The Great Depression & The New Deal


Causes & Effects of the Depression

Although investing in the stock market was a total risk, people in the 1920s we're living on the upbeat mood of the recent win in the war and pressing there luck by investing. Rise of wages, excessive use of credit, and increased prices for goods were all direct causes of the Wall Street Crash. When stock prices dropped, the market collapsed,and many lost everything they had borrowed and invested. The Roaring Twenties came to a sudden end. Investors lost their money in the Crash and could not pay their debts. Many banks closed, ordinary people lost their savings and people lost all hope for the future. People could no longer buy consumer goods like cars and clothes. As a result, workers were made redundant, other workers' wages was cut and unemployment rose to very high levels. This was the start of The Great Depression of the 1930s.

Hoover's Policies

Responding to a World Wide Depression

Through trade and the Dawes Plan for the repayment of war debts, European prosperity was closely tired to that of the U.S.. Hoover's first major decision concerning the international situation was one of the worst mistakes of his presidency. In June 1930, the president signed into law a schedule of tariff rates that was the highest history. By 1931, conditions became so bad in both Europe and the U.S. that the Dawes Plan for collecting war debts could no longer continue. Hoover therefore proposed a moratorium on the payment of international debt.

Domestic Programs

Hoover supported and signed into law programs that offered assistance to indebted farmers and struggling businesses.

  • Federal Farm Board: This board was authorized to help farmers stabilize prices by temporarily holding surplus grain and cotton in storage.
  • Reconstruction Finance Corporation: created as a measure for propping up faltering railroads, banks, life insurance companies, and other financial institutions.

Despair and Protest

Farmers in the Midwest formed the Farm Holiday Association, which attempted to reverse the drop in prices by stopping the entire crop of grain harvested in 1932 from reaching the market. Also in the desperate summer of 1932, a thousand unemployed WW1 veterans marched to Washington, D.C., to demand immediate payment of the bonuses promised them at a later date.

The Election of 1932

Franklin D. Roosevelt was elected for president 1932.

Franklin D. Roosevelt's New Deal

F.D.R. The Man

Franklin Roosevelt was the only child of a wealthy New York family. He personally admired cousin Theodore and followed in his footsteps as a New York state legislator and then as U.S. assistant secretary of the navy. In the midst of a promising career, Roosevelt was paralyzed by polo in 1921. He resumed his career in politics and eventually regained the full power of his upper body. In 1928, campaigning from a car and in a wheelchair, F.D.R. was elected governor of New York.

New Deal Philosophy

During the early years of his presidency, it became clear that his New Deal programs were to serve three R's: relief for people out of work, recovery for business and the economy as a whole, and reform of American economies institutions. In giving shape to his New Deal, President Roosevelt relied on a group of advisers who had assisted him while he was governor of New York.

The First Hundred Days

This began an unprecedented period of experimentation during which Roosevelt tried different methods to ease the Depression; if they failed, he tried something else. His success in winning congressional approval became the stuff of legend and established FDR as the most effective president in dealing with Congress during the first 100 days.

Other Programs of the First New Deal

  • The Civil Works Administration: was added to the PWA and other New Deal programs for creating jobs.
  • The Securities and Exchange Commission: was created to regulate the stock market and to place strict limits on the kind of speculative practices that had led to the Wall Street crash in 1929.
  • The Federal Housing Administration: gave both the construction industry and homeowners a boost by insuring bank loans for building new houses and repairing old ones.

The Second New Deal

Relief Programs

  • Works Progress Administration: Much larger than the relief agencies of the fist New Deal, the WPA spent billions of dollars between 1935 and 1940 to provide people with jobs.
  • Resettlement Administration: provided loans to sharecroppers, tenants, and small farmers.


  • National Labor Relations: guaranteed a worker's right to join a union and a union's right to bargain collectively. It also outlawed business practices that were unfair to labor.
  • Rural Electrification Administration: provided loans for electrical cooperatives to supply power in rural areas.

The Social Security Act

It created a federal insurance program based upon the automatic collection of taxes from employees and employers throughout people's working careers.

The Election of 1936

Roosevelt swamped Republican Alf Landon, winning every state except Maine and Vermont, winning the election.