"When Wall Street took that tailspin, you had to stand in line to get a window to jump out of, and speculators were selling space for bodies in the East River.“

Will Rogers

Americans bought stocks “on margin” Used projected earnings to buy more stock Naively assumed the market would continue to

climb Lavish lifestyles were funded on credit The market slipped Brokers made “margin calls”

Request to investors to pay off debts bought on margin Most did not have the cash So they quickly began selling all investments as fast as

possible This stock dumping created a catastrophic market

crash Black Tuesday 29 October, 1929 The Roaring 20s end & The Great Depression Begins

Buying on Margin Changing Economy

America shifted from heavy industry (iron, steel, coal, & oil) to mass manufacturing of consumer goods (radios, automobile and others…)

As Americans shifted to consumer goods, more things were purchased on credit

Then when the Market crashed, creditors had to absorb millions that debtors couldn’t repay.

Moreover, these same Americans could no longer buy the goods that once made the 20s roar until they had jobs but no factories were giving jobs because no goods were being sold.

This is the vicious economic cycle of Depression

Overproduction in Factories Production went up to match the consumer

demand Eventually out-produced the demand

Overproduction on Farms Increased debt forced farmers to plant more

cash crops such as wheat every year Wheat depletes the soil over time Land became unsuitable for planting Increased wheat production caused the price to

drop Forcing farmers to plant even more This perpetuated the cycle

Bad Banking Practices The Federal Government did not regulate

banks Americans had no where to complain Banks invested money on the Bull Market to buy

stocks. The money vanished when the market crashed Entire savings were lost in minutes

Income Inequality Old War Debts

Germany owed France & England France & England owed the U.S.

A significant cause of the Great Depression of the 1930’s was that some banking policies were unsound and had

led to the overexpansion of credit a decrease in protective tariffs had opened

American business to competition from abroad

a wave of violent strikes had paralyzed the major industries

consumer goods were relatively inexpensive

A significant cause of the Great Depression of the 1930’s was that some banking policies were unsound and had

led to the overexpansion of credit

At first claimed the slump was temporary Promised to clean up bad banking/business

practices Believed American’s could pull out of the

“recession” through hard work Indirectly tried to jump start the economy

Reconstruction Finance Corporation (RFC) 1932 Designed to provide loans to banks, insurance

companies, RRs, & state governments. Hoped money given to the top would “trickle

down” to the bottom. Individuals were not eligible for RFCs

Severe Drought plagued the mid-west Years of wheat farming had turned the

soil into a thick layer of barren dust. Farmers could no longer grow crops Farmers were forced off their lands due

to debt John Steinbeck’s 1939 novel The Grapes

of Wrath immortalized this “Okies” fled in caravans to California to search

for jobs and dignity.

WWI veterans were promised a bonus stipend to be collected in 1945

As depression worsened, more veterans demanded early bonuses, but Congress refused

20,000 vets marched on Washington and set up tents in front of the Capitol.

Hoover ordered General Douglas MacArthur to forcibly remove the Vets. Tear gas and fire were used.

Franklin Delano Roosevelt is elected President 1932. (Elected to 4 terms) The First New Deal

Set out to provide Relief, Recovery, & Reform in a bundle of programs known collectively as the New Deal.

Belief that government deficit spending could prime the economy.

Public Work Administration Constructed roads, bridges, & buildings.

Banking Relief & Reform March 6, 1933 – 2 days after becoming

president – Roosevelt declared a 5 day national bank holiday to temporarily close banks. He hoped that the days off would prevent them

from going under.

Emergency Relief Act Gave Roosevelt the power to regulate bank

transactions & foreign exchange

Tennessee Valley Authority (TVA) 1933 federal intervention to meet regional needs Created a Public utility company to provide

electricity to the poverty stricken area. Gave instruction on farming

Civilian Conservation Corps. Provide jobs to young men to plant trees, build

bridges and parks. Glass-Steagall Banking Reform Act 1933

Protected savings deposits

Federal Deposit Insurance Corporation (FDIC) 1933 Insured individual savings of up to $5,000 (today it

is $250,000) The Act also forbade banks from investing in the

stock market, & regulated lending policies

Securities Exchange Act 1934 Regulates stock exchanges

The Second New Deal Social Security Act 1935

Federal retirement pension system Unemployment insurance Federal matching for state worker’s

compensation Soil Conservation & Domestic Allotment Act

Subsidize farmers The National Labor Relations Act 1935 The Fair Labor Standards Act 1938

Schechter Poultry Corporation v. United States (1935) National Recover Act declared

unconstitutional b/c it gave Congress the authority to regulate INTRA-state commerce

United States v. Butler (1936) Agriculture Adjustment Act ruled

unconstitutional on grounds that agriculture is local and not an interstate matter.

Critics of Roosevelt Believed created dependency on the federal

government Roosevelt’s Court Packing Scheme

Frustrated by the conservative Court rejecting many New Deal legislation Petitioned Congress in 1937 to alter the makeup

of the Court Asked to appoint as many as six new justices

(Would bring the number to 15) Asked for the ability to replace justices This backfired as it is a blatant disregard for

checks & balances/separation of powers

Critics charged that President Franklin D. Roosevelt’s plan to increase the number of Supreme Court Justices was clearly in conflict with the Supreme Court’s practice of judicial restraint the constitutional principle of checks and

balances attempts of Congress to limit judicial

responsibilities efforts to restrict the number of terms a

President could serve

Critics charged that President Franklin D. Roosevelt’s plan to increase the number of Supreme Court Justices was clearly in conflict with the constitutional principle of checks and

balances