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Goal 9 . The New Deal. FDR’s Rise to Power. June, 1932 the Republicans met in Chicago and nominated Herbert Hoover as their nominee for president- many realized the depression hurt the Republican chances of victory
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Goal 9 The New Deal
June, 1932 the Republicans met in Chicago and nominated Herbert Hoover as their nominee for president- many realized the depression hurt the Republican chances of victory • Late June, 1932 the Democrats met in Chicago and after four ballots nominated the governor of New York Franklin Delano Roosevelt • FDR’s polices to fix the economy became known as the New Deal
FDR was confident he could solve the nation’s economic problems • Hoover had not done anything to successfully improve life for Americans • FDR won 472 electoral votes to 59 • FDR entered politics after completion of law school • 1910 he won a seat in the New York state Senate
FDR gained a reputation as a progressive reformer willing to stand up to the party bosses • FDR was a supporter of Wilson in 1912 • Wilson rewarded FDR’s support with an appointment as Assistant Secretary of the Navy- a position FDR held during WWI • 1920 the Democrats nominated FDR for vice-president
Around 1920 FDR contracted polio- left him little use of his legs • FDR engaged in strenuous exercise to regain muscle control • FDR was able to walk with the aid heavy steel leg braces, a cane, and the help of another person • During his recovery period FDR’s wife Eleanor kept his name before the New York Democratic Party- kept his political career alive
Mid- 1920s once again active in New York politics • When Al Smith ran for President in 1928, FDR ran for the governorship of New York • FDR campaigned hard to overcome the perception that polio had slowed him down • Won a close election • As governor, FDR was popular with the citizens of New York
Cut taxes for farmers • Reduced utilities rates • 1931 as Depression worsened, FDR convinced the New York legislature to set up a state agency to help the unemployed of New York • The agency distributed over $25 million in aid to provide relief to about 10% of the families in New YOrk
FDR’s popularity as governor helped him get the nomination for president in 1932 • Americans hoped FDR would use the government to help people • FDR won in November, 1932- the people had one more winter to endure before he took office • During the winter of 1933 unemployment continued to rise, bank runs increased, the banking system was in trouble
FDR’s first 100 days, he and his advisors took office with ideas for recovery- no clear agenda • Sent bill after bill to Congress between March 5 and June 16, 1933 • Congress passed 15 major bills to meet the economic crisis • These programs later known as the New Deal
Some bank runs prior to FDR taking office were due to fears FDR would take the US off of the gold standard to reduce the value of the dollar to fight the Depression • Gold standard- one ounce of gold equaled a set number of dollars • Reduce the value of the dollar the US would have to stop exchanging dollars for gold
Many Americans and foreign investors with deposits in American banks took out their money and converted it to gold before the dollar lost value • People stood in long lines with paper bags and suitcases to withdraw money from banks • By March, 1933 over 4,000 banks closed, did away with 9 million savings accounts
Bank holidays • 38 state governors declared a bank holiday- closed remaining banks before the runs could put them out of business • FDR’s inauguration day, most banks in the US closed • One in four people out of work • Economy going nowhere • To restore national confidence, FDR proclaimed “ we have nothing to fear, but fear itself”
The New Deal was not one clear strategy, shaped by a single philosophy • FDR was not an intellectual, nor did he have a strong political ideology • FDR was a practical politician, open to a variety of approaches to see if they worked and to see if they hurt him politically • FDR named an intelligent group of advisors with experience in academia, business, agriculture, government, law and social work
These advisors were known as the “Brain Trust” • FDR chose advisors with different points of view • Pitted advisors against one another, FDR made the final decision on which policies to pursue • Advisors fell into one of three groups
1. New Nationalism of T. Roosevelt • Business and government should work together to manage the economy, impressed by business/government cooperation during WWI • Government agencies would work with business to regulate wages, prices, and production- lift the nation out of the Depression
2. second group distrusted big business • Blamed business leaders for causing the Depression • Wanted government planners to run key parts of the economy • 3. third group- New Freedom of Wilson • Blamed trusts for the Depression • Government had to restore competition in the economy
Wanted FDR to support trust busting by breaking up big companies and allow competition to set wages, prices, and production levels • The government should impose regulations on the economy to maintain fair competition
FDR- first priority; restore confidence in the banking system • First night in office, told Sec. of Treasury William H. Woodin he wanted an emergency banking bill ready for Congress in less than 5 days • FDR declared a national bank holiday, closed all banks and called Congress into a Special Session
The House of Representatives passed the Emergency Relief Banking Act, Senate approved the bill the same day • The new law required Federal examiners to survey the nation’s banks and issue Treasury Department licenses to those that were financially sound • March 12, 1933 FDR talked directly to the nation via radio, 60 million listened to the first of his “fireside chats”
FDR told the people what he was trying to do • Assured them their money would be safe if they put it back in the bank • Banks that were sound reopened and deposits outnumbered withdrawals • The banking crisis had passed
To Securities Act of 1933 was enacted to protect investors in the stock market • The law required brokers to provide complete and truthful and information to investors • 1934, Congress created the Securities and Exchange Commission (SEC) to regulate the stock market and prevent fraud
The Glass-Steagall Act provided for more regulation of the banking system • Glass-Steagall separated commercial and investment banking • -commercial banks handled daily transactions, deposits, paid interest, cashed checks, lent money • Commercial banks could no longer risk depositor money by speculating on the stock market
Glass-Steagall also created the Federal Deposit Insurance Corporation • The federal government insurance for bank deposits up to a set money amount • The FDIC further increased confidence in the banking system
Debt Relief • Some Roosevelt advisors believed low prices caused the Depression • Debt was the main barrier to economic recovery • Incomes fell, people used most of their money to pay debts • Feared losing homes and farms, cut spending to pay off debt
To help homeowners pay their mortgages Congress created the Home Owners Loan Corporation (HOLC) • The HOLC bought mortgages from lenders of homeowners who were behind in their payments • The HOLC restructured the loans with longer terms and lower interest rates
10% of all homeowners received HOLC loans • Made loans to people who were employed • If a person lost their job and could not make payments the HOLC foreclosed • By 1938 the HOLC foreclosed on over 100,000 mortgages • The HOLC did help refinance 1 in 5 mortgages on private homes
The Farm Credit Administration • The FCA helped farmers refinance mortgages • Within 7 months the FCA lent four times the amount to farmers that banks had in the year before • The FCA pushed interest rates lower • Helped farmers in the short term, less efficient farmers kept their land, less money to lend to efficient farmers in the economy
FCA loans may have slowed overall economic recovery, did save poor landowners who would have lost their land
Farm and Industry • FDR’s advisors felt industry and agriculture were hurt by low prices and overproduction • Some advisors saw competition as inefficient and bad for the economy • Wanted business and government to work together along with federal agencies and manage the economy
To aid farmers hurt by the Depression FDR wanted a new farm program • The Agricultural Adjustment Act- the federal government would pay farmers not to raise certain livestock (hogs) or grow certain crops (cotton, corn, wheat, and tobacco) • The program was put in place after farmers had already planted crops and were raising livestock for the season
The AAA paid cotton farmers to plow under 25% of their acreage • Hog producers slaughtered 6 million piglets • Over the next two years farmers took millions of acres of land out of farm production and got over $1 billion in support • Farm surpluses fell in 1936, food prices rose as did farm income by 50%
Rising food prices in the midst of the Depression was not welcomed by the public • Not all farmers benefitted from the AAA • Commercial farmers who specialized in one crop profited more than the small farmer who raised several products • Tenant farmers became homeless and jobless when the landowner took land out of production
The National Industrial Recovery Act was enacted by Congress June, 1933 • The law was an attempt to help industry similar to attempts to help agriculture under the AAA • The law suspended antitrust laws, allowed business, labor, and the government to cooperate and set up voluntary rules for each industry
The rules = codes for fair competition • The codes set prices, minimum wage, and limited factories to two shifts • Attempted to spread production among as many as producers as possible • Shortened worker hours to create more jobs • Guaranteed workers the right to form unions • The National Recovery Administration (NRA) was headed by Hugh Johnson
Business owners who signed the code agreements received signs, the blue eagle, and the slogan, “We do our part” • The NRA lacked enforcement power, used public opinion to pressure companies to comply • The NRA did revive some industries • Small business complained that the large corporations wrote the codes to favor themselves
Efficient producers did not like price fixing, limited competition, hard to increase market share by cutting prices • Employers did not like the codes that gave workers the right to unionize, and bargain collectively for wages and hours, the minimum wage forced producers to charge higher prices to cover costs • Codes were hard to administer, business leaders tended to ignore the codes
The NRA failed as production levels dropped • The NIRA was declared unconstitutional in 1935
The Tennessee Valley Authority (TVA) was a New Deal program • The TVA built dams to control floods, conserve forest land, and bring electricity to rural areas • The TVA included dams in Kentucky, 4 in Tennessee, and 2 in Alabama
Consumption • Some FDR advisors thought the fastest road to economic recovery was an increase in consumption • FDR did not want to just give people money • Congress funded agencies to create work programs for the unemployed
