Emergency banking relief act what was its immediate purpose

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ENG4U-C Lesson 9

The New Deal

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The New Deal At Roosevelt’s nationally broadcast inauguration speech, the new president denounced the “money changers” who had brought on the economic disaster and declared that the government must wage war on the Great Depression as it would against an armed foe. Roosevelt’s liberal solution to the problems was to aggressively use government as a tool for creating a “new deal” for the American people, aimed at three R’s--relief, recovery, and reform. The New Deal’s most immediate goals were short-range relief and immediate recovery. These were the immediate goals of the Hundred Days Congress, which met March 9-June 6, 1933. Long-range goals of permanent recovery and the reform of institutional abuses and practices that had produced the Depression came as part of the Second New Deal, from November 1933 to 1939.

Money & Banking Roosevelt’s first priority was to deal with the crisis of bank failures. Two days after his inauguration, the president declared a nation-wide banking holiday, and then called a special session of congress. With sizeable Democratic majorities in both Houses, the new congress was ready to rubber-stamp bills drafted by White House advisors, and they gave the President himself extraordinary blank-check powers, in some cases delegating to him legislative authority. Only eight hours into the emergency session, Congress passed the Emergency Banking Relief Act, which gave the president absolute control over the national finances and foreign exchange of the United States. Combined with the Federal Reserve’s commitment to supply unlimited amounts of currency to reopened banks, the new law created de facto 100 percent deposit insurance.

President Roosevelt, a master showman, understood the power of radio, and he was the first president to use it effectively as a tool of propaganda. With about 35 million Americans tuned in, the President gave the first of his famous “fireside chats” on March 12, 1933. Using soothing words of assurance, he told the audience that it was now safer to keep money in a reopened bank than “under the mattress.” When the banks opened their doors, deposits easily outpaced withdrawals.

Cartoon: “It IS a New Deal”

Photograph of a “Bank Run,”

Detroit, MI, 1933

Radio Address on the

Bank Crisis (1st fireside chat), 3/12/1933

1930s radio listeners

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ENG4U-C Lesson 9

The New Deal

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A month later, Congress reformed the banking system with the Glass-Steagall Banking Reform Act. This law created the Federal Deposit Insurance Corporation, which insured individual deposits up to $5,000 (later raised several times). The days when individual Americans lost their entire life savings because of a bank failure, which had existed for more than a hundred years, were finally over. Roosevelt took further economic action by ordering all private holdings of gold to be surrendered to the Treasury, by taking the country off of the gold standard, and by reducing the value of the gold content of the dollar to 59.06 cents. Roosevelt’s theory was that controlled inflation would stimulate business. Prices did rise somewhat, but not in proportion to the change in the value of the currency. Purchasing power of the newly shrunken dollar was not substantially inferior to that of the old, except in purchases from foreigners. In 1933, Congress passed the Securities Act. The goal of the law was to require issuers of securities (a type of financial investment) to fully disclose all material information that a reasonable shareholder would require in order to make up his or her mind about the potential investment. This was followed up by the Securities Exchange Act of 1934, which regulates the secondary trading of those securities between persons often unrelated to the issuer, frequently through brokers or dealers. The Securities and Exchange Commission was set up to enforce the federal securities laws and to regulate the securities industry, the nation’s stock and options exchanges, and other electronic securities markets in the United States. The federal regulation imposed by these laws was intended to eliminate fraud and instill confidence in the markets.

Job Creation At the time of Roosevelt’s first inauguration, nearly 25% of the nation’s labor force was unemployed, the highest percentage in the nation’s history, and there was no social safety net in place to provide them any relief. Job creation cried out for immediate relief and recovery, and President Roosevelt had no reservations about using federal dollars to address the problem. First out of the chute was the Beer-Wine Revenue Act, passed on day 14 of the Hundred Days. This fulfillment of a campaign promise amended the Volstead Act, allowing for the manufacturing, sale, and distribution of beer and wine with an alcohol content of less than 3.2% by volume. This stop- gap measure, until the passage of the 21st Amendment (which repealed prohibition enacted by the 18th Amendment), provided jobs, and created a new stream of tax revenue (and, some would say, provided relief of another kind).

2nd Radio Address on the Bank Crisis, by President Roosevelt, 5/7/33

Bank Failures 1920-1945 Stock Market 1920-1940

Glass Fish Bowl: “Happy Days Are Back; At Last!”,

1933 (2 views)

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ENG4U-C Lesson 9

The New Deal

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Nine days later, Congress created the Civilian Conservation Corps (CCC), perhaps the most popular of all the New Deal Programs. The CCC provided unskilled manual labor jobs for about 3 million unmarried young men, many of whom might otherwise have drifted into criminal activity. Organized into outdoor government camps, the CCC worked in conservation and development of land resources owned by federal, state, and local governments. They planted 3 billion trees to replace the forests that had been devastated by unregulated industrialization. They fought fires, worked in flood control, drained swamplands, and built public access and service roads in rural areas. Some 800 parks were created, and most state parks were updated. CCC workers wore uniforms, lived in tents, and received $30 per month in wages--$25 of which was sent home to their parents. The pay wasn’t much, but the money and the work had a notable effect on morale.

Relief for the adult workers of America was provided by the creation of the Federal Emergency Relief Administration (FERA) on May 12. This agency granted about $3 billion tax dollars to the states, to be doled out as unemployment payments or as wages for work on state projects. FERA, intended as immediate relief, closed at the end of 1935 after providing work for over 20 million people on public projects.

A major economic recovery effort was made when the Hundred Days Congress passed the National Industrial Recovery Act on June 16, 1933, which created the National Recovery Administration (NRA). The NRA was the most complex and far-reaching of New Deal programs, designed to assist industry, labor, and the unemployed, first with immediate relief, and then with long-range recovery and reform. In order to spread existing labor over more people, over two hundred individual industries were required to work out codes of “fair competition” which placed a ceiling on the maximum hours of labor per week allowed each worker, and a minimum wage for which he would labor. Workers were guaranteed the right to organize and were granted collective bargaining rights through representatives of their own choosing. Anti-union contracts were expressly forbidden, and further safeguards were enacted to protect against child labor. To promote the NRA, the government appealed to the nation’s sense of patriotism. A blue eagle was designed as the symbol of the NRA, and the government used mass meetings and huge parades to promote the program. In San Francisco, 8,000 schoolchildren formed

a giant representation of the NRA eagle at a local baseball park. Merchants who supported the code were requested to display the symbol in their windows with the slogan, “We Do Our Part.” Enthusiastic support for the program caused an upswing in business activity, but it was short-lived. In reality, the NRA required too much self-sacrifice from industry,

CCC Poster

CCC Camp, California CCC men at work Souvenir Pillowcase, MI

NRA member sign, “We Do Our Part”

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ENG4U-C Lesson 9

The New Deal

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labor, and the public alike for it to work. Critics began to brand the program as “National Run Around,” and “Nuts Running America.” Too many businesses displayed the logo in public, but violated the codes in private. Already weak and sick, the program was finished off by the U.S. Supreme Court in 1935, which held that Congress could not “delegate legislative powers” to the President. The court further ruled against a provision of the law which regulated local businesses as interstate commerce. President Roosevelt was livid at the Supreme Court for this ruling, and soon hatched a scheme to bend the court to his will. The same act of Congress that had created the NRA had also created the Public Works Administration (PWA). This agency was headed by the Secretary of the Interior, Harold Ickes, a reformer who had once belonged to Theodore Roosevelt’s Bull Moose Party. The primary purpose of the PWA was long-range recovery. By the time it was shut down in 1943, $6 billion taxpayer dollars had been spent on 34,000 projects. Most of it was spent in contracts to private construction firms that did the actual work. The PWA accomplished the electrification of rural America, the building of canals, tunnels, bridges, highways, streets, sewage systems, and housing areas, as well as hospitals, schools, universities, and courthouses. Each year it consumed roughly half of the concrete and a third of the steel of the entire nation. One project, the Grand Coulee Dam on the Columbia River, was the largest structure erected by humans since the Great Wall of China.

Dedication of Boulder (Hoover) Dam by Secretary of the Interior Harold Ickes, 9/30/35

Address at the Bonneville Dam, by President Roosevelt, 9/28/37

In May 1935, Congress created the Works Progress Administration (WPA). It was the largest New Deal agency, designed to employ millions on useful projects, including the construction of public buildings, bridges, and roads. Almost every community in the United States had a park, bridge or school constructed by the agency, which especially benefited rural and Western populations. It fed children and redistributed food, clothing and housing. Over a period of 8 years, some 9 million Americans were employed in tasks ranging from controlling crickets in Wyoming, to building a monkey cage in Oklahoma

City. The WPA engaged the unemployed in professional-specific jobs, including arts, drama, media and literacy projects. Artists were employed to create murals in public post offices and schools, resulting in the creation of 10 million works of art. The WPA hired musicians to form orchestras, which produced recordings for the radio. Some 6,000 were employed by the Federal Writers’ Project, which went into the South and conducted interviews with the nation’s aging population of former slaves. The 2,300 first-person slave narratives they collected are perhaps the most important primary source on American slavery. They are housed at the Library of Congress and are available online.

Grand Coulee Dam

WPA Posters

Gallery of WPA artwork in Michigan, photographed

by Dirk Bakker in the 1970s (21 images)

Ex-slave Mary Randall, 1937

WPA Art Project Poster

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ENG4U-C Lesson 9

The New Deal

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Between 1935 and 1943, the WPA provided almost 8 million jobs, at a cost of over $14 billion. Full employment was never its intended goal. Rather, It tried to provide one paid job for all families where the breadwinner suffered long-term unemployment. Conservative objections to WPA projects focused on wastefulness and inefficiency. Although these critics claimed that WPA stood for “We Provide Alms,” the results of the agency, both in the value of many of its projects, and in its effects on the economic status and self-worth of millions of Americans, is hard to deny.

President Roosevelt fireside chat on the Works Relief Program (the WPA), 4/28/35)

Other Financial Relief The Hundred Days Congress also created relief for two specific groups. Farmers, who had been suffering from falling prices for a decade before the onset of the Great Depression, were given the Agricultural Adjustment Act (AAA). One provision of the law helped farmers pay their mortgages. (Likewise, the Home Owners’ Loan Corporation (HOLC) was designed to help non-farm mortgage holders refinance their home mortgages. It ultimately helped about a million households remain middle class home owners, many of whom remained life-long Democrats). To provide real recovery to farmers, the AAA intended to establish artificial scarcity of basic commodities by paying farmers to reduce production. To pay the farmers to work less, taxes were increased on the processors of farm products, such as flour millers, who in turn passed the increase on to consumers. The timing of the program’s implementation soon produced stories of existing crops that were plowed under, and millions of pigs slaughtered for fertilizer. No one was very happy with the AAA, and after the U.S. Supreme Court killed it in 1936, it was replaced by the Soil Conservation and Domestic Allotment Act of 1936, which paid farmers to plant soil-conserving crops like soybeans, or to let their land lie fallow. This new law, with the emphasis on conservation, passed muster with the Supreme Court. The Second Agricultural Adjustment Act was passed two years later, which paid farmers to not grow specific commodities, and which attempted to give farmers a more substantial share of the national income.

Federal Music Project:

Economic message excerpt |

Full Program

Economic Data: Unemployment, Real GDP, Federal Spending, 1929-

1938

Cartoon on FDR’s Farm Relief Plan (the AAA)

Farm Foreclosures: 1929-1945 The Dust Bowl, OK

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ENG4U-C Lesson 9

The New Deal

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In 1935, Congress also created the Resettlement Administration, which became the Farm Security Administration (FSA). With the advent of the “dust bowl,” caused by drought and mismanagement, the FSA stressed “rural rehabilitation” efforts to improve the lifestyle of sharecroppers, tenants, very poor landowning farmers, and a program to purchase sub-marginal land owned by poor farmers and resettle them in group farms on land more suitable for efficient farming. This experiment in collectivized farming failed, mostly because farmers wanted ownership. Nevertheless, the FSA became famous for its special photographic section that portrayed the challenges of rural poverty through 77,000 black-and-white documentary still photographs and 644 color photographs. “Migrant Mother,” perhaps the most famous of these, was made of Florence Owens Thompson and her children in February or March of 1936 in Nipomo, California, by photographer Dorthea Lange. The Information Division of the FSA was responsible for providing educational materials and press information to the public.

The Tennessee Valley Authority (TVA) Created in 1933 by the Hundred Days Congress, the TVA was a far-reaching enterprise that was a massive construction project, a solution to soil erosion problems, a way of improving the lives of several million Americans, and a revenue generator that competed with the private owned electric power monopoly which existed at that time. The TVA developed the hydroelectric potential of the Tennessee River. Private utilities complained bitterly, and either reduced their rates or went out of business. Critics called the TVA “creeping socialism in concrete,” but the gigantic project succeeded on numerous levels. It brought full employment to the region, reduced erosion problems, increased reforestation, provided for affordable housing, and better river navigation. It was so successful that New Dealers sought to duplicate the

project in the valleys of the Columbia and Missouri Rivers, but conservatives in Congress, growing bolder, blocked such schemes. Today, the TVA is enormously popular in the Tennessee Valley among conservatives and liberals alike.

Housing Reform To speed recovery of the housing industry, President Roosevelt created the Federal Housing Administration (FHA) in 1934. Small loans were provided to home-owners, both for home-improvement projects and for building new homes. In 1937 Congress created the United States Housing Authority, an agency designed to lend money to states or communities for low-cost housing construction. Although construction was slowed by real estate promoters, builders, landlords, and anti-New Dealers, progress was made at reducing the size and scope of the slums of America. The FHA was an extremely popular program.

Social Security Real reform was enacted by passage of the Social Security Act of 1935, which provided a social safety net beneath FDR’s New Deal economy. The new law provided for federal-state unemployment insurance, and a retirement pension for old-age workers, ranging from $10 to $85 a month, and paid for by a payroll tax of both employers and employees. Provision was also provided for the blind, the physically handicapped, fatherless children, and other

Migrant Mother

Map: TVA area and the 9 main dams

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ENG4U-C Lesson 9

The New Deal

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dependents. Opposition to Social Security was bitter. Republicans falsely claimed that every worker would have to wear a metal tag for life in order to be identified by their Social Security number. Liberals were essentially copying the ideas of industrialized Europe. It was a recognition that in the industrialized economy, with its boom-or-bust cycles, the government must bear some responsibility for the welfare of its citizens.

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Statement on Signing the Social Security Act, President

Roosevelt, 8/14/35

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