Chapter 24
The Great Depression and the New
Deal, 1929-1939
Black Thursday and the Onset of
the Depression
From 1925-1929: Market value goes
from $27 billion to $87 billion
 Speculators lending up to 75% on
“margin”
 Income-tax cuts increased the
amount of money that could be
speculated
 Federal Reserve tried to curb this by
raising interest rates- didn’t work

◦ Speculators were willing to pay 20% to by
more stock
Oct. 24, 1929- Black Thursday
 Oct. 29, 1929- 16 million stocks
changed hands
 Hoover says the economy is “sound
and prosperous”
 By Nov. the value of stocks is at $30
billion
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Causes
◦ Ag. Sector remained depressed
◦ Industrial sectors increased productivity did not
generate equivalent wages
◦ Reduced consumer spending power
 40% of the lowest received only about 12% of national
income
◦ Overproduction
◦ Important industrial sectors (rail, steel, textiles,
and mining) lagged technologically and could
not attract investments
◦ Feds tight money policies
◦ Global issues:

Impact
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GDP drops from $104 b. to $59 b.
Farm prices fall by 60%
By 1933 5,500 banks close
Unemployment stood at 25% (13 million
workers)
Hoover’s Response
Early effort based on localism and private
initiative
 He advised municipal govts to create
public works projects
 Set up Emergency Committee for
Employment - voluntary relief efforts
 Persuaded larger banks to set up
National Credit Corporation to help
smaller banks make loans

Unsuccessful programs led to the
Republicans losing the midterms (lose the
House and 8 seats in the Senate)
 He calls for a tax increase and the biggies
announce wage cuts
 1932 – sets up the Reconstruction Finance
Corporation (RFC)

◦ Loans to major economic institutions and then
grants to state and local govts for job creating
public works

Some ideas more controversial
◦ Moratorium on war reparations and war debt
payments
Mounting Discontent and Protest
Hoovervilles, Hoover Blankets, Hoover Valley
Suicide rates climb nearly 30%
Farm foreclosures
1931- midwestern farmers organize the Farmers’
Holiday Association
 Dairy Farmers dump milk
 1932- Bonus March
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◦ 10,000 vets descend on Washington to demand
immediate payment of veterans bonuses
◦ Congress refuses and 2,000 camp out
◦ U.S. Army (1,000) commanded by MacArthur drive
them out

American fiction- The 42nd Parallel;Young Lonigan
The Election of 1932

Democrats
◦ appeal to urban voters
◦ call for an end to Prohibition
◦ Appeal to farmers with support for aid
programs
◦ And to fiscal conservatives with demands for
a balanced budget and cuts to federal
spending
FDR from New York
 Democrats have a clean sweep

The New Deal Takes Shape

Industrial recovery
◦ Through business-govt cooperation and
pump-priming

Agricultural recovery
◦ Through crop reduction

Short-term emergency relief
◦ Funneled through state and local agencies
Roosevelt and His Circle
“The only thing we have to fear is fear
itself.”
 His circle of advisors rejected laissezfaire ideas
 Key people

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Eleanor
Sec. of Labor Frances Perkins
Interior Sec. Harold Ickes
Treasury Sec. Henry Morgenthau
Secretary of Agriculture Henry Wallace
The Hundred Days

1st- tackle the banking crisis
◦ Bank holiday- four days
◦ Emergency Banking Act
 Healthy banks can reopen; procedures were put in place to manage failed
banks; increased govt oversight; and banks had to separate savings deposits
from investment funds
◦ Federal Deposit Insurance Corporation
 Insured deposits up to $5,000

2nd – relief
◦ Home Owners Loan Corporation
 City dwellers refinance mortgages
◦ Farm Credit Administration
 Provided loans to rural Americans
◦ Civilian Conservation Corps
 Employed jobless youth in reforestation, park maintenance, and erosion
control
◦ Federal Emergency Relief Act
 $500 million to state and local relief agencies
 Harry Hopkins heads this

Cutting production was the key to raising
agricultural prices
◦ Southern cotton farmers plowed under much of their
crops; midwestern farmers slaughtered 6 million piglets
and pregnant sows (PR nightmare)

Agricultural Adjustment Act (1933)
◦ Farmers receive subsidies in return for cutting
production (a tax on grain mills and other food
processors – passed on to consumers) paid for this
◦ The AAA is set up to monitor

National Industrial Recovery Act
◦ Appropriates $3.3. billion for heavy-duty govt works
projects
◦ Sec. of Interior Harold Ickes heads this
◦ It is run by the Public Works Administration (PWA)

The law also set up the National Recovery
Administration
◦ Brought businesses together to draft codes of
“fair competition”
◦ Set production limits
◦ Prescribed wages and working conditions
◦ Forbade price cutting and unfair competitive
practices
◦ Aim was to promote recovery by breaking the
cycle of wage cuts, falling prices, and layoffs
◦ Symbol of business-government collaboration
◦ It banned child labor and affirmed workers’ right
to organize unions and to bargain collectively

Reconstruction Finance Corporation
◦ Spillover from the Hoover era
◦ Let billions to banks, insurance companies and
new business ventures (probusiness)

Federal Securities Act (regulatory)
◦ Corporations must inform the Federal Trade
Commission on all stock offerings and made
executive liable for any misrepresentation
 Set up the Securities and Exchange Commission

Tennessee Valley Authority
Failures and Controversies
Plague the Early New Deal

NRA
◦ Personality of Hugh Johnson
◦ Corporate America chafed under the
regulation
◦ Code violations increased; small
businesses complain; bogged down in
trivial codes
◦ Declared unconstitutional in 1935
 President did not have that regulatory power
 It regulated commerce within states

AAA
◦ 1933-37: farm income increased by 50%
◦ But it didn’t help farm laborers or migrants
◦ Crop reduction payments hurt southern
tenants and sharecroppers when growers
remove acreage (banking subsidy checks)
◦ Then the Dust Bowl
 Okies (3.5 million flee the Great Plains)
 1. What
did the Federal
Securities set up to regulate
Wall Street?
 2. How much did the FDIC
cover when it was established?
 3. Who was the head of the
PWA?

Harry Hopkins convinced Roosevelt
to support direct federal relief
programs
◦ Civil Works Administration (CWA)
◦ More than a billion dollars on short-term
work projects (late 1933-34 over winter)
◦ It was abolished in spring
 FDR did not want to create and underclass
living on welfare payments

Federal agencies were competing
for federal dollars
◦ Ickes and the PWA competed with
Hopkins and the CWA
◦ Ickes was “honest” and checked every
detail; Hopkins wanted to pay people
to shovel dirt, rake leaves, and collect
litter
1934-1935: Challenges from
Right and Left
In 1934 national income rose about 25%
above 1933 levels
 2,000 strikes took place that year from
many different occupations all over
America (many Communist led)
 Business leaders (joined by Al Smith)
formed the anti-New Deal American
Liberty League
 However, FDR did remain popular

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Socialists and Communists claimed he
didn’t go far enough
◦ Waiting for Lefty

Charles Coughlin
◦ Detroit priest calls for the nationalization of
banks

Frances Townsend
◦ California physician called for all retired to
receive $200 per month (required to spend it
in 30 days); stimulates the economy and
encourages retirement

Huey Long
◦ Gov. and Senator from Louisiana whose
Share the Wealth Program
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Cap personal fortunes at $50 million each — equivalent
to about $600 million today (later reduced to $5 - $8
million, or $60 - $96 million today)
Limit annual income to one million dollars each (about
$12 million today)
Limit inheritances to five million dollars each (about $60
million today)
Guarantee every family an annual income of $2,000 (or
one-third the national average)
Free college education and vocational training
Old-age pensions for all persons over 60
Veterans benefits and healthcare
A 30 hour work week
A four week vacation for every worker
Greater regulation of commodity production to
The New Deal Changes Course,
1935-1936

The veer left during the Second New Deal
◦ FDR begins to criticize the wealthy and the
business class
◦ Six intitiaves
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Expand public works
Assistance to the rural poor
Support for organized labor
Benefits for retired workers and other needy groups
Tougher business regulation
Heavier taxes on the well-to-do
Expanding Federal Relief

Emergency Relief Appropriation Act
(1935) - $5 billion
◦ Works Progress Administration (Hopkins
in charge)
◦ Assistance directly to individuals but
providing work, not handouts
◦ Lasted 8 yrs. – employed 8 million; pumped
$11 billion into the economy;
constructed/improved thousands of roads,
bridges, schools, post offices, etc.
 Federal Writers’
Project;
Federal Music Project; Federal
Theater Project; Federal Arts
Project
 Public Works Administration
(Ickes)
◦ $4 billion over its life span;
34,000 projects
Aiding Migrants, Supporting
Unions, Regulating Business,
Taxing the Wealthy
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The Resettlement Administration (1935)
– loans to help tenant farmers buy land or
move
Rural Electrification Administration (1935)
– low-interest loans to utility companies
and farmers’ cooperatives to extend
electricity to rural America
AAA declared unconstitutional
Soil Conservation Act paid farmers to
plant grasses and legumes
NIRA is ruled unconstitutional (including
the section protecting union members
rights)
 The Wagner Act (National Labor
Relations Act)
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Guaranteed collective-bargaining rights
Permitted closed shops
Outlawed blacklisting
Created the NLRB to supervise shop
elections and labor-law violations

Banking Act
◦ Strengthened Federal Reserve Board

Public Utilities Act
◦ Restricted gas and electric companies to
one geographic area

Steeper taxes during 1935
◦ Wealth Tax Act – increases taxes to a
maximum of 75% on incomes above $5
million
The Social Security Act of 1935;
End of the Second New Deal
1936 Roosevelt Landslide and the
New Democratic Coalition

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FDR carried the 12 largest states
New coalition
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Farmers
Union members
Northern blacks
Women
◦ FDR is a friend of labor
◦ Northern blacks- “that debt was paid in full.”
 However, “Negroes Ruined Again”
 FDR didn’t want to turn southerners away from support

But Roosevelt did have a “black cabinet”
◦ Mary McLeod Bethune as director of minority
affairs of the National Youth Administration
Roosevelt Supreme Court issued
antidiscrimination rulings
 Courting of female voters
