The Crash and the Hoover Years, 1929–1932

This is Unit Ten, part one, on the crash of nineteen twenty-nine and Hoover's response. Unit Nine closed on a gap: the twenties had aggregate growth far more than widely shared prosperity, and that gap is where this unit begins. Carry one correction through this part. The familiar story says Hoover did nothing. Collect what he did, entry by entry, and note the one kind of aid he would not give. At his record, the course sets the two side by side. By the end you will be able to explain how buying on margin turned a decline into a crash, and date it correctly. To explain why a crash that touched one household in ten ruined millions. To describe Hoover's measures and the one he refused. To describe the Bonus Army's removal. And to describe the scale of hardship, and who suffered most.

Five entries on the bull market and its collapse, and the fifth puts the days in the right order.

The great bull market.

USH2 1351 The Great Bull Market

The Dow Jones average peaked at three hundred eighty-one in September nineteen twenty-nine, roughly ten times its value at the start of the decade, after share prices rose year after year. Many investors bought expecting the rise to continue indefinitely.

How investors paid for their shares.

USH2 1352 Buying on Margin

Buying on margin meant putting down a small payment and borrowing the rest, planning to sell at a higher price before the loan came due, so an investor could own shares worth far more than the money he had put in. A falling market wiped out such buyers' savings in minutes, the anchor says, while their debt to the bank remained.

The first day of panic.

USH2 1353 Black Thursday

On October twenty-fourth, nineteen twenty-nine, Black Thursday, the New York Stock Exchange lost eleven percent of its value, and leading banks, including Chase National, National City and J. P. Morgan, bought large blocks of stock to stop the panic. The purchases steadied the market for a few days. The worst came the following week.

Black Tuesday.

USH2 1354 Black Tuesday

On October twenty-ninth, Black Tuesday, investors traded more than sixteen million shares and lost more than fourteen billion dollars in a single day, when three million shares had counted as a busy day. The Yawp records U.S. Steel falling from two hundred sixty-two dollars to twenty-two.

When the crash really began.

USH2 1355 September, Not October

The crash is remembered as a day in October, but the decline began earlier. The market peaked in September nineteen twenty-nine, and from September to November it fell from sixty-four billion dollars to about thirty billion, more than half. Black Thursday and Black Tuesday were the panic within that decline, not its beginning. The confusion to avoid is dating the collapse to one day. A market already falling in September turned into a panic in October, and the panic turned a decline into a crash: the climax of weakness already under way, not a bolt from a clear sky.

Four entries on why a crash in one market reached every household: who owned stock, the banks, jobs, and farms.

Who actually owned stock.

USH2 1356 Who Owned Stock

Only about ten percent of American households owned stock in nineteen twenty-nine, the anchor says, while eighty percent of families had virtually no savings, and one percent or less of Americans held over a third of the wealth. A crash that touched one household in ten still ruined millions.

Why the crash spread.

USH2 1357 Why the Crash Spread

The crash reached far beyond the ten percent of households that owned stock. Most families had no savings to fall back on, and wealth was concentrated in very few hands. Banks were exposed as well: the Yawp says one thousand three hundred fifty-two banks failed in nineteen thirty and nearly two thousand three hundred in nineteen thirty-two, taking deposits and credit with them. Digital History adds that in nineteen twenty-nine more than sixty percent of families earned less than the two thousand dollars needed for basic necessities. The answer lies in the savings and distribution figures, not the stock figure: when banks failed, the losses reached people who had never bought a share.

The rise in unemployment.

USH2 1358 Unemployment Climbs

Unemployment rose from one and a half million at the end of nineteen twenty-nine to four and a half million at the end of nineteen thirty; Digital History puts it at four point four percent when Hoover took office and twenty-three point six when he left. Each layoff cut spending further, the Yawp says, in a vicious downward cycle.

What happened to the farms.

USH2 1359 Farms Lost

Nearly seven hundred fifty thousand family farms were lost to foreclosure or bankruptcy between nineteen thirty and nineteen thirty-five, the anchor says. The farmers of unit nine, who had missed the boom, now faced the bust as well.

Five entries on how Hoover understood the crisis, and what he asked of business and charity.

How the president understood the crisis.

USH2 1360 Hoover's Philosophy

Herbert Hoover believed in rugged individualism and opposed direct federal relief, which he thought would destroy the character of those who received it. In nineteen thirty he declared that the worst was behind us, and in nineteen twenty-nine he had called any lack of confidence in business foolish. His optimism became part of his reputation.

The word that guided his response.

USH2 1361 A Voluntary Deed

Hoover repeatedly argued that a voluntary deed is infinitely more precious to our national ideal than money poured from the Treasury, and in nineteen thirty-one that the spread of government destroys initiative and thus destroys character. Voluntary was the word that ran his wartime Food Administration in unit eight. He was applying the method that made his reputation.

What he asked of business.

USH2 1362 Asking Business to Hold the Line

In late nineteen twenty-nine Hoover called industrialists to conferences and urged them to keep wages and production steady, and utilities and railroads pledged billions of dollars in construction. Hoover also cut taxes by one hundred sixty million dollars. The pledges depended on businesses keeping promises they could not afford.

His organisation for relief.

USH2 1363 POUR

In late nineteen thirty-one Hoover established the President's Organization for Unemployment Relief to coordinate private charities such as the Red Cross, the Salvation Army, the YMCA and the Community Chest, rather than pay aid directly from Washington. The Yawp says charitable relief organisations were overwhelmed by the growing numbers of unemployed, underfed and unhoused Americans.

The relief bill Hoover opposed.

USH2 1364 The Relief Bill Hoover Opposed

In nineteen thirty-one Congress proposed a Federal Emergency Relief Bill that would have given the states three hundred seventy-five million dollars for food, clothing and shelter. Hoover opposed it as a threat to the balance between state and federal power, and it was defeated in February nineteen thirty-two by fourteen votes, the anchor says.

Four entries on the federal aid Hoover did create, where it went, and what his record adds up to.

The agency he did create.

USH2 1365 The Reconstruction Finance Corporation

In nineteen thirty-two Hoover created the Reconstruction Finance Corporation, with two billion dollars for emergency loans to banks, credit unions, insurance companies, railroads and other private industries. The Yawp calls it radical in its use of direct government aid and out of character for Hoover, but says it bypassed needy Americans.

Where the first loans went.

USH2 1366 The Millionaire's Dole

Of the corporation's first sixty-one million dollars in loans, forty-one million went to three institutions, the anchor says, and Congressman Fiorello La Guardia of New York called it a millionaire's dole. The Yawp says La Guardia captured public sentiment. Aid to banks was meant to reach workers indirectly, and often did not.

The public works law of nineteen thirty-two.

USH2 1367 The Emergency Relief and Construction Act

The Emergency Relief and Construction Act of nineteen thirty-two authorised one and a half billion dollars for public works, limited to projects that would pay for themselves and required skilled workers. It let the Reconstruction Finance Corporation go beyond loans to financial institutions, but its limits kept it from reaching most of the unemployed.

What Hoover's record adds up to.

USH2 1368 What Hoover Did

The familiar story says Hoover did nothing. The anchor's record contradicts it. He called business conferences to hold wages, cut taxes, created an organisation to coordinate private relief, established the Reconstruction Finance Corporation with two billion dollars, and signed a public works act of one and a half billion. What he refused was direct federal relief to individuals, and he opposed the relief bill of nineteen thirty-one on that principle. Mistake a narrow response for no response and the record makes no sense. Hoover acted, and the acting ran upward. The line he would not cross, direct relief to the unemployed, is the line unit eleven's New Deal crossed.

Four entries on the veterans who marched on Washington, how the army removed them, the cost of that day, and the president's private generosity.

The veterans who marched on Washington.

USH2 1369 The Bonus Army Marches

In the spring of nineteen thirty-two about fifteen thousand veterans of the First World War marched on Washington to demand early payment of bonuses due in nineteen forty-five, camping in vacant federal buildings and on the Anacostia Flats near the Capitol. They remained for weeks, waiting for Congress to act. The Senate refused their demand in July.

How the government removed them.

USH2 1370 The Bonus Army Routed

After the Senate refused early payment in July nineteen thirty-two, Hoover ordered police to clear the veterans from federal buildings. The anchor says police killed two veterans; Digital History says two police officers and two veterans were killed as a skirmish became a riot. Hoover then sent General Douglas MacArthur, assisted by Dwight Eisenhower and George Patton, to clear the veterans from Anacostia Flats with cavalry, fixed bayonets, tear gas and tanks, and the army burned their camp. The Yawp describes troops chasing down men and women. The sight of the army attacking veterans, the anchor says, sealed Hoover's defeat.

The cost of that day.

USH2 1371 The Cost of Anacostia

The raid on Anacostia injured dozens of people, and the anchor reports that a twelve-week-old infant was killed by a tear gas canister; the Yawp confirms that a baby was killed by tear gas. Photographs and newsreels showed the army forcibly removing veterans, and Digital History says the incident virtually assured Roosevelt's election.

Hoover's private generosity.

USH2 1372 Hoover's Charity

Hoover gave away his presidential salary of about twenty-five thousand dollars a year to charity, the anchor says, and raised five hundred thousand dollars for the nineteen thirty White House Conference on Child Health and Welfare. His personal generosity was real. His objection was to federal relief, not to helping people.

Five entries on how deep the Depression went: breadlines, Hoovervilles, bank closures, hunger, and who suffered most.

How deep the Depression went.

USH2 1373 The Scale of Hardship

By the end of nineteen thirty-two about sixty million Americans were affected by the Depression, the anchor says. New York City's eighty-two breadlines and soup kitchens served up to eighty-five thousand meals a day; New York had nearly one million unemployed and more than fifty thousand homeless, and Chicago more than five hundred thousand out of work.

The shantytowns named for the president.

USH2 1374 Hoovervilles

Shantytowns called Hoovervilles grew on the edges of most major cities, newspapers used as bedding became Hoover blankets, and a pants pocket turned inside out was a Hoover flag. The Yawp says the chronically unemployed camped on public or marginal land, living on bread lines and street-corner peddling.

The collapse of the banks.

USH2 1375 Banks Close

About five thousand banks closed between nineteen thirty and nineteen thirty-two, more than three quarters of them in towns of fewer than twenty-five hundred people, leaving depositors outside locked doors. The Yawp counts one thousand three hundred fifty-two failures in nineteen thirty and nearly two thousand three hundred in nineteen thirty-two. Deposits were not insured.

Hunger.

USH2 1376 Hunger

At least twenty starvation deaths were documented in nineteen thirty-one, and one hundred ten in nineteen thirty-four, the anchor says, and more than sixty percent of rural households and eighty-two percent of farm families counted as impoverished by nineteen thirty-nine. The richest agricultural nation in the world recorded Americans starving to death.

Who suffered most.

USH2 1377 African Americans in the Depression

By nineteen thirty-two roughly half of all African Americans were out of work, the anchor says, facing both job losses and discrimination, and Digital History says that a year after the crash seventy percent of Black Charlestonians and seventy-five percent of Black Memphians were unemployed. Recorded lynchings rose from eight in nineteen thirty-two to twenty-eight in nineteen thirty-three.

Look at what you can now do. You can explain how buying on margin wiped out savings and left debts, and date the collapse correctly: a decline from September, a panic in late October. You can explain why the crash reached everyone. Most families had no savings, wealth was concentrated, and when banks failed, the losses reached people who owned no shares. You can describe Hoover's measures, the conferences, tax cuts, coordinated charity, the Reconstruction Finance Corporation and public works, and the one kind of aid he refused: direct federal relief to individuals. You can describe the Bonus Army's removal, with both counts of the first deaths, and the army burning the camp at Anacostia. And you can describe the hardship: sixty million affected, Hoovervilles, five thousand banks closed, starvation deaths, and roughly half of African Americans out of work.