The 1920's

Contents Page

Chapter 27

 

Herbert Hoover, or what is the worst possible thing I could do?  O.K. let’s do that!

 

  1. Cracks in the foundation
    1. President Hoover felt that business should not be regulated
    2. Farmers produced more each year but were limited in how much they could sell, gains in productivity outpaced market gains.
    3. High tariffs limited the European market and resulted in reprisals (Hawley Smoot Tariff resulted in average tariff rates of 40%)
    4. Stock Market was soaring in the late 20’s – much of the speculation had little financial basis.  Much of the investment was on a margin.
    5. American economy was not balanced – wealthy 5% controlled majority of wealth, many workers could not afford the things they manufactured.
    6. American banks had loaned billions to European countries.
  2. October 1929
    1. October 24th – stock prices drop markedly.  J.P. Morgan and associates attempt to pool money to keep the market up (a strategy that had worked twice before).
    2. October 29th – stocks completed a disastrous week, no one could hold up stock prices at this point
  3. Hoover’s policies – he wanted to convince Americans that things were not that bad, if confidence could be restored than so could the “roaring 20’s”
    1. Most business leaders felt that this was a normal turn of the business cycle and that nothing should be done
    2. Hoover cut income tax to encourage spending (only the richest 1-2 % paid taxes) and investment
    3. Hoover opposed deficit spending, and insisted on staying on the gold standard
    4. Businesses and Banks were failing at a record rate 9000 banks failed 1930-1933 – every bank failure wiped out hundreds or thousands of families’ savings
    5. The election of 1930 gave the Democrats a majority in the House – they blamed Hoover for the crisis.

                                                               i.      Hoover blankets, Hoover flags, later Hooverville’s

                                                             ii.      Hoover still felt relief was a local responsibility – vetoed relief efforts

    1. Europe’s economy collapses – countries could no longer borrow from US banks.  Countries devalued their currency, which resulted in lower prices for American farmers.
  1. Foreign policy and Hoover
    1. Hoover started the “Good neighbor” policy, which promised that the US would not interfere with nations south of our border – repudiated the Roosevelt Corollary of the Monroe Doctrine.
    2. Hoover allowed Japan to build up their Navy in the pacific – had little choice. 
    3. France asked US to sign a pact with them against Italy – US refuses but does pass “escalator” clause to allow military build-up in case of emergency.
    4. Hoover convinces European nations to pass a 1-year moratorium on debt between countries to allow economy to rebound.
    5. Japan attacks China’s province of Manchuria – China asks for help, but all other nations are preoccupied with depression and little is done.  Secretary of State Stimson criticizes Japan to no avail.
    6. Congress frees the Philippines in 1933 over Hoover’s veto – this act will backfire, it allows Japan to conquer the Philippines easily later.
  2. Hoover acts domestically
    1. Starts National Credit Association to loan $500 million – little of this was loaned.
    2. Congress in 1932 creates the Reconstruction Finance Corporation with power to loan $1.5 billion.  Unfortunately the RFC could only loan to those with sufficient collateral, so those who needed it most could not get a loan.  By the end of 1932 they had only loaned $30 million.
    3. Bonus Army marches on Washington D.C.

                                                               i.      WWI veterans had been promised an insurance policy; they wanted to be able to cash the policy to help them now.  Congress and Hoover said no.

                                                             ii.      After the protest march many veterans had nowhere to go so they formed a “Hooverville” in the park across from the White House.

                                                            iii.      Hoover ordered them evicted in July of 1932 – police attempted to remove the veterans – 2 vets were killed and 7 police were wounded

                                                           iv.      Sec of War Hurley called in the Army (Hoover did not stop him), and General MacArthur attacked the vets and drove them out of the city using troops, tanks, tear gas, and machine guns.

                                                             v.      This action appalls the nation and guarantees Hoover’s defeat (It’s not like he had much chance anyway) in the November election.

  1. Election of 1932
    1. Republicans stay with Hoover
    2. Democrats choose Franklin D. Roosevelt who is Governor of New York

                                                               i.      FDR is opposite of Hoover, gregarious, fun loving, against prohibition, and a distant relative of Teddy Roosevelt.

                                                             ii.      FDR is deliberately vague about what he will do – he realizes that he needs to make no promises to become elected.

       c.  FDR easily defeats Hoover and becomes President.