Chapter 12 Roosevelt & the New Deal

1. Chapter 12 Roosevelt & the New Deal • CAUSES: Overproduction of agriculture & consumer goods, weak financial regulations (banks), purchasing stock on margins (over speculation) & runs on the banks (no reserve requirements) • Results of Crash & Depression – • Lasted 10 yrs (WWII gets us out) • 25% unemployment (today 5%) • If employed, 50% faced pay cuts • 6,000 banks failed, 32,000 businesses failed, 186,000 homeless, 14,000 hopped trains to go west • Farmers couldn’t get decent price for crops(burned crops in protest)(killed livestock & poured milk out on streets) • Hungry people rioted, communists & socialists blamed capitalism (party membership grew) (highest #s ever)

2. Why does the Crash become a Depression? • Stock prices cont. to decline for almost 4 yrs. (no chance to make up $ lost) • Prosperity of 20’s relied on durable goods once purchased, they last long time so demand leveled off & declined • Over production by farmers & factories (too much supply not enough demand) (farmers never adjusted to demand from WWI) • Over expansion of credit through installment plans (buying beyond means) (80% without savings) • Europe never fully recovered from WWI so couldn’t sell there & high tariff shut us out

3. Herbert Hoover blamed? ? • As depression worsened, he lost popularity • 30yrs fighting humanitarian causes (Food Administration Board during WWI)but blamed for depression: • Shanty towns =Hoovervilles • Newspapers=Hoover blankets • Empty pockets =Hoover flags • Hoover hogs = rabbits & rats used as food (Hoover stew) • “Hoover wagons” = cars pulled by mules because no $ for gas • “hard times are still Hoovering over us”

4. Biggest Mistake Hoover • Not able to communicate w/ people about how he was helping • Republican philosophy of Laissez faire “leave business alone” prevented him from helping (Republicans believe in less govt interference and Dem believe in more govt interference) • When he does help, gives aid to businesses & banks to TRICKLE DOWN to masses (doesn’t trickle down because businesses don’t reinvest)

5. Election of 1932 & FDR Takes Over • NY Governor & assistant Sec. of Navy & ran for VP in 1928 w/ Cox but lost/Suffered from Polio disease that left him paralyzed (a fact he hid from public) • Election of 1932 – FDR wins big (Dem) • Inauguration speech –sun broke through: “the only thing we have to fear is fear itself” -watch 5 min of speech • Wife Eleanor (FDR’s eyes & ears) distant cousin & TR’s niece • Three R’s –Relief, Recovery & Reform: • Relief= legislation meant to give immediate aid to those suffering • Recovery=legislation meant to bring country out of depression –never going to happen cause only WWII did this! • Reform=legislation meant to change policies so economic crisis doesn’t happen again (regulations & rules)

6. Brain Trusts • During 4 months between election & inauguration day, FDR went into seclusion (20th Amendment will change time between election & inauguration- March to January) • 4th period stopped here • Met w/ experts on agriculture, industry, taxation, finance (many were professors from Columbia & Harvard Univ) • All these experts will help formulate his program = The NEW DEAL

7. 1st Hundred Days • March 9 – June 16, 1933 -3 ½ months • Passed more legislation than any Congress prior in 2 years time • Goals: • 1. increase consumer’s purchasing power (people need $$$ in form of Jobs not handouts) - 4 million put to work but still 10 million w/ out jobs (jobs, jobs, jobs, jobs) • 2. Restore prices to level that make it worth factories to start producing again(w/ NO jobs demand is way down so massive deflation) (price fixes) • Called special session & introduced 15 pieces legislation & received back 15 laws –NEW DEAL • (Congress desperate & democratic because Republicans booted out & blamed for Depression)

8. Fireside Chats • FDR will use the radio to address the people • Explain his programs so people can understand • In conversational tone he told the people what he & Congress were doing & what he needed from them • Used talks to encourage & persuade (cheerleader –n- chief) • Very unlike Hoover who cut himself off & didn’t communicate w/ public –there was a common man attitude to the white house now (trump v. Clinton)

9. BANK HOLIDAY • (Banks in 48 States were either closed or heavily restricted by the states on how much one could withdrawl) • Day after FDR sworn in Proclaimed all banks closed for 4 days (5,000 banks failed & 10,000 in crisis mode) • Treasury Dept. would determine which ones could be saved using loans from the Federal Govt • EMERGENCY BANKING RELIEF ACT = only reopened sound banks (had to have permit from Treasury dept. to reopen ) • Glass Steagall Act = created FDIC(Federal Deposit Insurance Corporation) no worry about losing $ in banks / insured accounts in banks / banks have rules now that they must adhere to $250,000 Relief, Recovery or Reform??? • (Listen to FDR 1st fireside chat)

10. CIVILIAN CONSERVATION CORPS • During this era Fed becomes largest employer • Provided work for unemployed age 18-25 (3 month job) • Went off to work in camp like setting w/ military regiment (free food & living expenses) • Worked in U.S. National Parks planting trees, conservation projects, irrigation projects & constructing buildings (Smoky Mt. National Forest example) • Paid $30 month & required to send $22 to family so $ put in circulation (men in camp didn’t need $) (important!!!!) • Relief & Recovery

11. Agriculture Adjustment Act • Farmers told to plow crops under in exchange for $ & slaugter their pigs etc. (what???) • Very controversial People starving in cities while destruction of crops in rural areas • Supply down, prices up(then farmers have $ to spend in economy) • Increased crop prices & farmers incomerelief,recovery or reform??? • RELIEF How? & RECOVERY How? • Will get ruled unconstitutional!

12. Works Progress Administration -9 million put to work (artists, writers, researchers)painted murals, write state guidebooks & interview people for history books (skilled jobs) (WPA) • Relief, Recovery or Reform ???? • National Recovery Administration = set standards for wages (minimum wage laws), • limit hours to 8 a day or overtime (limit production so prices go up - supply Down) & conditions for workers Improve • Relief, Recovery or Reform???? Laissez faire or not?

14. End of Gold Standard – Took country off gold standard so to put more $ in circulation/ made it illegal to hoard gold or export it. (Fort Knox built to house U.S. supply of gold)(Hoover said this was us moving towards Communism) (Populist dream!)(if $ supply isn’t set to pieces of Gold then FED can pump $ in & pull $ out as necessary= sell & buy bonds, raise & lower reserve rate, & raise & lower interests rates) • Relief, Recovery or Reform?????

15. What was FDRs policy to solve the Great Depression called: • Explain What he meant by the 3 Rs: • How & why was his 1st 100 days so legislatively successful? • Explain what a fireside chat was: • What was the Bank Holiday & Emergency Banking Relief Act for? • What was the FDIC? • Why was it so important to fix the banks? • Explain why the AAA (Agriculture Adjustment Act) was necessary but why it was so controversial: • What was the Works Progress Administration?

16. Social Security Act • 1. Unemployment Compensation (safety net) (6 months to bridge gap between finding another job (26 weeks today) • 2. Old Age Insurance (age 65) (take elderly out of job market so more jobs) • 3. Relief to blind, homeless, & crippled (disability) • Relief, Recovery or Reform?? • Benefits paid for w/ payroll taxes (You pay your whole working life into system – SS# issued to all citizens) • (show FDR 28:53 part 6)

17. Causes of the Great Depression: • Overproduction of agriculture & durable goods, weak financial regulations of banks, purchasing stocks on margin drove demand for stock higher than actual worth of company, too much credit & not enough savings • Results of the Crash & Depression: • 10yrs, 25% unemployed, 6,000 banks failed, 32,000 businesses failed, 186,000 homeless, 14, 000 hobos out of pop of 120 million • How is it that Hoover goes from being loved to hated: • Food Administration Board in WWI, Sec. of Commerce during 20s then blamed for Depression because not relieving suffering • Explain the Public Works Program? • 800 million to construct highways, federal offices & dams to jump start economy in 1931 (too little too late) • How did the Hoover Dam provide relief in 2 ways: • Jobs & electricity 56% CA, 25% NV & 19% AZ (created customers of goods)

18. Explain the construction of the Hoover Dam? • Enough concrete to cover globe in 4 ft wide sidewalk, used pipes w/ Co. River under concrete to cool faster, 1st had to divert River so tunnels built & many died from carbon dioxide poisoning • Explain the Federal Farm Market Board & why did many of the farmers react negatively & how? • Govt buys crops from farmers at a loss to get it off market (driving up demand & keeping supply down so prices go up) farmers destroyed crops because didn’t want to take a loss on crop • Explain the Reconstruction Finance Corporation passed by Hoover and how this is Trickle Down Economics & why is didn’t work? • Loaned $ to banks, RR, businesses & they were supposed to open up businesses, start hiring, make loans but nothing forced them to use the $ for this so they didn’t because no demand for goods • Once FDR beat Hoover in the 1932 Election why did he have to wait so long to take office & how long was it? • NOV to March (20th Amendment to change time to Jan)