Hoover's Presidency Flashcards
Did Hoover prolong the Depression?
Hoover’s beliefs, personality and how some of his actions reflected these
believed people should be responsible for their own welfare
did not believe the govt. should solve people’s problems
he was a self made man and thought everyone else could be too
gave generously to charity
cut own officials’ salaries by 20% to help provide revenues for recovery measures
believed economy had to right itself
“Economic depression… cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body - the producers and consumers themselves”
The promotion of voluntarism
Hoover hoped to persuade business men and state govts. to combat depression.
He called meetings of businessmen which he implored them not to reduce workforce or cut wages, but rather maintain their output and urge people to buy
He encouraged state leaders to begin new programmes of public works as well as continuing with the old
As Depression worsened business had to cut back - workers laid off, most investment post-phoned, wages reduced
problems too great for voluntarism to work particularly when it went against customary business practice
National Credit Corporation
October 1931
set up by bankers
aim to help failing banks survive
capital fund of $500 million donated by major financial institutions
corporation spent only $10 million by end of 1931
bankers too ingrained in ways to begin investing in failing concerns
Federal Government Politics
Although Hoover eventually intervened, the measures he was prepared to take were insufficient to meet the demands of the economic crisis
He could not accept the need for direct government involvement and neither could his supporters
Agriculture
The Agricultural Marketing Act 1929, established a Federal Farm Board with funds of $500 million to create “stabilisation corporations”
These corporations had the task of buying, storing and disposing of farm surpluses in an orderly way
They had no power to order reductions in production
Surpluses in 1931 and 1932 both at home and abroad saw prices fall and the corporation paying above-market values for produce
The Grain Stabilisation Corporation bought wheat in Chicago at 80 cents while the price would have fallen to 60 cents - By the time it had ceased its purchases in summer 1931, it had paid an average of 82 cents per bushel for 500 million bushels while the world price had fallen to 40 cents a bushel
The Corporation were seen as throwing tax payers’ money away
Seen as encouraging farmers to keep producing more - should produce less
1932: world price of wheat between 30 and 39 cents, less than harvesting costs in the USA
Congress proposed a bill to subsidise farmers to reduce production, however Hoover threatened to veto it as it undermined principle of voluntary action
Bill failed without veto - too radical:
it was paying American farmers artificially high prices and this could not continue long term
it treated agriculture as a domestic issue, failed to account for foreign considerations. Without high tariffs, there was little point in trying to keep American price high. Answer to problem of cheap foreign imports then seemed to be higher tariffs
Tariffs
Smoot-Hawley tariff was the highest in America history
Average duties of 40% on both agricultural and industrial items
Led to most European nations abandoning free trade
Fewer American goods exported
1929-30 value of international trade fell by $500 million, 1931 fell by $1.2 billion
US imports fell from $1,334 million in 1929 to $390 million in 1932
US exports from $2,341 to $784 million in the same period
Farming interests in Congress fought against this tariff
Passed senate by 2 votes
Hoover chose not to veto it - swayed by interests within own party which was that it was more important to encourage protection
The repudiation of war debts
Hoover blamed the Depression on Europe
Others have argued that it was the American Depression that spread to Europe and not vice versa
The Smoot-Hawley tariff led to European countries repudiating war debts in the early 1930s
21 June 1931 - Hoover announced the USA would postpone collection of debts for 18 months if other countries would do the same - hoping it would release monies for investment (moratorium) but it was too late to stop collapse of European economics
When the proposed moratorium came up for renewal in December 1932, Hoover’s presidency was coming to and end - Hoover advised Roosevelt to continue the moratorium
However, Roosevelt agreed the passage of the Johnson Act - illegal to sell in the USA the securities of any country that had refused to repay its debts - stock markets were still stagnant so this had little effect and made European countries more resentful of the USA
Unemployment relief
unemployment in 1932 was 24.1%
relief agencies and charities couldn’t cope
Hoover secured additional amounts from Congress - $500 million in 1932 given to help agencies but this was wholly inadequate to meet the scale of the problem
He set up the President’s Emergency Committee for Employment to help agencies
Hoover would not countenance direct relief, arguing this destroyed self-help and created a class of people dependent on the government for hand-outs - even during the severe drought of 1930-31 in the south
In the end, Congress allocated a pitifully small sum, $47 million, and even that was to be offered as loans which were to be repaid later
The Federal Home Loan Bank Act
passed in July 1932
intended to save mortgages by making credit easier
Federal Home Loan Banks were set up to help loan associations to provide mortgages
As the loan was only a maximum loan was only 50% of the value of the property, it was largely ineffective
homes were being repossessed due to the failure of this Act
The Reconstruction Finance Corporation
RFC was established in January 1932 with authority to lend up to $2 billion to rescue banks and other financial institutions in distress
Ogden Mills, the treasury secretary, said the RFC “was an insurance measure more than anything else” - designed to restore confidence in financial system
90% of its loans went to small/medium banks
70% of loans to banks in towns with a population of less than 5,000
critics argue 50% of loans went to 7% of borrowers who happened to be the biggest banks
Of the first $61 million, $41 million was loaned to no more than 3 institutions
The Central Republican National Bank and Trust Company received $90 million alone - almost as much as the bank held in deposits at the time
As the need for direct relief became greater Hoover gave support to Emergency Relief and Construction Act - first major legislation to offer relief - authorised RFC to lend up to $1.5 billion to states to finance public works - create temporary employment locally while works undertaken to improve public facilities
However, to be eligible states would have to declare bankruptcy and works undertaken to produce facilities would have to make revenue would have to pay off loans - Hoover agreed to this
1932 - James M. Beck, a former solicitor general, compared Hoover’s government to Soviet Russia’s - damaged his credibility
War veterans and the ‘Bonus Army’
Congress had agreed a veterans bonus in 1925
It was to be paid in full to each veteran in 1945
As the Depression hit America, the veterans needed it immediately - so a march to Washington was organised to publicise their cause
15 June 1932 - 20,000 people in the capital, mainly around the Anacostia Flats region
Hoover offered $100,000 to pay for their transportation home - many refused to leave
The Secretary of War called in troops under General Douglas MacArthur - tanks chased squatters back on Anacostia Flats (main camp and used tear gas to disperse them
The camp was destroyed
Many marchers were injured
Two babies died from the tear gas
Americans were horrified and blamed Hoover for this violent dispersal of the Bonus Army by the military
The 1932 presidential election
Hoover was blamed for his failed policies
The USA had been in the economic depression for most of Hoover’s presidency
Capitalism was questioned by the Communist Party and offered extremist alternatives
The Democrats selected a candidate of great charisma who engendered confidence and faith even though he offered little actual substance in electoral programmes
Roosevelt won, but only gained 57% of the popular vote
Conclusion
Hoover was prepared to do more than any previous president
The economic downturn was too great for his policies to address effectively
He would not consider direct government intervention
The Depression eventually affected every aspect of the US economy - millions became unemployed and homeless
Although Hoover repudiated foreign war debts, the high tariffs made matters worse
Why did the Great Depression last so long?
Hoover blamed the collapse of the European economies for the onset and continuation of the Depression because they could not repay their debts to the USA
Charles P. Kindleberger felt the Federal Reserve should have been more prepared to lend money to stricken banks
Robert Sobel argued in 1968 that Hoover should have reformed the whole financial system before it collapsed
Paul Johnson argued in the 1990s the Hoover intervened too much; left alone the economy would have righted itself
Lee Ohanian and Amity argued wages were too high, preventing employers from risking expansion in a depressed economy - agree intervention prolonged the depression
Howard Zinn argued that the government didn’t intervene enough to combat the economic stagnation
