Herbert HooverHerbert Hoover1929 - 19331929 - 1933

I. The Election of I. The Election of 19281928

A. Democrats- 1. ALFRED E. SMITHa. Received votes from urban and industrial areas

b. Catholic, anti-Prohibition

c. 87 Electoral Votes

B. Republicans- 1. HERBERT HOOVERa. Received votes in rural/agrarian

areasb. “The government should be an umpire instead of a player in the economic game”c. The prosperity of the 20s was seen as the “Republicans' doing.”

d. 444 Electoral Votes

C. Major Issue: Prohibition- should it continueeven though itwas not working?

1. Most people still wanted it to continue.

2. It was called the “Noble Experiment”

For the first time since Reconstruction, some Southern states voted Republican!

II. Financial II. Financial TroublesTroubles

Causes of The Stock Market Crash - 1929

What caused a spectacular business boom of the 1920s to collapse in

October 1929?

A. “Sick Industries”?1. Textile Industries2. Coal Industries3. Agriculture4. Railroads

5. These industries were dragging the economy down because they were not stimulating enough growth

B. Farmer’s problems1. Congress called a special

session to discuss the problemsa. The government should not get involved in buying and selling and price fixing

b. Agricultural Marketing Act (1929): helped farmers use their organizations to produce more efficiently

c. Hoover will establish the Federal Farm Board, which offered loans and financed creation of farmers’ cooperatives.

d. Also aimed for the gov’t to buy surplus crops

e. Crop prices continued to fall; farmers continued to suffer.

f. Plan was not successful. “Too little, Too late”

C. CONSUMER SPENDING DOWN

• By the late 1920s, American consumers consumers were buying lesswere buying less

• Rising prices, stagnant wages and overbuying on credit were to blame

• Most people did not have the money to buy the flood of goods factories produced

D. GAP BETWEEN RICH & POOR

• The gap between rich The gap between rich and poor widenedand poor widened

• The wealthiest 1% saw their income rise 75%

• The rest of the population saw an increase of only 9%

• More than 70% of American families families earned less than $2500 earned less than $2500 per yearper yearPhoto by Dorothea Lange

1. Credita. Purchases on credit in

1929 reached $7 billion.b. Interest rates were kept low

to promote businessc. Consumers ignored warnings

of economic experts that feared a downturn was coming.

E. An unstable economy

2. Playing the Market a. Investors poured millions of dollars into the stock market

i. Bull market- upward trend in stocks

ii. Bear market- downward trend in stocks

III. The CRASHIII. The CRASHA. The value of securities, stocks,

and bonds tripled between 1925 and 1929.

B. More people were speculating- taking a chance on a quick profit

C. Many people bought stock on margin- paid a % down in cash and then the stock broker paid the rest. (left them in debt to broker, hoping the stock would pay off eventually)

D. The stock market begins to decline- the first major hit came on Thursday, October 24, 1929

Buying on the margin…Buying on the margin…

Stock value: $1000You put down 10%: $100; You borrow 90%: $900

Stock values increase: $2000When you sell, the broker is paid back first ($900 + interest). You then collect your profits, which are greater than they would have been had you only invested your pitiful sum.

Stock values DECREASE: $500Again, broker is paid back first ($900 + interest). As you can see, with this process, debt mounts QUICKLY.

E. Black Tuesday- 10/29/19291. 16 million shares of stock were sold and the bottom fell out of the stock market

THE GREAT DEPRESSION

• The Stock Market crash signaled the beginning the beginning of the Great Depressionof the Great Depression

• The Great Depression is generally defined as as the period from the period from 1929 – 1940 in 1929 – 1940 in which the economy which the economy plummeted and plummeted and unemployment unemployment skyrocketedskyrocketed

• The crash alone did not cause the Great Depression, but it hastened its arrival

Alabama family, 1938 Photo by Walter Evans

FINANCIAL FINANCIAL COLLAPSECOLLAPSE

• After the crash, many Americans panicked Americans panicked and withdrew their and withdrew their moneymoney from banks

• Banks had invested in the Stock Market and lost money

• In 1929- 600 banks banks failfail

• By 1933 – 11,000 of the 25,000 banks nationwide had collapsed

Bank run 1929, Los Angeles

GNP DROPS, UNEMPLOYMENT

SOARS

• Between 1928-1932, the U.S. Gross National Product (GNP)(GNP) – the total output of a nation’s goods & services – fell nearly 50%fell nearly 50% from $104 billion to $59 billion

• 90,000 businesses businesses went bankruptwent bankrupt

• Unemployment Unemployment leapedleaped from 3% in 1929 to 25% in 1933

HAWLEY-SMOOT TARIFF

• The U.S. was not the only country gripped by the Great Depression

• Much of Europe suffered throughout the 1920s

• In 1930, Congress passed the toughest tariff the toughest tariff in U.S. historyin U.S. history called the Hawley- Smoot Hawley- Smoot TariffTariff

• It was meant to protect It was meant to protect U.S. industry yet had U.S. industry yet had the opposite effectthe opposite effect

• Other countries Other countries enacted their own enacted their own tariffs and soon world tariffs and soon world trade fell 60%trade fell 60%

CAUSES OF THE GREAT CAUSES OF THE GREAT DEPRESSIONDEPRESSION

(1) Tariffs & war debt policies

(2) U.S. overproduction of products and low demand

(3) Farm sector crisis(4) Easy credit(5) Unequal distribution

of income

IV. Hoover’s IV. Hoover’s PoliciesPolicies

A. Reconstruction Finance Plan- Hoover’s attempt to aid the economy by loaning state governments money for relief- immediate help (too late)

1. No federal $ directly to citizens2. Money was going to RRs, large banks, farm mortgage associations, savings and loans associations

3. “Trickle-down” theory

4. Hoover was a firm believer in rugged individualism- success comes through individual effort and private enterprise.

B. President’s Committee B. President’s Committee for for

Unemployment Relief Unemployment Relief 1. Designed to assist state and local relief efforts. 2. The committee did little beyond urging Americans

to contribute more $ to charities.

C. Home Loan Bank Act - 1932C. Home Loan Bank Act - 1932 1. Hoover established the Home

Loan Bank Board and provided aid to savings banks, building and loan associations, and insurance companies for low-interest mortgages.

2. In 1932, over 30,000 companies and 800 banks failed, wiping out savings.

HOOVER’S PHILOSOPHY• Hoover was not quick to Hoover was not quick to

reactreact to the depression• He believed in ““rugged rugged

individualismindividualism”” – the idea that people succeed through their own efforts

• People should take care of themselves, not depend on governmental hand-outs

• He said people should ““pull themselvespull themselves up by their bootstraps”

Hoover believed it was the individuals job to take care of themselves, not the governments

D. Want in the land of D. Want in the land of plentyplenty

1. Fear- loss of confidencea. Banks were afraid to lend moneyb. Companies were afraid to introduce new productsc. Business leaders would not build new factories d. People would not spend the little

money they had.

2. Many kept their jobs but had hours and wages reduced

3. Some were better off because they kept their jobs but prices declined

V. The V. The Depression Depression

WorsensWorsens

A.A. The Human Cost The Human Cost of the Depressionof the Depression

1. Unemployment- businesses promised Hoover they would not cut wages, but as the depression worsened, they had to.

a. Breadlines and soup kitchens appeared on every corner as private charities attempted to feed the long lines of people

b. Hoovervilles- those who could not pay their mortgage payments ended up in makeshift housing on the outskirts of town, some in doorways or park benches

B. The Bonus Army

1. In 1932, unemployed army veterans (WWI) marched to Washington D.C. to demand early payment of the Bonus Congress had agreed to pay them in 1945

2. Their numbers grew to an estimated 10,000-20,000!

3. The government tried to keep the demonstration peaceful, but they rejected the bonus army’s demands

4. There was a clash between the bonus army and the local police - Hoover called out the National Guard

5. General Douglas MacArthur-Commander of the troops, who carried out the president’s orders to clear the veterans from federal buildings

6. Tanks, machine guns, and tear gas were used! The American people turned on Hoover because of this excessive use of force

C. Fear of RevolutionC. Fear of Revolution

1. The American people began to get restless

a. They blamed the depression

on bankers and industrialists

2. Radical alternatives - The unrest in society led to the rise of socialism and communism

3. Both alternatives claimed to be the best for Americaa. They destroyed each other’s

credibility on their way to the top

4. Most Americans clung to their democratic traditions and expressed their anger at the ballot box