevelt (a distant cousin)
 Most active 1st lady (think Hillary Clinton – only
uglier)
 Traveled giving speeches
 Strained marriage relationship
 President’s social conscience – support for
minorities and the poor
NEW DEAL Philosophy




Three R’s (Relief, Reform, Recovery)
Relief for people out of work
Recovery for business and banks
Reform of American institutions
(political and financial)
Brain Trust
 Trusted advisors of the President
 Most were university professors
(liberal elites)
 Divers cabinet included (Frances
Perkins = first female cabinet
member)
First 100 Days
 Special session of Congress was
called
 Every request of the President was
passed into law
 More legislation enacted than any
Congress in History
 Established the precedent for future
presidents to get things done quickly
(see– Obama)
100 Days
 Bank Holiday = closed solvent banks
until they could be re-organized
 Repealed prohibition = 21st
Amendment and created the Beer and
Wine Revenue Act (tax money)
 Fireside Chats = weekly radio
messages appealing directly to the
American people
Relief during the 100 days
 Federal Emergency Relief Act (FERA) =
Federal money to states and local
governments to help with relief (welfare)
(think Obama’s stimulus)
 Public Works Administration (PWA) =
public works projects and jobs
 Civilian Conservation Corps (CCC) =
 Tennessee Valley Authority (TVA) = 1,000s
of jobs for the poor in the Tenn. Valley to
build dams, operate power plants, control
flooding, manufacture fertilizer. (Brought
electricity to parts of rural south)
Recovery during the 100 Days
 National Recovery Administration
(NRA) =help industry set codes for
wages, hours of work, levels of
production, prices (ruled as
unconstitutional by the Supreme
Court in Schecter v. US)
 Farm Production Control
 Agricultural Adjustment Administration
(AAA) = government subsides for
plowing your fields under. (lower supply
= higher prices)
 AAA ruled unconstitutional in 1935
Other programs of the 1st New Deal
 Civil Works Administration (CWA)
 Securities and Exchange Commission
(SEC) = regulate stock market
 Federal Housing Administration (FHA)
= insured housing loans
 Removed the US from the Gold
Standard = drove up inflation (help
people in debt; reduced savings for
those that had money)
2nd New Deal (1935)
 Relief Programs
 Works Progress Administration (WPA)
 3.4 million employed
 Paid double relief rate, but under regular
rates
 Laborers and artists employed
 NYA = part-time jobs for high school
students
 Resettlement Administration (RA) = farm
labor camps
2nd New Deal
 Reforms
 Wagner Act (1935) = gave worker’s the right to
join a union and union’s the right to collective
bargaining.
 Federal Taxes = raised tax on the rich; added a
capital gains tax (money you make off of
investments)
 Social Security (1935) = help for the
 Retired
 Unemployed
 Disabled
 Dependent children and mothers
Opponents of the New Deal
 Liberal Critics
1) too much done for business
2) not enough done for women and
minorities
 Conservative Critics
1) New Deal = Socialism
2) Business resented regulations,
pro-union position, and deficit
spending (spending money you don’t
have)
Demagogues (Vocal Critics of the
New Deal)
 Father Coughlin = popular radio minister
that criticized FDR for not doing enough to
help the poor.
 Dr. Townsend = pressed FDR for economic
security for the elderly
 Huey Long “The King Fish” =
 Socialist Governor of Louisiana
 Became a senator and challenged FDR for
Democratic party leadership
 Advocate for income re-distribution
 Assassinated
Supreme Court Challenges the New
Deal
 Roosevelt sought to “pack” the court with
liberal judges that would support his
programs.
 He wanted to increase the number of
judges from 9 to 15 after the Supreme
Court struck down several New Deal
Programs
 Schecter v. US = Court struck down the
NIRA because “it transferred legislative
powers from the legislative to the executive
branch”