The Great Depression: The Effects Of Roosevelt's New Deal

When Herbert Hoover was inaugurated as the thirty-first President of the United States early in 1929, the nation was enjoying unprecedented prosperity. But by the end of the year, the stock market had crashed and the country was headed for the Great Depression. President Hoover tried to fight the Great Depression, but as he neared the end of his term, the American economy was in its worst state yet, and many fearful citizens wanted a leader who would do more to alleviate the crisis. They found that leader in Franklin D. Roosevelt, who promised the nation a "New Deal" and with that promise won the election of 1932. Roosevelt's New Deal had profound effects upon American history. Although it was intended to restore America's devastated economy,
By the end of September, stock averages had begun to decline steadily. As more and more people began to sell, prices continued to drop. The stock market crash began on Thursday, October 24, when a massive wave of selling sent stock prices spiraling downward and nearly 13 million share of stock changed hands. During the afternoon, several influential banking houses, including J.P. Morgan's company, invested large amounts of money in sagging stocks in an effort to quell the panic. For a few Days, stock prices seemed to stabilize, but on October 29, 1929, remembered as "Black Tuesday," the bottom fell out of the market. Stock prices plunged downward and a record 16 million shares changed hands. The stock market had crashed. Prices continued to fall steadily; by mid-November, $30 billion had been lost on the New York Stock Exchange. Practically overnight, many investors - big and small, rich and poor - lost everything. The "Great Crash" left many in debt for loans they could not
By 1933, the nation's financial structure was in critical condition. Scores of banks were failing because of bank runs. Since a bank keeps only a fraction of its deposits on reserve, it is impossible for it to meet demands when all customer demand their money at once. The governor of Michigan had stopped bank runs in his state by declaring a "bank holiday," closing all banks within the state for eight days. This gave the banks time to calm the fears of depositors and assure them that their money was safe. Although some banks had failed because of unwise investments, many remained sound. President Roosevelt's first official act was to declare a national bank holiday, closing all banks in the United States. At the same time, he placed a temporary embargo on the exportation of gold. On March 9, the Hundred Days Congress passed the Emergency Banking Relief Act, which gave the President broad power to control banking policies and to reopen banks as he saw fit. By late in March, about three-fourths of the banks that had been closed were back in operation, have been declared "safe" by the federal government. Roosevelt's next step was to take the country off the gold standard. On April 19, 1933, he announced that all privately held gold, except jewelry and coin collections, was to be turned in to Federal Reserve banks in exchange for paper money. Paper money was no longer to be redeemed for gold. Roosevelt claimed that paper money which was backed by the