1. The Great Depression and the New Deal
Unit 9

2. Causes of the Great Depression

3. Guiding Questions
What economic choices caused the economy to become unstable in the late 1920s?
How did the stock market crash trigger a chain of events that led to the Depression?
What were the underlying conditions that led to the collapse of the U.S. economy?

4. Terms to Know Stock market Bull market Speculation Margin Margin call
Bank run
Installment

5. (Secretary of Commerce)
Election of 1928
Nominee
Democrats
Alfred E. Smith
(Governor of N.Y.)
First Roman Catholic to run for president from a major political party
Religious beliefs became a campaign issue
Protestants believed the Roman Catholic church would have inappropriate influence in the U.S.
Republicans
Herbert Hoover
(Secretary of Commerce)
Former head of the Food Administration
Hoover and the Republicans took credit for the prosperity of the 1920s
Easily won the election

6. Stock Market Soars Bull market Buyers began practicing speculation
Long period of rising stock prices
Convinced many people to invest in stocks
~10% of Americans households held stock
Buyers began practicing speculation
Betting that prices would keep rising
Did not look carefully at company earnings or profits
Buyers began buying on margin
Making only a small cash down payment(10%)
Stockbroker loaned the other money to the buyer and charged interests
When prices began to fall, a broker could issue a margin call
Demand that the investor repay the loan at once

7. Stock Market Crashes Monday, Oct. 2, 1929
Stock market began to drop greatly
Stockbrokers made margin calls
Many customers sold stocks, making the market drop even more
Tuesday, Oct. 29, 1929 (Black Tuesday)
More than 16 million shares of stock were sold
Industrial index (value of leading industrial companies0 dropped by 10%
Mid-Nov. 1929
Market price of stocks had dropped by more than 1/3
Total loss of about $30 billion
People had loss their savings, others in huge debts

8. Bank Failures Banks were hurt by stock market crash
Loaned billions of dollars to stock speculators
Invested depositor’s money in the stock market
Banks greatly reduced the number of loans made
People and businesses couldn’t get loans
Caused economy to enter recession
Banks failed (closed)
Government did not insure deposits
People stopped trusting banks
Bank runs became widespread
Depositors decided to take their money out of the bank at the same time
Most banks did not keep enough reserve to meet need’s of depositors if a run was made
By 1932, ~25% of U.S. banks had gone out of business

9. Underlying Causes of Great Depression
Overproduction and Income Inequality
Tariffs and Decline of Exports
Federal Reserve Policy
About 2/3 of families earned less than $2,500 a year
Did not have money to buy new goods
Many farmers went bankrupt
Buying on installment plan made people unable to afford new goods (overtime)
Manufactures had to cut production and lay off workers
No unemployment insurance
More than 26,000 businesses failed in 1930
U.S. banks were making loans to speculators instead of foreign companies
Lack of loans caused European companies to buy fewer American products
Congress raised tariffs to protect American industry
Hawley-Smoot Tariff- raised the average tariff rate to the highest level in U.S. history
European countries raised tariffs in response
By 1932, U.S. exports had fallen to ½ the level it had been in 1929
Federal Reserve kept interest rates very low throughout the 1920s
Low rates encouraged member banks to make risky loans
Low rate led business leaders to think economy was still growing
Borrowed more money to increase production, led to overproduction
Federal Reserve raised interest rates after workers began being laid off (made it harder for people to get loans)

10. Discussion Questions
What do you think could have been done to prevent the financial crisis?
What do you think would be the correct response to such a crisis?

11. Life During the Great Depression

12. Guiding Questions
How did the economic changes affect everyday life during the 1930s?

13. Terms to Know
Hobo
Shantytown
Soup kitchen
Bread line

14. The Depression Worsens
In 1930, 1,352 banks suspended operations
30,000 companies went out of business in alone
By 1933, the unemployment rate was 25%

15. People Struggle to Survive
May people lost their homes
Had to wait in breadlines or visit soup kitchens in order to have food
Many homeless built small shacks on unused or public lands
Shantytowns- small neighborhoods made up entirely of shacks
“Hoovervilles”- blamed Hoover for the hard times
Hoboes, mostly boys and young men, snuck into open boxcars or freight trains traveling trying to find jobs
Suicide rate rose more than 30% from
Americans compromised and made sacrifices that would affect them the rest of their lives
Stopped going to dentist/doctpr
Young people put off going to college, getting married, having children

16. The Depression and Immigrants
Many immigrants returned to their home
Repatriation
Could not find jobs
Federal government sped up deportation of some immigrants
Sent back those immigrants that had broken the law

17. The Dust Bowl
Long period of dry weather, turned the Great Plains soil into dust
Dust storms were very common
50 dust storms a year during the 1930’s
Dust made sky dark for hundreds of miles
People and animals caught in storms would often die because they could not breath
Many farmers moved to California in hopes of a better life
“Okies”
Life was just as hard

18. The Great Depression and American Culture
Movies
Radio
Literature
Photography & Art
More than 60 million Americans went to movies each week
Comedies and cartoons very popular (Snow White (1937))
Wizard of Oz (1939)
Gone with the Wind (1939)
Hattie McDaniel became first African American to win an Academy Award (Best Supporting Actress)
Tens of millions of people listened to the
radio each day
Comedian Jack Benny was very popular
Daytime dramas, soap operas, continued their storylines from day to day (The Guiding Light)
People listened to music as well
Often told the stories of homeless, jobless people
Used new techniques such as stream of consciousness (puts dreams and daydreams into words)
Life magazine
Showed how the Great Depression affected average Americans
Work emphasized traditional American values, especially rural Midwestern and Southern
American Gothic by Grant Wood

19. Discussion Questions
What effect did the Dust Bowl have on life in the Great Plains?
Why might people have enjoyed lighthearted entertainment during the Great Depression?

20. Hoover’s Response to the Depression

21. Guiding Questions
How did President Hoover’s governing philosophy influence his efforts to combat the Great Depression?
Why and how did citizens try to change government policy during the Depression’s early years?

22. Terms to Know
Public works
Relief

23. Promoting Recovery
Hoover believed “rugged individualism” would keep economy moving
American’s ability to rely on themselves, not the government
Hoover believed socialism was bad for economies
Hoover asked consumers and business leaders to be reasonable and not let fear guide their actions
Organized a series of talks including heads of backs, railroads, and other big businesses
Increased funding for public works
Building projects paid for by the government
Was not enough to increase employment
Did not want to raise taxes or run a budget deficit

24. Efforts to Rescue Banks
Asked the Federal Reserve Board to make more money available (allow banks to make more loans)
Federal Reserve refuse
Set up the National Credit Corporation(1931)
Set aside money for banks that were having financial problems
Was not effective
Reconstruction Finance Corporation (1932)
Purpose was to make loans to businesses
By 1932, more than $238 million of loans were made to banks, railroads, and building-and-loan associations
Did not increase lending enough

25. Direct Relief for Citizens
Hoover was opposed to federal government giving direct relief
Money given directly to poor families
Believed only state and local governments should give relief
Charities should fill other needs
Hoover reluctantly signed the Emergency Relief and Construction Act (1932)
Called for $1.5 billion for public works and for $300 million in emergency loans to states for direct relief
First time in U.S. history federal government was giving direct relief money

26. The Bonus Army
In May 1932, several hundred veterans began marching to Washington, D.C.
Tried to convince Congress to pass a bill authorizing a $1,000 bonus for each veteran of WWI
By time they arrived in Washington, there were about 15,000
Lived in Hoovervilles outside Washington
Senate voted down bill
Some went home, but others remained in camps or moving into empty buildings downtown
Hoover ordered the police to make the veterans leave the buildings in late July
Police killed 2 veterans
General MacArthur sent soldiers and tanks to clear camps
Hoover told him to allow those in camps to stay
Soldiers burned shacks, threw tear gas at veterans who did not leave fast enough
Newspapers and radio reporters covered the incident and it greatly hurt Hoover’s image and his campaign for the 1932 presidency

27. Discussion Questions
Why do you think that Hoover’s efforts ultimately failed?
Could the soldiers of the Bonus Army have used a different method to get what they wanted?

28. The First New Deal

29. Guiding Questions What qualities make an effective leader?
How did New Deal legislation differ from President Hoover’s attempts to combat the Depression?
Why are the first hundred days so important for a president?
Why did Roosevelt broadcast “fireside chats”?
How did New Deal legislation try to stabilize agriculture and industry?

30. Terms to know Polio Gold standard Bank holiday Fireside chats
Fundamental
Ideology

31. FDR Becomes President Democratic governor of New York Very popular
Former assistant secretary of the navy under Woodrow Wilson
Oversaw the creation of the first state relief agency to help unemployed
Very popular
Energetic, hopeful, confident
Determined(paralyzed from waist down (polio))
Won election of 1932 in a landslide
Won electoral vote in all but 6 states
Promised people a “New Deal”

32. Roosevelt’s Inauguration
By Roosevelt’s inauguration, most of nation’s banks had closed
25% unemployment rate
Roosevelt had to get Americans to feel confident again
Nation needed to take action and stop being afraid
“The only thing we have to fear is fear itself”

33. The Hundred Days
Congress passed 15 major acts to try and fix the economy between March 9 and June 16, 1933
These programs made up the First New Deal

34. Emergency Banking Act
Roosevelt knew that getting people to trust the banks was the most important issue
Banks had to be open for other programs to work
Enacted a national bank holiday
Closed all the banks in the United States
Stated that federal examiners would study the nation’s banks
When banks were deemed strong enough to open, they were issued a Treasury Dept. license and reopened
Roosevelt gave his first “fireside chat” on March 12
Radio address to the American people
Ensured people the banks were safe and urged them to deposit their money back in the banks

35. Bank and Stock Market Legislation
Securities Act of 1933
Securities Exchange Act of 1934
Glass-Steagall Act
Requires companies selling stocks and bonds provide complete and truthful information to investors
Created the Securities Exchange Commission (SEC)
Regulated the stock market
Designed to stop fraud
Separated commercial banking from investment banking
Commercial banks could no longer risk the money people deposited through stock speculation
Created the Federal Deposit Insurance Corporation
Provides government insurance for bank deposits (greatly increased public confidence)

36. Mortgage and Debt Relief
Home Owner’s Loan Corporation
Farm Credit Administration
Bought loans of homeowners behind on their mortgages
Reorganized the loans to give people more time to repay and lower interest rates
Helped refinance farmer’s loans
May have slowed economic recovery
Made money less available to lend to more efficient businesses

37. Farming and Industry Reform
Agricultural Adjustment Act
National Industrial Recovery Act
Pay farmers not to keep certain livestock, grow certain crops, and produce dairy products
Farmers received more than $1 billion in support payments
Made food prices rise
Thousands of tenant farmers, mostly African Americans, lost their jobs and homes
Allowed the National Recovery Administration to suspend antitrust laws
Allowed business, workers, and government to work together with rules called codes of fair competition
Set prices and minimum wages, shortened workers’ hours to create more jobs, allowed unionization
Employers disliked NRA because it allowed workers to form unions
Argued that paying minimum wages forced them to raise prices
Led to a decline of industrial production
Ruled unconstitutional in 1935
* Roosevelt and his advisers believed prices were too low and production was too high

38. Relief Programs (Employment)
Civilian Conservation Corps
Federal Emergency Relief Act
Public Works Administration
Civil Works Administration
Gave jobs to unemployed men between years old
Supervised by the forestry service (planted trees, fought forest fires, built reservoirs)
Usually worked 6-12 months
Taught more than 40,000 workers to read/write
Total of 3 million workers
Gave money to pay for state and local relief projects
Headed by former social worker Harry Hopkins
Spent $5 million on relief projects
Many critics complained projects made no sense in long run
Hopkins was not worried about long run
Put people to work from the construction industry
Buiilt highways, dams, schools, and other government structures
Gave contracts to companies who could not discriminate against African Americans
Hired workers directly (FERA and PWA were not very effective)
Employed over 4 million people
Built or improved airports, roads, schools, playgrouds, parks
Spent roughly $1 billion in just 5 months (winter)
Roosevelt insisted CWA be ended in spring

39. First New Deal Success
Programs showed Roosevelt’s energy and willingness to experiment
New Deal programs did not pull country out of depression
Improved banking system
Increased availability of loans
Inspired hope and restored American’s faith in their nation

40. Discussion Questions
Roosevelt received almost 58 percent of the popular vote. Why do you think most people voted for him rather than Hoover?
Why did President Roosevelt take his message about the banks directly to the people?
Why do you think Roosevelt was concerned about people relying on the government to create jobs?

41. The Second New Deal

42. Guiding Questions
Why did President Roosevelt decide to introduce new legislation to fight the Depression?
How did the Wagner Act and Social Security Act affect Americans?
What led to the re-election of Roosevelt?
What impact has the New Deal legislation had on federal and state governments?

43. Terms to Know Deficit spending Binding arbitration Sit-down strike
Court-packing
Broker state
Safety net
Mediate

44. Roosevelt Faces Criticism
Right-Wing (Republicans)
Believed New Deal regulated business to tightly
Gave federal government too much power over the states
Very opposed to deficit-spending
Spending more than you take in
Left-Wing (Democrats)
Believed New Deal hadn’t gone far enough
More government involvement in managing economy
Move money from rich to middle-income and poor Americans

45. Democratic Opposition
Huey Long
Father Charles Coughlin
Francis Townsend
Former governor of Louisiana
Built and improved schools, colleges, hospitals, bridges, and roads
Very popular in LA
Built a very powerful and corrupt political machine
Became a U.S. Senator in 1934
Established the Share Our Wealth Society to work to provide a good life for ordinary people
Planned to run for president in 1936, but was assassinated in 1935
Catholic priest and popular radio host from Detroit
Strongly supported the New Deal but grew impatient with its moderate changes
Wanted to decrease the value of money
Put the banking system under the control of the national government
Began supporting ideas of Hitler and Mussolini in his radio broadcasts
Doctor from California
Proposed the federal government pay people over 60 years old $200 a month, for those people to stop working
Had to spend all the money every month
Believed plan would increase spending and make more jobs available for the unemployed

46. Second New Deal Launched in 1935
Purpose was to generate greater economic recovery
First New Deal did not alleviate problems from the Depression
More than 10 million still unemployed
Nation’s total income was about ½ of what it was inn 1929

47. Supreme Court’s Role Schechter Poultry Corporation v. United States
Declared the authority of the National Recovery Administration was unconstitutional
Congress could not delegate its legislative powers to the executive branch
Roosevelt knew he needed a new series of programs to keep voter’s confidence
Told Congress they could not go home until they passed his new bills

48. Works Progress Administration
New Deal’s largest public works program (1935)
Employed 8.5 million workers from
Spent more than $11 billion to build roads, airports, bridges, parks
WPA program, Federal Number One, financed artists, musicians, theater people, and writers
Federal Art Project
Created wall paintings and sculptures for public buildings
Federal Writers Project
Recorded the stories of formerly enslaved people and others whose voices had not often been heard
Federal Theatre Project
Wrote and staged plays
Federal Music Project
Set up orchestras and smaller musical groups

49. The Wagner Act (National Labor Relations Act)
Guaranteed the right to unionize and bargain as a group
Knew unions were vital to keeping them in power
Thought high union wages would help pull country out of depression
Established the National Labor Relations Board
Organized elections in factories with secret ballots to decide whether workers wanted to unionize
Investigated employers’ actions and stopped unfair practices
Set up binding arbitration
Union members could take their complaints about employers to a neutral party who would listen to both sides and decide on the issues

50. Wagner Act Leads to Labor Activity
Committee for Industrial Organization
United Auto Workers
Other Labor Activity
Formed by John L. Lewis in 1935
Began trying to organize unions that included both skilled and unskilled workers in particular industries (Steel/Auto)
Used sit-down strikes as a common tactic (employers stopped working and refused to leave)
Changed name to Congress of Industrial Organization in 1938
Staged a sit-down strike against General Motors in late December 1936
Violence began when police used tear gas on strikers, but strike held
General Motors recognized the UAW on Feb. 11, 1937
Became one of the most powerful unions in the united States
In march 1937, U.S. Steel recognized the CIO’s steelworker union
By 1941, steelworker’s union won contracts throughout steel industry
Union membership tripled from 3 to 9 million from 1933 to 1939

51. Social Security Act
Provided financial security to older Americans, unemployed workers, people with disabilities, and poor mothers with dependent children
Workers pay a tax in order to receive benefits
Core of the Social Security is the monthly retirement benefit
Collect once you retire (67 years old)
Can begin collecting at 62 (75%)
Critics did not like fact money came from taxes imposed on workers and employers

52. Election of 1936
By 1936, New Deal programs had helped millions of voters
Democratic Party coalition developed
Included African Americans, farmers, workers, immigrants, women, progressives, and intellectuals
Many former Republican supporters changed to Democratic Party because of the affect the New Deal had on their lives
Republicans nominated Kansas governor Alfred Landon to challenge Roosevelt
Roosevelt won election
More than 60% of the popular vote

53. Roosevelt’s Court Packing Plan
Supreme Court ruled the Agricultural Adjustment Act was unconstitutional (1936)
Also prepared to make decisions on Social Security and Wagner Act
Roosevelt tried to change the Court’s political power
Wanted to increase the number of justices
Allow president to appoint an additional justice if a sitting justice had served 10 years and did not retire within six months of reaching 70 years old
Would have allowed Roosevelt to appoint 6 new justices

54. Court-Packing Damages Democratic Party
Democrats were split on issue
Southern Democrats worried new justices would end laws allowing segregation
African American leaders worried future justices might oppose civil rights
Many Americans though plan would give president too much power
Supreme Court narrowly approved the constitutionality of the Wagner and Social Security Acts (1937)
A conservative justice left soon after
Roosevelt appointed a judge who supported the New Deal
Court-packing bill ultimately failed, but hurt Roosevelt’s reputation
Caused Conservative Democrats to work with Republicans to block any additional New Deal proposals

55. Recession of 1937 Roosevelt made large cuts to the WPA and PWA
Worried about debt
By 1937, 2 million people were unemployed
Leaders of the WPA and PWA used Keynesianism to encourage Roosevelt to spend
Idea that government should spend a lot of money during a recession to get the economy going
In 1938, Roosevelt asked Congress for $3.75 billion for the PWA, WPA, and other programs

56. Farm Security Administration Fair Labor Standards Act
Final New Deal Reforms
National Housing Act
Farm Security Administration
Fair Labor Standards Act
Created the United States Housing Authority
Received $500 million in funding
Used money to provide loans to builders who agreed to build low-cost housing
Gave loans to tenant farmers who had lost their jobs when farmers stopped using their land for growing crops
Tenants used the loans to buy farms
Made child labor illegal
Set 44 hours as the standard work week
Set the first federal minimum wage

57. New Deal Ends
The Recession of 1937 allowed Republicans to win seats in Congress during the 1938 mid-term elections
Conservative Democrats, along with Republicans began blocking further New Deal legislation
By 1939, New Deal era was over

58. Legacy of the New Deal
Did not end the Depression, but gave many Americans a stronger sense of security and stability
Set up what many call the broker state
Government works out conflicts among different groups (mediates)
Started a new public attitude toward government
Expected government to provide a “safety net” for citizens
Safeguards and relief programs to protect people against economic disaster
Continuing debate over how much government should intervene in society
Many critics argue New Deal made the federal government too powerful

59. Discussion Questions
Do you agree or disagree with critics who believe government should not assist artists, writers, and musicians?
What was the difference between the Public Works Administration in the First New Deal and the Works Progress Administration in the Second New Deal?
What were some of the main reasons that the Democratic Party attracted new supporters?
Why might the court-packing plan be considered Roosevelt’s first major mistake?
How do Keynesian economics continue to influence the United States today?