Sunday 3 July 2011

Hoover and the Depression - extra notes

The Presidency of Herbert Hoover:  March 4, 1929 – March 4, 1933
Background
       I.            Herbert Hoover
1.      Was a very qualified president: respected, shy and taciturn, disliked publicity.
2.      Hoover was firm in his beliefs throughout his life and this was a downfall.
                                                              i.      Self-reliance: believed in individual responsibility of welfare and was therefore inactive in Great Depression relief
                                                            ii.      “American-Individualism”: believed in hard work and equality of opportunity, responsibility of the individual, government co-ordination of activities of capital and labour, and the use of self-help and voluntary co-operation to solve problems.
    II.      Hoover’s elections
1.      Herbert Hoover won with 21.9 popular votes in 1928 but lost with 15.8 in 1932 because of his complete lack of success in addressing the Great Depression, a lacklustre campaign and bad publicity.

Hoover’s Policies
       I.            Agriculture
1.      The 1929 Agriculture Marketing Act created a Federal Farm Board with $500 million to create marketing co-operatives that would buy, store, and dispose of farming surpluses. It was established to stop prices from falling, but was accused of wasting taxpayer money and justifying overproduction. The Board was abandoned in 1931. It failed because:
                                                              i.      Farmers were given artificially high prices which could not continue in the long run; by 1932 wheat was 30-39 cents per bushel, which was less than production costs.
                                                            ii.      Agriculture was treated as a domestic issue, and foreign factors (such as high tariffs to justify the need for a high domestic price) were not taken into account
                                                          iii.      Hoover forbade the board from imposing production controls; farmers continued overproduction of cotton and wheat as a result.
2.      Smaller initiatives regarding agriculture:
                                                              i.      Hoover consented to a federal loan to buy seeds and tools for farmers affected by the drought in the Southwest’s Dust Bowl in 1931.
                                                            ii.      “Never before,” Hoover declared when vetoing a relief bill for farmers in 1931, “has so dangerous a suggestion been seriously made in this country.”
    II.            Tariffs
1.      The Hawley-Smoot Tariff of 1930 increased duties on agricultural and industrial imports. It was the highest tariff in US history with average duties of 40%, and led most European nations to abandon free trade and reduced exportation of American goods. It was not vetoed by Hoover.
 III.            Repudiation of war debts
1.      On June 21 1931 Hoover announced a Moratorium, in which the US would postpone reparative debt collection for 18 months if other nations agreed to do so as well.
                                                              i.      International trade fell by $500million in 1929 and $1.2 billion in 1930. This led to European nations to repudiate their war debts.
                                                            ii.      Germany’s announcement of reparation payment suspension led Hoover to fear another European war and further negative affects on American banks.
2.      The moratorium was in hopes of releasing monies for investment but did little to prevent the economic collapses of European nations
 IV.            Banking and Finance
1.      The National Credit Corporation (NCC) was formed in 1931 by bankers for the purpose of encouraging larger banks to provide loans to smaller banks with the risk of collapse. It was an example of Hoover’s support of voluntarism, but was unsuccessful because larger banks were reluctant to provide sufficient loans.
2.      Declining federal revenues threatened to result in huge public debts and possible abandonment of the gold standard.
                                                              i.      Falling revenues and deficit spending by Hoover increased the national debt from slightly over $16 billion in 1930 to $19.5 billion in 1932. The deficit for 1931 alone neared $1 billion. 
                                                            ii.      To counter the deficit, Hoover slashed plans for public works in order to avoid throwing the budget further out of balance. 
                                                          iii.      When the Creditanstalt Bank in Vienna collapsed, triggering similar financial crises across much of the continent, Europeans dumped American securities, resulting in a heavy flow of gold from America to Europe. To counter the effect, the Federal Reserve Board raised the rediscount rate from 1.5 percent to 3.5 percent, saving the gold reserve but making credit tighter for businessmen.
    V.            Voluntarism
1.      Hoover called a series of conferences in Washington of businessmen, industrialists, agricultural spokesmen, and labour leaders and obtained promises to maintain wage rates and to continue capital investments. This demonstrated Hoover’s faith in encouraging cooperation between various groups in the private economy.
2.      At Hoover’s suggestion, Julius H. Barnes of the United States Chamber of Commerce invited important businessmen in a National Business Survey Conference to discover and remove the key barriers in the economy in order to restore prosperity. The organization was abandoned by 1931, a failure.
 VI.            Unemployment
1.      Hoover appointed an Emergency Committee for Employment in 1930 (later called President’s Organization on Unemployment Relief) to stimulate voluntary and local charity to help the unemployed. It avoided government spending for unemployment. The program ended in 1932.
2.      An inadequate $500 million from Congress was secured by Hoover in 1932 to help various agencies provide relief.
3.      Congress allocated a total of $47 million for UE relief. This shortage was a result of Hoover’s reinforcement of self-help.
VII.            Housing: Federal Home Loan Bank Act
1.      Another insufficient measure in 1932 that paid a maximum of 50% of a property value in order to help provide mortgages. Thousands of home owners had already lost their homes however —273,000 in 1932 alone. Repossessions of homes still occurred on a grad scale.
VIII.            Reconstruction Finance Corporation (RFC)
1.      This was Hoover’s most radical measure against the Depression. Established in 1932, it held $2 billion for lending towards mainly financial institutions (banks, railroads, etc.) to restore confidence in those areas.
2.      90% of the loans went to smaller banks, but in terms of loan sizes 50% of loans went to 7% of the biggest banks; $90 million went to Central Republican National Bank and Trust Company, and similarly the biggest loans went to the biggest public utilities
3.      Public urge for direct relief finally led Hoover to issue the Emergency Relief and Construction Act of 1932, which authorized $1.5 billion for public works but demanded conditions of bankruptcy by states and projects where revenues would be produced to repay loans.
4.      RFC’s first director, Charles G. Dawes, loaned his own bank, the Central Republic Bank and Trust Company in Chicago, $90 million. Hoover defended the loan as proper, but it appeared to demonstrate the willingness of the administration to help only big business. 
 IX.            Optimism
1.      Hoover understood the seriousness of the Depression, but publically he exuded confidence.
                                                              i.      In October 1932, he stated that “the fundamental business of the country...is on a sound and prosperous basis,” and in November he declared that “any lack of confidence in the economy future or the basic strength of business, is foolish.”
                                                            ii.      On May 1, 1930 following a slight economic upsurge, Hoover proclaimed to the U.S. Chamber of Commerce, “we have now passed the worse and with continued unity of effort we shall rapidly recover.” The spring upsurge, however, quickly passed and the depression continued.
    X.            War veterans and the “Bonus Army”
1.      WWI veterans were looking to claim bonuses for their service because of the Depression, and a march of 20 000 to Washington was organized to publicise their cause on June 15 1932. The Senate vetoed the House of Representatives’ pass for payment and Hoover offered $100 000 for the veterans’ transportation back home. Many reject this decision.
2.      The Secretary of War Gen. Douglas MacArthur used military force to drive away the “mob” of veterans. Many were injured and two babies died from the use of tear gas at Anacostia Flats.
3.      This shattered Hoover’s public image, which was worsened when he said “Thank God you have a government that knows how to deal with a mob”.

Franklin Delano Roosevelt and the New Deal 1933-9
The First New Deal 1933-5
       I.            Banking
1.      On March 6 1933, FDR declared a four day bank holiday in order to draft the Emergency Banking Relief Act. Its purpose was to restore confidence in the banking system and it gave the Treasury power to investigate banks threatened with collapse.
2.      FDR used the radio to give “fireside chats”. His first one on March 12 1933 urged Americans to deposit their hidden savings into newly solvent banks. It worked, and $1 billion was returned to bank deposits by April.
3.      The bank crisis was over, but FDR established the Glass-Steagall Act to ensure long-term stability. It separated commercial from investment banking, increased the powers of the Federal Reserve Board to curb speculation by banks. The Act had the following effects:
                                                              i.      Commercial banks relying on smaller depositors were banned from making investment banking, which had fuelled the 1920s situation
                                                            ii.      Bank officials were prohibited from taking personal loans from their own banks
                                                          iii.      The Federal Reserve Board (Fed) were responsible for overseeing open-market operations.
                                                          iv.      Individual bank deposits were insured for up to $2500 with the newly established Federal Deposit Insurance Corporation
                                                            v.      Many banks had been given subsidiaries for aid; state banks were required to join the Federal Reserve Banks to qualify for insurance, giving larger banks power over smaller ones
    II.            Finance
1.      FDR’s financial intentions:
                                                              i.      Stop the flow of gold out of America
                                                            ii.      Increase circulation in the US, thus raise prices
2.      FDR took the US off the gold standard by prohibiting its export or trading in for currency, and those holding gold were required to trade it with the Federal Banks for $20.67 an ounce
3.      The dollar had been devalued by 60% by March 1933 and circulation increased. In October 1933, FDR ordered the Reconstruction Finance Corporation to buy gold for $31.36 and the 1934 Gold Reserve Act raised it to $35
4.      The Silver Purchase Act of June 1934 stated that the Treasury would purchase silver until its value was 33% of gold (at artificially high prices); the measure had little effect beyond subsidising the domestic silver industry
 III.      Regulation of the Stock Exchange
1.      Truth-in-Securities Act of May 1933, required brokers to offer realistic information about the securities being sold
2.      Securities Act of June 1934 set up the Securities Exchange Commission which was to regulate Stock Market activities. After Richard Whitney was caught by the Commission for embezzlement in 1938, Wall Street gained in credibility
 IV.      Economies in Government
1.      To reduce federal expenditures and balance the budget the Economy Act of 1933 cut about $500 million from government salaries and cut veteran’s pensions.
    V.      Agriculture
1.      In 1933 legislations were passed extending farm credit:
                                                              i.      The Farm Credit Act of March brought all agricultural agencies together to form the Farm Credit Administration.
                                                            ii.      The Emergency Farm Mortgage Act of April lent loans to farmers who were in danger of losing property
                                                          iii.      The Frazier-Lemke Farm Mortgage Act of June lent money with 1% interest to farmers to recover repossessed lands
2.      Agricultural Adjustment Act, May 1933 addressed overproduction (which had fallen only 6% from 1929-33) and raise farmers’ income, the Act subsidized farmers by the government to reduce acreage and production voluntarily. It paid farmers who reduced production of staple items.
                                                              i.      The AAA destroyed cotton and piglets; cotton rose from $0.065 per pound to $0.10 per pound from 1932 to 1933.
                                                            ii.      Total farm income rose from $4.5 billion in 1932 to $6.9 billion in 1935. Farm income had risen by 50 percent at the end of Roosevelt’s first term.
3.      The Tennessee Valley Authority, establish in May 1933, was an extensive programme that intended to harness the power of the River Tennessee, which flowed through seven of the poorest US states. The TVA was largely responsible for the 200% increase in income for the areas residents from 1929-49. Some of its major tasks included:
                                                              i.      Construction of 20 large dams
                                                            ii.      Encourage measures to stop soil erosion and promote efficient means of cultivation
                                                          iii.      Provide jobs through establishing fertilizer manufacture factories, and develop welfare and educational programmes
                                                          iv.      Most importantly, produce hydro-electricity, though this was declared a secondary intention so as to not attract opposition of private companies.
 VI.      Industry
1.      The National Industrial Recovery Act (NIRA) of June 1933 came in two parts:
                                                              i.      National Recovery Administration (NRA), June 1933 was responsible for overseeing industrial recovery, which several parts to its legislation: anti-trust legislations were suspended for two years to gain support of big businesses; firms were encouraged to practice regulate unfair conduct; employees were permitted to unionize and participate in collective bargaining. It was headed by General Hugh Johnson and eventually 557 codes were drawn up covering most industries. It was a programme with high expectations.
a.       Codes were adopted too quickly and often contentious. Big businesses were favoured and small firms were placed at disadvantages with clauses such as a minimum wage of $11/week for a 40 hour week which they could not afford.
b.      In March 1934 the National Recovery Review Board was set up by Congress to investigate the effect of the codes on small firms; they were declared to be at a severe disadvantage. The NRA codes were unsuccessful in the end and did not help economic recovery.
c.       Johnson attempted a few last unsuccessful campaigns such as the “Buy Now” in 1933 which encourage people to spend more to stimulate production. Eventually he was dismissed in September 1934 for his disorderly conduct (drinking, affairs, etc.)
                                                            ii.      The Public Works Administration (PWA) was an emergency administration headed by Sec. of the Interior Harold Ickes, which was given $3.3 billion for “pump priming” (heading economic growth through government spending) through public works.
a.       The PWA put hundreds of thousands to work built nearly two-thirds (13 000) of the nation’s new school buildings, 50 000 mi of roads, county court-houses, and city facilities; one-third of the hospitals and public health service buildings; and a number of warships for the navy, including the aircraft carriers Yorktown and Enterprise. It pumped billions of dollars into the economy
VII.      Relief
1.      Federal Emergency Relief Act of March 1933 established the Federal Emergency Relief Administration (FERA) ran by Harry Hopkins, which was given $500 million to divide equally amongst states to provide aid for the unemployed. Half was for direct relief and half was to be split for $1 of pay to the state for every $3 of relief.
                                                              i.      State officials were generally opposed to providing direct relief, and FERA funds were often exploited making FERA’s effectiveness limited
                                                            ii.      Conditions for its workers were poor, and limited funds provided $25 a month to an average family on relief while minimum subsistence wage was $100. Despite this it showed government effort to provide direct relief.
2.      Civilian Conservation Corps (CCC), March 1933
                                                              i.      Unemployed men aged 17 to 24 (later 28) were recruited by the Department of Labour to work in public works projects under the CCC, which was organized like the military. Men served nine months and were paid $30/month, with $25 having to be sent home. The first 2500 recruits were comprised of the second Bonus Army.
                                                            ii.      $5500 million was spent in the first year for 250 000 recruits; the project was extended for seven years by Congress in 1935 and its force increased to 500 00 men
                                                          iii.      Accomplishments include installing 65 100mi of telephone lines, planting 1.3 billion trees, and improving literacy skills of 100 000 recruits, though it was primarily exclusive to whites.
3.      Civil Works Administration (CWA) of November 1933 was an agency granted $400 million from the PWA to provide emergency relief for the unemployed during the winter of 1933-34. It put 4 million to work on public projects but was closed after winter.
VIII.      Housing
1.      Under the Homeowners Refinancing Act of June 1933 the Home Owner’s Loan Corporation (HOLC) was established. This agency offered homeowners facing difficulties new mortgages at low interest rates for longer periods of time.
                                                              i.      This was to replace the system of Federal Home Loan Banks approved under Hoover for the improvement of building and loan associations. This system offered little direct help to people losing homes through mortgage foreclosures.
                                                            ii.      By 1935, HOLC had loaned over $3 billion and held one-sixth of the national home mortgage indebtedness.
2.      The Federal Housing Administration (FHA) was established under the Federal Housing Act of June 1934. It offered federal insurance to protect the ability to repay low-interest, long term mortgages in order to stimulate the building industry but was only for newly purchased homes.
                                                              i.      The FHA could not help inner-city areas and resulted in a move to the suburbs. 65% of new housing cost over $4000 and less than 25% of urban families could afford this.
The Second New Deal 1936-6
       I.      Relief
1.      In April 1935, the Emergency Relief Appropriation Act was established. It was the largest measure to provide unemployment relief through federal work. $45.5 billion was allocated and the WPA was established underneath it.
2.      The Works Progress Administration (WPA) provided employment through large-scale public works projects to those who would otherwise have been unemployed.
                                                              i.      It had approximately 2 million employees at any given time, being paid about $52/month.
                                                            ii.      It spanned different social groups and established agencies under it such as: the National Youth Administration to promote education and provide part-time employment for students; the Division of Negro Affaires department under the NYA, which regulated relief opportunities for minorities.
    II.      Agriculture
1.      The Rural Electrification Administration was established in May 1935. Its purpose was to build power lines and plants in rural areas which had little electricity because they were seen as unprofitable areas and denied bank loans.
                                                              i.      REA provided loans for low interest and encouraged farmers’ co-operations for laying electricity.
                                                            ii.      By 1941, 35% of farms had electricity; 580,000 farms had been electrified in 1929, increasing to 2 million by 1941. 
2.      In May 1935, Resettlement Administration (RA) under Rexford Tugwell established three “greenbelt towns” of 500 to 800 families each near Washington, Cincinnati, and Milwaukee, and tried to help rural people move from worn out farms to better land and teach effective farming methods and the use of new machinery to farmers.
                                                              i.      Initial plans were to move 500 000 families. After two years, it had only purchased five million acres of land and resettled 4,441 families. 
 III.            Labour and Social Security
1.      The Wagner-Connery National Labor Relations Act, established in July 1935, was a milestone in US labour relations. However, Roosevelt was not actively involved in labour relations legislation so as not to deter the support of big businesses and conservative politicians, and this act was approved only after senate approval.
                                                              i.      It guaranteed workers the rights to collective bargaining through a union of their choice
                                                            ii.      It set up the National Labor Relations Board to ensure fair play
                                                          iii.      It was the first Act to give unions rights in the federal government under significant and committed roles.
2.      The Social Security Act of August 1935 was the first federal measure of direct help as a workers’ right, which provided old-age pensions and unemployment insurance. It was self-financing and therefore not relief. Pensions would be paid through payroll tax by both employers and employees, and unemployment insurance would be controlled by the states in programs where employers would receive 90% payroll tax exemptions for participating
                                                              i.      The Act was generally inadequate for meeting the needs of the poor:
a.       pensions were paid from $10-$85/month starting from 1940
b.      unemployment benefits were a maximum of $18/week for 16 weeks
c.       aid was inconsistent between states, e.g. Massachusetts paid $61/month for families with poor children while Mississippi paid $8/month
                                                            ii.      Despite its shortfalls, the Act was a major break with American governmental tradition because it was a direct system of national benefits
 IV.            Economies, Banking and Finance
1.      The Revenue Act (Wealth Tax) was implemented in June 1935 to reduce the need for government deficit spending by taxing the wealthy population. It raised much debate and served as a precedent for higher taxes during WWII
                                                              i.      Comparatively, taxes were raised only $250 million, because only 1% of the population earned more than $1000. The maximum tax on income over $50 000 was increased from 59% to 75%.
                                                            ii.      William Hearst called it the “soak the successful” tax.
2.      The Public Utility Holding Company Act of August 1935 ordered the breaking up of all companies more than twice removed from the operating company by making such holding companies register with the Securities Exchange Commission. The SEC would determine the fate of such companies and also held control of their financial transactions and stock issues.  
                                                              i.      This helped to remove much of the exploitation by holding companies on the capitalist system by breaking up the unfair pyramid structure and thus strengthening the capitalist system.
3.      The Banking Act of August 1935 gave the federal government control of banking in the US when Governor of the Federal Reserve Board, Marriner Eccles tried to repeal the 1913 Federal Reserve Act because he felt Wall Street exercised too much power in national finance. The Act was a compromise due to opposition and control of banks became more centralized as the centre of financial management shifted from New York to Washington. Measures included:
                                                              i.      Federal Reserve Banks could elect a head to be approved by the Board
                                                            ii.      Reserve and rediscount rate requirements would be determined by the Board
The Third New Deal 1937-9
       I.            Agriculture
1.      The Bankhead-Jones Farm Tenant Act of July 1937 established the Farm Security Administration (FSA) in replace of the RA. Its purpose was to help tenants acquire low-interest loans to buy and restock farms, and was proposed in response to reports showing bank foreclosures on farms which were reducing farm ownership.
                                                              i.      By 1947 40 000 farmers bought their own farms and 900 000 families borrowed $800 million for rehabilitation
                                                            ii.      The FSA also provided medical and dental centres and 30 relief camps for displaced families
2.      The Second Agricultural Adjustment Act was passed in February 1938 with the purpose of storing surplus produce in good years for distribution in poor ones, and establish that quotas on staple crops (rice, tobacco, wheat, corn, cotton) could be imposed by 66% majority of farmers in a vote; those following quotas received subsidies.
                                                              i.      Emphasis on quotas over subsidies increased opportunities for smaller farms
                                                            ii.      For surpluses: the Commodity Credit Corporation gave loans to farmers to store their own crop until market price fell; the Food Stamp Plan allowed for surpluses to be distributed for relief
    II.            Housing
1.      Wagner-Steagall National Housing Act of September 1937 established the US Housing Authority to act through the public housing bureaux in large cities to provide loands up to 100% at low rates of interes to build new homes
                                                              i.       Congress allocated $500 million, and by 1941 160 000 homes had been built for slum dwellers with a $12-15 rent/month
                                                            ii.      Millions of people remained in poor housing due to inadequacies of the Act
 III.            Labour
1.      The Fair Labor Standards Act of June 1938 fixed minimum wages to 25 cents/hour and maximum hours to 44hr/week  in all industries engaged in interstate-commerce, children under 16 were forbidden from working
                                                              i.      the wages of 300 000 were immediately increased and the hours of 1.3 million reduced
                                                            ii.      The Wages and Hours division was established in the Department of Labor

New Deal Critics

       I.            Huey Long and the “Share Our Wealth” programme
1.      Governor of Louisiana and US Senator Long, who was involved in massive public works programmes in Louisiana, proposed his “Share Our Wealth” program in February 1934. He advocated that all private fortunes over $3 million be confiscated and redistributed to all Americans. Long began talk of joining forces with other radicals to form a third party to run against Roosevelt in the 1936 election. Long was gunned down in September 1935.
                                                              i.      Also: old age pensions, $2-3000 to all families per year, free education
                                                            ii.      A secret poll conducted by Postmaster General James A. Farley in 1935 revealed that 4 million Americans were prepared to vote for Long in 1936
    II.            Francis Townsend and the Old Age Revolving Pensions Inc.
1.      Townsend was a retired doctor who advocated that all unemployed individuals over 60 years be paid $200 per month on the condition that all of it is spent. The idea was to boost consumption and production and free up jobs for younger people.
                                                              i.      Townsend Clubs had 500 000 members
                                                            ii.      The movement was impractical but received support
 III.            Father Charles Coughlin and the National Union for Social Justice
1.      Coughlin was a priest who had an influential radio program called The Golden Hour of Power with a regular audience of 30-40 million. Coughlin founded the National Union for Social Justice in 1934 with the aim of monetary reform and redistribution of wealth because he believed that the New Deal was not effective in reforming banks.
                                                              i.      Roosevelt feared Coughlin’s influence in alliance with Huey Long
                                                            ii.      Coughlin became increasingly anti-Semitic and blamed the Jews for the New Deal and its shortcomings. Support declined thereafter.
 IV.            The Supreme Court
1.      In 18 months during 1935-6, the Supreme Court found 11 federal laws unconstitutional; on “Black Monday” May 27 1935, the Court found attacked the New Deal in various aspects, including finding the Farm Mortgage Act unconstitutional; it found the NIRA to be unconstitutional.
2.      The “sick chicken” case, 1935, was a decision by the Supreme Court that said federal government had no right to interfere in internal state issues and implied that the government had no powers to oversee nation-wide economic affairs.
                                                              i.      The Schechter Brothers, who were butchers, appealed against a verdict by the NIRA for breaking codes of practise to the Supreme Court after selling inconsumable chicken.
3.      Judiciary Reform Bill (rejected in July 1936) was a bill drawn up by Roosevelt in order to fill the court with personally appointed nominees that would favour New Deal legislation because the current nine justices were acting against him; it proposed that the president could appoint justices when an existing justice failed to retire by six months after the age of 70 and allowed for the appointment of up to six more justices (15 total)
                                                              i.      It was rejected but Justice Van Devanter retired and Roosevelt elected his own nominees to replace but not to reform the court.

Depression to the Cold War, Joseph M Sircusa

Clements, Peter. Prosperity, Depression and the New Deal: The USA 1890-1954.

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