The 1920s were a period of optimism and prosperity for some Americans. When Herbert Hoover became president in 1929, the stock market was soaring to unprecedented levels, and some investors were taking advantage of low interest rates to buy stocks on credit, pushing prices even higher. in October 1929 the bubble burst and, in less than a week, the market fell to nearly half of its recent all-time highs. billions of dollars were lost and thousands of investors went bankrupt.
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After the stock market crash, President Hoover tried to prevent a panic from spreading throughout the economy. In November, he summoned business leaders to the White House and assured them of promises to keep wages. According to Hoover’s economic theory, financial losses should affect profits, not employment, thus keeping consumer spending down and shortening the recession. Hoover received commitments from private industry to spend $1.8 billion on new construction and repairs beginning in 1930 to stimulate employment.
The president ordered federal departments to speed up their construction projects and asked all governors to expand public works projects in their states. He asked Congress for a $160 million tax cut while doubling spending on public buildings, dams, highways, and ports.
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Praise for the president’s intervention was widespread; the new york times commented, “no one in his place could have done more. very few of his predecessors could have done as much.” Together, government and business spent more in the first half of 1930 than in the entire previous year. Still, consumers cut back on spending, forcing many businesses and manufacturers to cut production and lay off workers.
In October 1930, with unemployment rising, Hoover created the President’s Emergency Committee for Employment (PECE) to coordinate state and local relief programs and to develop methods for increasing private-sector employment. . But without direct control of funds for relief or jobs, the fish had only limited success.
As the depression worsened, Hoover requested that the Federal Reserve increase credit and persuaded Congress to transfer farm surpluses from the Federal Farm Board to the Red Cross for distribution to aid agencies. Hoover called on Congress to spend even more on public works and continued to encourage states and private companies to create new jobs.
Economic conditions improved in early 1931 until a series of bank collapses in Europe sent new shock waves through the American economy, leading to more layoffs. In August 1931, PACE was reorganized as the President’s Organization for Unemployment Relief (POUR). Pour expanded Pece’s work but also implemented a nationwide fundraising campaign for unemployment relief. the national fund campaign raised millions of dollars, but proved woefully inadequate as unemployment soared to record levels.
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hoover was criticized for almost every program he proposed. his public works projects, designed to create jobs, were characterized as wasteful public spending. His efforts to promote local relief programs, rather than asking Congress to create relief programs nationwide, were seen as callous disregard for the unemployed.
On January 22, 1932, Hoover established the Reconstruction Finance Corporation (RFC) to provide emergency loans to businesses in danger of default. At first, the RFC lent money only to banks, railroads, and certain agricultural organizations, but later the scope of its operations expanded and it proved to be an effective tool in stabilizing business and industry. In July 1932, Hoover signed the Emergency Relief Construction Act, which allowed the RFC to lend $300 million to states for relief programs and $1.5 billion for public works projects. Hoover also persuaded Congress to establish federal home loan banks to help protect people from losing their homes.
By the summer of 1932, the Great Depression had begun to show signs of amelioration, but many people in the United States still blamed President Hoover. With the presidential election approaching, the Democratic candidate, New York Governor Franklin D. Roosevelt exuded hope and optimism, promising the people a “new deal.” Hoover, defending his record, was pessimistic and defeated. in november, roosevelt won in a landslide.
four long months elapsed between the election and roosevelt’s inauguration. the economic signs that seemed so promising in the summer of 1932 trended downward, unemployment rose, and banks failed at an alarming rate. As weak banks closed their doors, nervous depositors began withdrawing cash from even the strongest banks, but Congress refused to enact Hoover’s plans to stop the panic. When Roosevelt opened on March 4, 1933, the banking system was on the verge of complete collapse and unemployment had reached 25%. Within days, Congress passed and FDR signed into law the Emergency Banking Relief Act, which stopped the panic and restored confidence in the financial system, and was nearly identical to the legislation Hoover had proposed weeks earlier. Despite all of Roosevelt’s “new deal” efforts, the depression persisted for another seven years, until World War II stimulated the economy with increased demand for basic goods and war materials.