Problems with Hoover
- Hoover could not shift from his fundamental beliefs
- Self-Reliance - People should be responsible for their own welfare. Not up to the government to solve people's problems, instead up to the government to give people the ability to solve their problems by themselves.
- "American individualism" - Equality of opportunity. Everyone could, with hard work and initiative, become rich just as Hoover had. Hoover felt a balance should be struck between people's desire to do whatever they wanted themselves and the needs of the wider community.
- Emphasis was always on the responsibility of the individual, the curbing of excesses in one's personal life and treating others fairly. Best system in the world. The role of the government was helping its development. A belief in self-help and voluntary co-operatio to solve problems. People should help themselves and each other.
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- Hoover called a special session of Congress in April 1929, before the Wall Street Crash, to deal with the pressing problems of agriculture.
- He was prepared to help farmers help themselves.
- The Agricultural Marketing Act, 1929, established a nine-person Federal Farm Board with funds of $500 million to create farmers' marketing co-operatives called "stablisation corporations". These were to be given the task of buying, storing and eventually disposing of farm surpluses in an orderly way.
- The Corporation might have been helping farmers, but it was also accused of throwing taxpayers' money away. It was buying farm produce at well over the market price and therefore encouraging farmers to keep producing more when, in fact, they should have been encouraged to produce less.
- By 1932, the world price of wheat was between 30c and 39c a bushel.
- When Congress did propose a bill to subsidise farmers to reduce production, Hoover threatened to veto it because it undermined the principle of voluntary action.
- Treated agriculture as a domestic issue and failed to regard foreign considerations.
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Role of President Hoover
- Worked tirelessly to combat the depression.
- Hoover well understood the seriousness of the Depression. In public, however, he had to be optimistic in spite of all the problems.
- As a result of his constant public hopefulness, Hoover gradually lost all credibility.
- "Hoovervilles" - Shanties where hoboes lived, named after him. As were "Hoover blankets", newspapers they wrapped themselves in to keep warm.
- Hoover's problem was that he could not abandon his two central beliefs of self-help and voluntary co-operation.
- He believed the economy had to right itself.
- "Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body - the producers and consumbers themselves".
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Hawley-Smoot tariff, June 1930
- Average duties of 40% on both agricultural and industrial items.
- Led to most European countries abandoning free trade and even American goods being exported overseas.
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Repudiation of War Debts
- After the Wall Street Crash, American credit dried up. The Hawley-Smoot tariff made things worse. In the years 1929 and 1930 the value of international trade fell in total by $500 million and in the following year it fell by $1.2billion, which led to European countries repudiating their war debts.
- Germany was particularly affected. When the government practically became bankrupt, it announced the suspension of reparations payments and said that it might have to refuse to payback loans too. Hoover feared the French would start a war over this, and so on 21 June 1931 Hoover announced the USA would postpone the collection of debts for 18 months if other countries would do the same.
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Promotion of Volunteerism
- Hoover initially hoped to persuade business men and state governments to continue as if there was no depression, to solve it through their own voluntary efforts.
- However, as the Depression worsened, businesses had no choice but to cut back. The problems were too great for volunteerism to work.
- Bankers set up the National Credit Corporation in October 1931 with the task of helping failing banks survive. However, with banks continuing to fail at unprecedented rates, the Corporation had spent only $10 million by the end of 1931. The Corporation died a death, showing again that individual financial concerns would almost always put their own interests before those of their country.
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- Hoover secured additional amounts from Congress to the tune of $500 million to help various agencies provide relief.
- He set up the President's Emergency Committee for Employment to help the agencies to organise their efforts. But he would not countenance direct federal relief, arguing that this destroyed self-help and created a class of people dependent on the government for handouts.
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Federal Home Loan Bank Act
- Passed in July 1932.
- Intended to save mortgages by making credit easier. A series of Federal Home Loan banks was set up to help loan associations to provide mortgages.
- However, as the maximum loan was only 50% of the value of the property it was largely ineffective.
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Reconstruction Finance Corporation
- Established in January 1932.
- Had authority to lend up to $2 billion to rescue banks, insurance companies, railroads and construction companies in distress.
- Of its loans, 90% went to small and medium banks, and 70% to banks in towns with a population of less than 5000.
- It was argued, however, that 50% of loans went to the 7% of borrowers who happened to be the biggest banks.
- The government argued its case by saying that the largest firms were the biggest employers so it made sense to help them in the war against unemployment.
- In 1932, Hoover gave his support to the Emergency Relief and Construction Act, which authorised RFC to lend up to $1.5 billion to states to finance public works. However, to be eligible states had to declare bankruptcy and the works undertaken had to produce revenues that would eventually pay off the loans.
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War Veterans and the "Bonus Army"
- Ironically, Hoover was the one who had set up the Veteran Administration for those who had seen military service. Annual federal expenditure on veterans' disabilities was $675.8 million.
- Congress had agreed a veteran's "bonus" in 1925. Based on the number of years in service, it was to be paid in full to each veteran in 1945.
- When the Depression hit, many veterans said they needed it immediately.
- A march to Washington was organised to publicise their cause.
- By 15 June 1932, 20,000 people were camped in the capital. On that day the House of Representatives voted by 226 votes to 175 to allow immediate payment of the bonus.
- Two days later, because of the cost, the Senate vetoed this. Hoover offered $100,000 to pay for their transportation home.
- Many refused to budge.
- The Secretary of War called in troops under General Douglas MacArthur. Tanks and infantry not only shifted the squatters, but chased them back to the main camp where tear gas was used to disperse them.
- The Americans were horrified at the scenes and whether they were his fault or not, Hoover was blamed.
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