The Great

Depression and
the New Deal
Module 24
The Crash and the First New Deal
Major Concept I
- The Postwar Economy was designed to grow at any cost which leads to
excessive lending and borrowing.
- The Postwar Economy - Corporations have become the largest form of business in the US.
- Mergers have consolidated banks, making Wall Street the financial center of the world.
- Increasing prosperity gap between urban and rural Americans.
Cont.
- Direct Causes of the Great Depression
- Too much lending makes consumer credit more difficult to obtain.
- Exacerbated by global economic recession as a result of WWI
spending and destruction
- The US continues to strictly adhere to the gold standard - causes
contraction in the credit supply - harder to get loans.
- Massive overproduction of goods, priced to high for Americans to
afford.
- As consumer spending falls, industrial production also crashes.
- Falling production causes a spike in unemployment.
- Bank failures occur en masse as people panic and
attempt to pull out their savings. Makes it even
harder to get credit.
- Bank Runs
Major Theme I
- Private Charity will not be able to handle the burden of so many
unemployed.
- Who is big enough to handle the burden?
- The Federal Government!
- Leads to the creation of the welfare state
Key Concept II - Early responses by the federal government and Herbert Hoover fail to provide
relief and in many instances make the situation worse.

- Hoover believed in two American traditions

- Economic outcomes were the product of individual character.
- Businesses could and would regulate itself through voluntary
action.
- Hoovers Failures
- Adherence to the gold standard makes the depression more
severe and last longer.
- The Smoot Hawley Tariff - - highest peacetime tariff in US history.
Leads to a trade war with Europe and decreasing demand for US
products.
- Americans view Hoover as insensitive
Cont.
- Rising Discontent
- Hoovervilles - The public will connect Hoovers name
with the shantytowns erected by the newly homeless.
- Farmers will collectively resist attempts at eviction -
leading to violent clashes
- Fords River Rouge plant
- The Bonus Army - 15,000 unemployed WWI veterans
march to Washington to demand their pensions - Hoover
uses the army to have them removed.
Key Concept III - Franklin Delano Roosevelt will make sweeping changes in his first one hundred days in
office, transforming the US into a welfare state.

- Banking Reform - the day after inauguration, FDR declares a bank

holiday closing every bank nationwide.
- Banks that prove they have reserves are allowed to reopen.
- The Glass Steagall Act - Separates investment banking from savings and creates the
FDIC to insure deposits.
The Fireside Chats
- Were informal talks where FDR calmly & confidently reached out by
radio to the American people & explained the New Deal
- He talked in plain, ordinary language
- People felt he was talking directly
- VERY EFFECTIVE
The First 100 Days Cont.
- Congress passed 15 bills more than had ever been done before in
such a short time!
- FDR had overwhelming support from Congress
- Prohibition Repeal Amendment is passed by Congress in Feb. 1933;
ratified by states in Dec., 1933
The Purpose of New Deal Programs
- RELIEF immediate relief for the unemployed, the farmer, the
elderly
- HANDOUTS - Dole, money, food, etc.

- RECOVERY to return to a healthy economy

- JOBS (1 in 4 jobless when FDR took office)

- REFORM of unfair business practices to prevent another depression

- NEW LAWS for permanent change

KNOW THE THREE Rs

-
Cont.
- The Agricultural Adjustment Act
- Direct government support and regulation of the farm economy -
provides subsidy (welfare) to farmers to cut production - causing a
rise in prices.
- Primarily benefits large farms - not sharecroppers.
- Unemployment Relief
- The Federal Emergency Relief Administration
- Avoided direct payouts and instead put people back to work.
- Public Works Administration - puts people to work building infrastructure
projects.
- Civil Works Administration
- Civilian Conservation Corps - Works to preserve the national parks
- Tennessee Valley Authority - Brings electricity to rural areas
Resistance and the Second New Deal