Essential Question: What caused the crash of 1929, and why did the ensuing depression last so long?
I. Causes of the Great Depression
A. Stock market speculation
1. New York Stock Exchange underwent a remarkable run-up in prices
2. Many investors were buying on margin
a. Expected to resell stock at profit to pay off loans
3. By late October, a wave of selling caused stock prices to collapse
4. Market crashed in Oct 1929, and creditors began demanding that
investors who had bought stocks on margin repay their loans
B. Mistakes by the Federal Reserve Board
1. In 1930 and 1931, Fed curtailed amount of money in circulation and
raised interest rates
a. This tight money policy proved disastrous
2. Economy needed expanded money supply, lower interest rates
and easier credit
3. By taking opposite course, Fed plunged an economy starved for credit
deeper into depression
C. An ill-advised tariff
1. Hawley-Smoot Tariff caused economic decline abroad and at home
a. Higher tariffs on agricultural products and manufactured goods
2. Angry foreign gov�ts retaliated by raising their own tariffs to keep out
American goods
a. This hurt international trade
D. A maldistribution of wealth
1. Although average incomes in 1920s increased, incomes of wealthiest
families rose higher than rest
2. Coolidge administration contributed to maldistribution of wealth by
lowering taxes on wealthy
3. Deepening inequality of income distribution slowed consumption and
held back growth of consumer-related industries
II. Hoover: The Fall of a Self-made Man
A. Hoover�s program
1. Encouraged farmers, industrialists, and bankers to cooperate to solve
each sector�s problems
2. Gov�t would provide information, strategies of mutual aid, occasional
loans, and morale-boosting speeches
3. Pursued a more aggressive strategy once he realized that
associationalism was failing
a. Reconstruction Finance Corporation (1932) made $2 billion
available in loans to ailing banks and to corporations willing to
build low-cost housing, bridges, and other public works
4. Hoover especially reluctant to engage gov�t in providing relief
unemployed and homeless
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The Great Depression and the New Deal, 1929-1939 (sec 2)
Essential Question: What was the first New Deal?
III. The First New Deal, 1933-1935
A. Initial action
1. When FDR assumed office in Mar 1933, economy lay in shambles
2. Undertook vast legislative program during first Hundred Days
a. Didn�t solve economic crisis, but restored hope
3. Launched fireside chats to speak directly to people
B. Saving the banks
1. Emergency Banking Act made federal loans to private bankers
2. Economy Act committed gov�t to balancing budget
3. Glass-Steagall Act (1933) created Federal Deposit Insurance Corp.
4. Securities Act (1933) and Securities Exchange Act (1934) imposed
long overdue regulation on New York Stock Exchange
a. Reined in �buying on margin� (credit)
C. Economic relief
1. Federal Emergency Relief Administration granted millions to poor
2. Civilian Conservation Corps put more than two million single young
men to work planting trees, halting erosion, and otherwise improving
the environment
3. Civil Works Administration put unemployed to work on small-scale
gov�t projects
4. Homeowners� Loan Corporation provided funds to refinance
mortgages
D. Agricultural and industrial reform
1. Agricultural Adjustment Act (1933) and National Industrial
Recovery Act (1933) most important legislation of his Hundred Days
a. Both based on idea that curtailing production would trigger
economic recovery
b. Both eventually declared unconstitutional by Supreme Court
2. Soil Conservation Service (1935) urged farmers to plant soil-
conserving grasses and legumes in place of wheat
E. Rebuilding the nation�s infrastructure
1. Public Works Administration sponsored improvements to nation�s
bridges, roads, sewage systems, hospitals, airports, and schools
a. Labor needed for projects would shrink relief rolls and reduce
unemployment
F. The TVA Alternative
1. Tennessee Valley Authority called on gov�t itself, rather than private
corporations, to promote economic development throughout Tennessee
Valley
2. Impressive list of accomplishments (i.e. Control flooding, harness water
power, develop local industry (fertilizer), and improve river
navigability)
3. One of New Deal�s most celebrated successes
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The Great Depression and the New Deal, 1929-1939 (sec 3)
Essential Question: What was the Second New Deal? What were the similarities and differences of the First and Second New Deals?
IV. Critics of the First New Deal
A. Some critics disturbed by conservative character of New Deal
1. Louisiana�s Huey Long called for redistribution of wealth in order to
guarantee each American family a $5,000 estate
2. Father Charles Coughlin attacked New Deal on his weekly radio show
a. called for strong gov�t to compel capital, labor, agriculture,
professionals, and other interest groups to do its bidding
3. Francis Townsend, a California doctor, proposed monthly gov�t
stipend of $200 to senior
a. Townsend Plan not implemented, but idea embodied in later
Social Security program
4. Attacks by Long, Coughlin, and Townsend deepened popular discontent
and inspired other insurgent movements
V. The Second New Deal (Jan-June 1935 period of Second New Deal)
A. Philosophical underpinnings
1. New Deal in more populist direction, FDR turned increasingly to
economic theory of underconsumption
a. Maintained that chronic weaknesses in consumer demand caused
Great Depression
b. Path to recovery lay not in restricting production but in boosting
consumer expenditures through support for strong unions, higher
social welfare expenditures, and vast public works projects
c. If gov�t found itself short of funds, it could always borrow
additional funds from private sources
B. Legislation
1. Social Security Act one of two historic pieces of legislation
a. Provided sturdy foundation upon which future presidents would
erect American welfare state
2. Other key was National Labor Relations Act
a. Actually ensured right of workers to join unions and obligated
employers to bargain with unions in good faith
3. Wealth Tax Act increased tax rates on wealthy and corporations
4. Rural Electrification Administration brought electric power to rural
households
5. Emergency Relief Appropriations Act provided funding for PWA
and CCC and created National Youth Administration
6. Most relief money went to Works Progress Administration
a. Provided jobs to approximately 30 percent of nation�s jobless
C. Victory in 1936
1. Second New Deal limited power and privilege of wealthy and increase security and
welfare of ordinary citizens
2. In the 1936 presidential election, FDR won a landslide victory