Events
1928Herbert Hoover is elected president
1929Stock market crashes
1932Reconstruction Finance Corporation is createdCongress passes Norris–La Guardia Anti-Injunction
Act“Bonus Army” camps out in Washington, D.C.Franklin D. Roosevelt is elected president
Key People
Herbert Hoover -
31st
U.S. president; failed to provide federal relief after Crash of
1929 and
adhered firmly to laissez-faire economic policy
Franklin Delano Roosevelt -
32nd
U.S. president; elected in
1932 after
serving as governor of New York
The Election of 1928
Despite the booming U.S. economy of the late 1920s, Calvin Coolidge decided
not to run for president again. In his place, Republicans nominated
the president’s handpicked successor, popular World War I humanitarian
administrator Herbert Hoover, to continue America’s
prosperity. Democrats chose New York Governor Alfred E. Smith on
an anti-Prohibition platform. Hoover won with ease, with 444 electoral
votes to Smith’s 87 and with
a margin of more than 6 million popular votes.
The Crash of 1929
Soon after Hoover took office, the good times
and successful run of the bull market came to an abrupt halt. Stiffer
competition with Britain for foreign investment spurred speculators to
dump American stocks and securities in the late summer
of 1929. By late October, it was clear that the
bull had been grabbed by the horns, and an increasing number of Americans
pulled their money out of the stock market. The Dow Jones Industrial
Average fell steadily over a ten-day period, finally crashing
on October 29, 1929.
On this so-called Black Tuesday, investors panicked and
dumped an unprecedented 16 million shares.
The rampant practice of buying on margin (see The
Politics of Conservatism, p. 17),
which had damaged Americans’ credit, made the effects of the stock
market crash worse. As a result, within one month, American investors
had lost tens of billions of dollars. Although the 1929 stock market
crash was certainly the catalyst for the Great Depression, it was
not the sole cause. Historians still debate exactly why the Great
Depression was so severe, but they generally agree that it was the
result of a confluence of factors.
Consumer Goods and Credit
Ever since the turn of the century, the foundation
of the American economy had been shifting from heavy industry to consumer products.
In other words, whereas most of America’s wealth in the late 1800s
had come from producing iron, steel, coal, and oil, the economy
of the early 1900s
was based on manufacturing automobiles, radios, and myriad other
items that Americans could buy for use in their own homes.
As Americans jumped on the consumer bandwagon, an increasing
number of people began purchasing goods on credit,
promising to pay for items later rather than up front. When the
economic bubble of the 1920s
burst, debtors were unable to pay up, and creditors were forced
to absorb millions of dollars in bad loans. Policy makers found
it difficult to end the depression’s vicious circle in this new consumer
economy: Americans were unable to buy goods without jobs, yet factories
were unable to provide jobs because Americans were not able to buy
anything the factories produced.
Margin Buying
Consumer goods were not the only commodities Americans
bought on credit; buying stockson margin had
become very popular during the Roaring Twenties. In margin buying,
an individual could purchase a share of a company’s stock and then
use the promise of that share’s future earnings to buy more shares.
Unfortunately, many people abused the system to invest huge sums
of imaginary money that existed only on paper.
