How Hoover and America Handled the Onset of the Great Depression
How Hoover and America Handled the Onset of the Great Depression

How Hoover and America Handled the Onset of the Great Depression

Larry Holzwarth - May 7, 2020

How Hoover and America Handled the Onset of the Great Depression
Hoover’s three years of failures controlling the Great Depression cost him the White House in 1932. National Archives

17. Hoover at first earned praise for his response to the economic downturn

During the first 18 months of the depression, Hoover’s steps to mitigate the effects of the downturn focused on completing government projects such as dams and bridges, encouraging businesses to keep wages up, and preventing general panic. In 1930, The New York Times editorialized, “No one in his place could have done more. Very few of his predecessors could have done as much”. Both the government and major businesses spent more in the first six months of 1930 than in all of 1929. But consumers did not follow suit. Consumer spending dropped month after month after month. In late 1931, Hoover ordered the Farm Board to transfer surplus agricultural products to the Red Cross.

The transfer of agricultural surpluses, intended to be distributed to relief agencies across the country, did not produce much in the way of food. The poor harvests of preceding years continued in 1930 and worsened in 1931. In August, 1931, Hoover organized the President’s Organization on Unemployment Relief (POUR), intending to raise money for the unemployed through private donations. Still, Hoover opposed direct injection of federal capital via unemployment payments. By the end of 1931 Hoover was roundly criticized for his actions, viewed as failures, and for his inaction, viewed as callous disregard for the nation’s suffering citizens.

How Hoover and America Handled the Onset of the Great Depression
By 1932 the majority of Americans viewed President Hoover as callous and aloof. National Archives

18. Hoover took more forceful action in the run-up to the 1932 elections

In early 1932 the first hopeful signs the depression was easing appeared. They were short-lived, as another series of shocks to the banking industry, triggered in large part by bank failures in Europe, again induced national panic. In January Hoover created the Reconstruction Finance Corporation (RFC), a federally owned entity intended to lend money to corporations in danger of default. During the first six months the RFC lent money primarily to railroads and agricultural businesses. In July, Hoover expanded the RFC to allow loans to states and communities for public works projects.

The RFC loans stabilized some industries and state governments with injections of cash, but it failed to accomplish its most important goal, reducing unemployment. Jobs remained scarce, cash among consumers remained scarce, and consumer spending continued to drop. The blame fell most squarely on the shoulders of the President. Hoover ran for re-election touting his record in supporting businesses, especially big businesses, and promising jobs and prosperity would quickly return. His opponents in his own party cited his wasteful federal spending and protective tariffs as causes for the increasing severity of the depression.

How Hoover and America Handled the Onset of the Great Depression
The Bonus Army encampment at Anacostia Flats, Washington DC. Library of Congress

19. The Bonus Army

In 1924 Congress passed, over the veto of President Calvin Coolidge, the World War Adjusted Compensation Act. The law guaranteed the payment of benefits to veterans of the First World War, granting them certificates redeemable in 1945. A veteran’s beneficiaries could cash the certificates should he pre-decease the redeemable date, which was his birthday in 1945. The certificates were also available as collateral for loans, and by 1932 over $1.3 billion in loans to veterans were backed by certificates. That same year, veteran groups led by the Veterans of Foreign Wars (VFW) began demonstrating to have the benefits paid to unemployed veterans as a means of easing the strains of the depression.

Hoover opposed the idea. The House of Representatives supported it. In the spring, 1932, a massive gathering of 17,000 veterans and their families, comprising 43,000 in all, gathered in Washington near the Anacostia River, establishing a “Hooverville”. They called themselves the Bonus Army. In June, after the House of Representatives passed a bill authorizing early payment of the certificates, a massed gathering of the veterans appeared before the United States Capitol. They demonstrated on the day the Senate was to consider and vote on the bill. The Senate defeated the bill on June 17. The veterans returned to their encampment, where they remained despite orders from the DC police and the federal government to disperse.

How Hoover and America Handled the Onset of the Great Depression
The Bonus Army camp after it was attacked by units of the US Army in July, 1932. Library of Congress

20. The attack on the Bonus Army

On July 28, tired of the negative publicity created by the existence of the Bonus Army, Hoover ordered his Secretary of War to use the US Army to disperse the veterans. The job fell to the Army’s Chief of Staff, Douglas MacArthur, a veteran of World War I. MacArthur relied on Army intelligence which indicated the Bonus Army was incited by Communist influencers, as part of a general uprising to take place that summer. He violated his orders to avoid the use of force, and attacked the Bonus Army encampment with tanks and infantry. After Hoover ordered the attack stopped, MacArthur again ignored the President and launched a second assault.

George Patton, Dwight Eisenhower, and other officers who gained prominence during World War II took part in the attack on their fellow veterans. At least two veterans were killed and over 1,000 injured in the assaults and panic as the veteran’s families fled. Eisenhower wrote the official Army report, which endorsed the actions taken by MacArthur, his boss at the time. The public reaction was for the most part outrage, other than from the conservative wing of the Republican Party. Hoover retained control over the party, though its progressive wing abandoned him completely.

How Hoover and America Handled the Onset of the Great Depression
Franklin D. Roosevelt campaigning in 1932. FDR Presidential Library

21. The Election Campaign of 1932

Herbert Hoover had no problem dominating the Republican Convention in 1932, emerging as the party’s nominee, though with tepid support from most of the party nationally. The protective tariffs (which he opposed other than for agriculture) and the creation of federally funded agencies to fight the depression (which created deficit spending) isolated him from much of the party. Worst was his raising of taxes during the height of the depression. Long considered aloof and callous by the general public, the Bonus Army incident reinforced the belief that he cared little for the common man, and much for big business.

Hoover campaigned vigorously, proclaiming his actions against the depression successful, and predicting the return of prosperity in the near future. He argued that businesses and the banking system were fundamentally sound. Meanwhile the worst months of the depression unfolded. FDR, who pointed at the measurable success of the programs he instituted in New York, announced similar national programs to end the depression. FDR won just under 58% of the popular vote, and the Democrats retained control of the House, extending their majority. They also seized control of the Senate. In the Electoral College Hoover received just 59 votes, to FDR’s 472.

How Hoover and America Handled the Onset of the Great Depression
The foreboding cover of News-Week in February, 1933, indicating changes to come. Wikimedia

22. The lame duck period, 1932-33

Prior to 1937, Inauguration Day for the office of the President of the United States occurred on March 4, except when that date was a Sunday. In such a case, the date moved to March 5. Thus, a period of four months transpired between the election and the installation of a new administration. The last four months of the Hoover Administration were among the worst, in terms of the depression, of any of the preceding years. Unemployment during that winter climbed rapidly. Cash continued in short supply. Once again, bank failures led the nation into a panic-driven run on the banks. As weaker and smaller banks collapsed, larger banks foun depositors lining up at their doors to remove their savings.

Many banks, throughout that winter, responded by simply closing their doors, refusing to admit customers. Hoover responded by lobbying Congress to enact emergency legislation to allow federal funds to further bolster the banking system. Congress did nothing. The incoming legislators weren’t interested in Hoover’s response, and the Republicans remaining in the Senate resented Hoover, blaming him for the loss of the majority in that body. Major banks in the United States also felt the tremors from bank failures in Europe. By the end of February, 1933, the nation was ready for Hoover’s exit from the national stage.

How Hoover and America Handled the Onset of the Great Depression
Hoover promised FDR is support in a concession telegram, but it was not forthcoming. Wikimedia

23. Hoover left office determined to oppose government intervention to fight the depression

Herbert Hoover was 58 when he left office, and the only surviving ex-president. He left office embittered and angry. During the failed campaign he endured being pelted with eggs and vegetables at several stops as he attempted to deliver remarks defending his actions and outlining his plans. His speeches were interrupted by hecklers, his radio addresses were ignored, and the few Republican newspapers which endorsed him found their subscription bases reduced. His attempts to present FDR’s planned programs as socialism did not find an appreciative audience, other than with the far-right wing of his own party. Nonetheless, he left office determined to oppose Roosevelt’s plans for expanding the government.

Hoover published the first of several books defending his Presidency and attacking FDR in 1934, titled The Challenge to Liberty. He called the Banking Act of 1933, which stabilized the banks and created the Federal Deposit Insurance Corporation (FDIC), “gigantic socialism”. To Hoover, the National Recovery Administration and Roosevelt’s actions to save America’s small farms were “fascism”. Hoover drew thinly veiled comparisons between FDR’s New Deal and the rise of the Nazi Party in Germany. In 1938 Hoover went to Germany, stayed for a time at Herman Goering’s hunting lodge, Karinhall, and met Adolf Hitler. When FDR introduced Lend-Lease in 1940, which added American jobs, Hoover opposed it vehemently, calling it irresponsible war-mongering on the part of the President.

How Hoover and America Handled the Onset of the Great Depression
Americans waiting for relief checks during the “Roosevelt Recession” in 1937. Library of Congress

24. Hoover helped create the myth that FDR made the depression worse

By the end of 1933, the US economy showed signs of growth in all areas, including easing unemployment numbers and greater consumer spending. 1934 continued the upwards trends, as did the following year. By the end of 1936 all areas of the economy had returned to or exceeded the levels measured in the summer of 1929 except one. Unemployment remained above 10% by most estimates, though it too had improved from the darkest days of 1932. In late 1936 the Federal Reserve, concerned about the sharp increases in consumer spending and in bank lending, took steps to contract the money supply. The result was the Recession of 1937, which ended four years of economic growth.

Hoover was one of the earliest opponents to call the downturn the Roosevelt Recession, a name adopted by Republicans and even conservative Democrats. Its causes were many, but again a rapid and aggressive response by the federal government limited its scope, and by the beginning of 1939 employment had returned to 1936 levels, and the economy again experienced steady growth, which expanded with the coming of Lend-Lease and the eventual war economy. Hoover and conservatives argued that it was only the war which ended the Great Depression, made worse by FDR. Conservatives continue to advance that argument today.

 

Where do we find this stuff? Here are our sources:

“The Great Depression Hits Farms and Cities in the 1930s”. Tom Morain, Iowa Pathways. Online

“Why do banks fail? Evidence from the 1920s”. Lee J. Alston, Wayne A. Grove, David C. Wheelock, Explorations in Economic History. 1994. Online

“Hoover’s Economic Policies”. Steven Horwitz, Library of Economics and Liberty. Online

“Smoot-Hawley Tariff: A Bad Law, Badly Timed”. John Steele Gordon, Barron’s. April 21, 2017

“The Hoover/Mellon Tax on Checks”. David Henderson, Library of Economics and Liberty. March 18, 2013. Online

“Davis-Bacon and Related Acts”. Article, United States Department of Labor. Online

“Hoovervilles and Homelessness”. Article, The Great Depression in Washington State. Online

“Herbert Hoover was no deficit-cutter”. Stefan Karlsson, the Christian Science Monitor. March 11, 2010

“The Great Depression”. Article, Herbert Hoover Presidential Library and Museum. Online

“America’s Forgotten History of Mexican-American ‘Repatriation'”. Francisco Balderrama Interview, Fresh Air, National Public Radio. September 10, 2015. Online

“America’s Forgotten History of Illegal Deportations”. Alex Wagner, The Atlantic. March 6, 2017

“Franklin D. Roosevelt: Life Before the Presidency”. William E. Leuchtenberg, The Miller Center, University of Virginia. Online

“Herbert Hoover: Domestic Affairs”. David E. Hamilton, The Miller Center, University of Virginia. Online

“Banking Acts of 1932”. Michael Gou, Gary Richardson, Alejandro Komai, Daniel Park, Federal Reserve History. Online

“World War and Veterans: Struggle for Compensation”. Article, US House of Representatives History, Art, and Archives. Online

“The Bonus March”. The American Experience, PBS. Online

“Franklin D. Roosevelt: Campaigns and Elections”. William E. Leuchtenberg, The Miller Center, University of Virginia. Online

“Hating on Herbert Hoover”. Nicholas Lemann, The New Yorker. October 16, 2017

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