Crash, Depression & The Hoover Years: Comprehensive Exam Notes

Pre-Crash Optimism (Early 1929)

  • Optimism! President Hoover + public thought 1920s prosperity would last.

  • Post-Crash Nicknames: When things went bad, people made fun of Hoover:

    • "Hoovervilles" = shantytowns.

    • "Hoover blankets" = newspapers used for warmth.

    • "Hoover flags" = empty pockets, turned inside out.

Hoover’s Initial Domestic Agenda (Pre-Crash)

  • Goal: Keep gov't small (laissez-faire) & less rules, like past Republicans.

  • Key Actions (Spring–Summer 1929):

    • Federal Farm Board: Helped farmers with crop prices.

    • Tax Cuts: Broader cuts for everyone.

    • Urban Slum Clearance: Federal money to fix bad city areas.

    • Old-Age Pension: Suggested \$50/month for 65+ (like an early Social Security idea!).

    • Created/fixed agencies (Vets Administration, Prisons).

    • Cracked down on gangs (Al Capone).

  • Philosophy: Believed in "partnership" (gov't + citizens) & individual effort. Not direct gov't aid.

25.1 The Stock Market Crash of 1929

Roots of the Bubble

  • Federal Reserve Policy (1921–1928):

    • Low interest rates.

    • Relaxed bank rules (reserve requirements).

    • Result: Money supply grew about 60\%!

  • Speculation Culture (Risky stuff):

    • Ponzi schemes: Used new money to pay old investors.

    • Buying on margin: You pay a little, borrow the rest. Only works if prices go UP!

    • Brokers pushed everyday people to invest.

  • Real-Estate Manias (Warning signs!):

    • Florida land boom (busted 1920–1926).

    • Aggressive sales, easy credit, but they all crashed (hurricanes, IRS).

Warning Tremors, Fall 1929

  • September 3: Dow Jones (stock index) hit its highest: 381 points (10x 1920 levels).

  • September 18: First big stock drop.

  • September 20: London Stock Exchange crashed.

  • October 24 (Black Thursday):

    • NY Stock Exchange lost 11\% in one day.

    • Big banks (J.P. Morgan, Chase) bought stocks to stop the panic.

  • Hoover's Message: Said the economy was “on a sound and prosperous basis.” (He was wrong!)

Black Tuesday – Oct\,29\,1929

  • Trading Volume: Over 16,000,000 shares traded (super busy day!). Normal busy was 3,000,000.

  • Wealth Lost: Over \$14\text{ billion} gone in one trading session.

  • First Minutes: About 3,000,000 shares traded, \$2\text{ million} lost immediately.

  • Market Contraction (Sept 1–Nov 30): Market value shrank from \$64\text{ billion} down to \$30\text{ billion} (over 50\% loss!).

  • Brokerage Chaos: People punching, fainting; a parrot squawking “More margin!”

  • Consequences for Investors: Banks demanded loan payments. Those who bought on margin lost everything + went into deep debt.

Underlying Weaknesses That Amplified the Crash

  • Banking System Flaws:

    • Over 90\% of banks invested in the stock market (BAD IDEA!).

    • Federal Reserve had lowered reserve requirements (less money banks had saved for emergencies).

  • International Financial Problems:

    • Allies owed U.S. WWI debts.

    • Allies needed German reparations, but Germany was borrowing from U.S. banks.

    • Result: A huge debt chain! If one part failed, the whole thing could crash.

    • Banks pulled foreign loans when panic started.

  • Unequal Income Distribution:

    • 80\% of families had almost NO savings.

    • Only 0.5\% to 1\% of people controlled over 33\% of the nation's wealth.

    • Few new buyers could afford stocks when big investors wanted to sell.

  • Psychology of Confidence & Contagion: 1920s optimism turned into massive panic (both spread quickly!).

25.3 The Depths of the Great Depression (Economic Metrics)

  • Gross National Product (GNP): Dropped over 25\% in one year (1929–1930).

  • Wages & Salaries: Fell by \$4\text{ billion}.

  • Unemployment:

    • 1.5\text{ million} (1929) became 4.5\text{ million} (end of 1930).

    • By 1932: about 25\% nationally. African Americans: around 50\%.

  • Banking: Roughly 5,000 banks closed (1930–1932); 75\% were small rural banks.

  • Automotive Industry: November 1929 production lowest since 1919. Luxury car brands disappeared.

  • Construction: Almost stopped. Empire State Building opened half-empty. NYC built no new hotels/theaters for 30 years!

Everyday American Hardships

Urban Workers

  • Food & Shelter: Breadlines, soup kitchens common. NYC had 82 breadlines (feeding 85,000 daily).

  • Housing: Evictions common; people moved in with relatives.

  • Makeshift Living: Used "Hoover blankets" (newspapers), made fires in trash cans.

  • Social Impact: Marriage/birth rates down. Many hid their homelessness.

Women

  • Labor Force: Increased from 10\text{ million} (1929) to 13\text{ million} (late 1930s).

  • Employment Restrictions: 26 states limited hiring married women.

  • Job Shifts: "Pink-collar" jobs (phone operators, secretaries) grew.

  • Domestic Service: White women started taking these jobs, pushing out minority women.

African Americans

  • Unemployment: Reached about 50\% by 1932.

  • Violence: Lynchings went up (8 to 28 between 1932–1933).

  • Job Competition: White workers demanded jobs normally held by Black workers.

  • Scottsboro Boys Case (1931–1937):

    • Nine young Black men falsely accused of rape.

    • Convicted by all-White juries.

    • Supreme Court said their rights were violated (14th Amendment). Important for future civil rights law.

Farmers & Rural America

  • Commodity Price Collapse: Wheat prices plummted from \$2 to \$0.40!

  • Farm Foreclosures: About 750,000 family farms lost (1930–1935).

  • Examples of Losses:

    • Farm mortgaged for \$4,100 sold for only \$49.50.

    • 25\% of Mississippi land sold in one day (1932).

  • Desperate Measures: Farmers sometimes burned corn for fuel; it was cheaper than buying coal.

The Dust Bowl (Environmental + Economic Disaster)

  • Drought: Hit Great Plains (1931–1939).

  • "Black Blizzards": Over 850\text{ million tons} of topsoil lost in 1935 alone (takes 500 yrs to replace 1 inch!).

  • Causes:

    • Over-plowing of land.

    • Stopped crop rotation and leaving fields empty (fallow).

    • Boom in farming during WWI (often on borrowed money).

  • Consequences:

    • "Dust pneumonia" (people got sick).

    • Livestock died/had to be sold.

    • Mass abandonment of farms! People moved, became "Okies" (from Oklahoma & nearby).

  • Literary Impact:

    • Caroline Henderson's letters showed the impact.

    • John Steinbeck's The Grapes of Wrath = famous book about "Okies" (Joad family).

Hoover’s Philosophy vs. Reality

  • Core Belief: “Rugged individualism” (people help themselves, gov't aid makes them weak).

  • Early Crash Response:

    • Held meetings with business leaders to promise to keep wages high & start projects.

    • 160\text{ million} tax cut (1930) to boost spending.

    • NYT (April\,1930): "No one in his place could have done more." (At first, they thought he handled it well).

  • Hoover's Quotes (Optimism/Denial):

    • 1929: “Any lack of confidence is foolish.”

    • 1930: “The worst is behind us.”

    • 1931: “If starvation exists, I’ll act” (he didn't really admit how bad it was).

Hoover’s Relief Programs (Small Scale & Indirect)

  • PECE/POUR (1930–1931):

    • Gov't helped coordinate private charities (Red Cross).

    • NO direct federal money to individuals.

  • RFC (Reconstruction Finance Corporation) (1932):

    • Gave \$2\text{ billion} in loans to BIG institutions (banks, insurance co.).

    • Most loans went to 3 large banks; small rural banks got little.

  • Emergency Relief & Construction Act (1932):

    • Gave \$1.5\text{ billion} for state public-works projects (via RFC).

    • Hoover put rules: projects had to "pay for themselves" (toll bridges) & use skilled labor only.

  • Opposed Direct Aid Bills:

    • Drought Relief Bill: Reduced spending, no money for food.

    • Federal Emergency Relief Bill (1931): \$375\text{ million} for food/clothing/shelter was defeated.

Public Discontent & Protest

  • Terminology Ridicule:

    • "Hoovervilles," "Hoover flags" (examples mentioned above).

    • Hitchhikers' signs: "Give me a ride or I’ll vote for Hoover."

  • Ford Hunger March (March 7, 1932):

    • 3,000 unemployed workers marched to a Ford plant.

    • Clash with police/security: 4 died, 60+ injured.

  • Farm Holiday Association (Milo Reno):

    • Farmers blocked roads.

    • "Penny auctions": They bid pennies on foreclosed farms to give them back to owners.

    • Threatened foreclosure judges.

  • Bonus Army (May–July 1932):

    • Around 15,000 WWI vets marched on D.C. for early bonus pay (due in 1945).

    • Senate said NO.

    • Hoover ordered them out. Gen. Douglas MacArthur's troops burned their camps, hurt people, and even caused a newborn's death. HUGE public outrage!

Foreign & Economic Policy Under Hoover

  • Clark Memorandum (1930):

    • Said "NO" to U.S. intervention in Latin America (rejected Roosevelt Corollary).

    • Set up FDR’s Good Neighbor Policy.

    • U.S. troops left Haiti & Nicaragua.

  • Hoover-Stimson Doctrine:

    • U.S. wouldn't recognize land taken by force (Japan's actions in Manchuria).

  • Smoot-Hawley Tariff (1930):

    • Increased taxes on 20,000 imported goods.

    • Result: Other countries did the same, causing a major global trade decrease.

  • Hoover Moratorium (1931):

    • Suggested a 1-year pause on German reparations/Allied war-debt payments.

    • Didn't work well.

Civil & Native American Policies

  • No Federal Anti-Lynching Support: Hoover thought education/assimilation were better than laws.

  • Native American Policies:

    • Appointed Charles Curtis (Native American) as Vice President.

    • Appointed Charles Rhoads as Bureau of Indian Affairs chief.

    • Doubled federal spending on Native schools & health.

    • Supported the Indian Citizenship Act.

Cultural Responses & Shifts (1930s)

  • Emphasis Shift: From individual success to community connection.

    • The Grapes of Wrath (film 1940): Tom Joad's idea of “one big soul.”

    • Frank Capra films (Mr. Smith Goes to Washington): Common people vs. greedy rich guys.

  • Escapism: Entertainment helped people forget problems.

    • Shirley Temple movies.

    • Marx Brothers comedies.

    • Fred Astaire & Ginger Rogers musicals.

  • Depression Anthems:

    • “Brother, Can You Spare a Dime?” (sad, showed hardship).

    • “We’re in the Money,” “Happy Days Are Here Again” (FDR's song, hopeful).

  • Changing Sexual Mores:

    • Surveys (1936–1937): 66\% of college students supported birth control.

    • 50\% men, 25\% women admitted premarital sex.

    • Contraceptive sales went up.

    • Mae West (actress) with her "risqué" style was popular.

25.4 Assessing the Hoover Years on the Eve of the New Deal

  • Historical View: Polls often put Hoover in the bottom 7 presidents; criticized for being too stubborn.

  • Contemporary Satire: Jokes/cartoons showed him as out of touch.

  • Mitigating Factors (Things to consider):

    • Crash causes started before he was president.

    • No one really knew how to fix a huge depression back then (Keynesian economics was new).

    • Public actually wanted limited gov't when he was elected in 1928.

  • Outcome: By 1932, tons of banks closed, 25\% unemployment, Bonus Army disaster… he lost badly to Franklin D. Roosevelt.

  • Hoover’s Reflection: “Democracy is a harsh employer.”

Key Takeaways for Examination

  • Identify & explain why the 1929 crash happened (Fed policy, speculation, inequality, international debt, public psychology).

  • Compare Hoover’s voluntarism (relying on private groups) with FDR's upcoming New Deal (direct, large gov't help).

  • Understand impacts of Depression on different groups: women, African Americans, farmers, kids, elderly.

  • Recognize the Dust Bowl: Bad environmental choices + economic pain = people moving ("Okies").

  • Significance of the Bonus Army: A disaster for Hoover's public image.

  • Quantitative Memory Aids (Numbers to remember):

    • Dow Jones peak: 381 points.

    • Market loss: Over 50\% (Sept-Nov 1929).

    • Topsoil lost in 1935: 850\text{ million tons}.

    • National unemployment in 1932: 25\%.