Within eight months of Herbert Hoover becoming president, the stock market crashed. President Hoover tried to prevent panic from spreading throughout the economy. He believed that financial losses should affect profits, not employment. He worked with business leaders to maintain workers’ wages, hoping to maintain consumer spending. Private industry pledged $1.8 billion to stimulate employment through construction projects.
Hoover also ordered federal departments to start construction projects such as public buildings, dams, highways, and harbors. He asked governors to expand public works projects in their states and lobbied Congress for a $160 million tax cut.
Praise for the President’s intervention was widespread. Government and business spent more in six months than in the previous year. Yet nervous consumers were not spending. Many businesses and manufacturers were forced to reduce their output or lay off workers.
To deal with rising unemployment, Hoover created the President’s Emergency Committee for Employment (PECE) to coordinate state and local relief programs, and to develop methods for increasing employment in the private sector. PECE lacked direct control of funding for relief or jobs, so it could not meet its goals.
Hoover asked the Federal Reserve to increase credit. He lobbied Congress to distribute agricultural surpluses to relief agencies and to increase spending on public works. He also continued to encourage states and private businesses to generate new jobs.
In 1931 a series of bank collapses in Europe led to additional lay-offs in the United States. PECE was reorganized into the President’s Organization on Unemployment Relief (POUR). POUR’s raised millions of dollars, but this amount was insufficient to help the huge number of unemployed Americans.
The public blamed Hoover and criticized his programs. His public works projects were designed to create jobs, but people called them wasteful government spending. His reluctance to create nationwide relief programs was viewed as disregard for the unemployed.
In 1932, Hoover established the Reconstruction Finance Corporation (RFC) to make emergency loans to failing businesses. The RFC proved to be an effective tool for stabilizing business and industry. The Emergency Relief Construction Act allowed the RFC to lend $300 million to the states for relief programs and $1.5 billion for public works projects. Under Hoover, Congress established the Federal Home Loan Banks to protect people from losing their homes.
By mid-1932, the economy began to show signs of improvement, but many people in the United States still blamed President Hoover. In November, Franklin D. Roosevelt defeated the incumbent president in a landslide.
Between the election and Roosevelt's inauguration, the economy took another turn for the worse. Congress refused to enact Hoover’s plans to curb the panic. Within days of Roosevelt's inauguration, the new president signed the Emergency Banking Relief Act, which was almost identical to legislation Hoover had proposed weeks before. Roosevelt's New Deal did not fix the economy. Only the outbreak of World War II in 1939 stimulated the economy and ended the Great Depression.
Source: The Great Depression
Courtesy of The Hoover Presidential Library