Crash
On Thursday, October 24, 1929, the New York Stock Exchange opened quietly, but volume was heavy and soon prices began to plunge at such a pace that the ticker could not keep up. “By eleven o’clock,” John Kenneth Galbraith wrote later, “the market had degenerated into a wild, mad scramble to sell. By eleven-thirty the market had surrendered to blind, relentless fear.” October 29, “Black Tuesday,” was far worse: $30 billion in securities self-destructed. The next morning, the New York Times reported: “Stock prices virtually collapsed yesterday, swept downward with gigantic losses in the most disastrous trading day in the stock market’s history.” By mid-November, industrials were worth only half of what they had commanded ten weeks before. (Before Hoover left office, blue chip U.S. Steel dropped from 262 to 21, General Motors from 92 to 8, Montgomery Ward from 138 to 4.)
A number of Hoover’s predecessors had confronted financial crises, but none had left him a usable legacy. In previous depressions—from 1837 to 1894—Martin Van Buren, James Buchanan, and Ulysses S. Grant had done nothing, and Grover Cleveland had taken a hard line against aid to the unfortunate. “All communities are apt to look to government for too much,” Van Buren had declared, in explaining why he was going to “refrain from suggesting to Congress any specific plan for … relieving mercantile
embarrassments.” In later years, Hoover, too, would be categorized as a “do-nothing” president. In fact, as might have been expected of a man who had been so activist a secretary of commerce, he moved with commendable alacrity to arrest the decline.
Over nine days, starting in mid-November, the president summoned to the White House leaders of industry, finance, construction, public utilities, agriculture, labor, and the Federal Reserve system. A financial journalist opened his account of the gatherings by writing: “‘Order up the Moors!’ was Marshal Foch’s reply at the first battle of the Marne. ‘Order up the business reserves’ directed President Hoover as pessimistic reports flowed in from all quarters following the stock market crash.” At this Conference for Continued Industrial Progress, as Hoover designated the meetings, he implored manufacturers to maintain wage rates—a policy, he believed, that would not only benefit workers but bolster the economy by sustaining consumer purchasing power. He asked unions to pledge not to strike and to withdraw pending demands for wage increases.
The president accompanied these pleas with reassurances. To calm nerves, he eschewed the familiar usage “panic” and instead designated the downturn a “depression,” an unfortunate choice that would be forever associated with him. “The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis,” he declared. “Any lack of confidence in the economic future … in the United States is foolish.” Critics soon were throwing these words back at him and charging him with irresponsible chatter, but it was perfectly reasonable for a chief executive to rally the nation. Hoover’s assertions differed little from FDR’s later contention that there was nothing to fear but fear itself.
Initially, Hoover succeeded beyond all expectations. Management and labor readily fell into line. The U.S. Chamber of Commerce created a National Business Survey Conference that drew upon the knowledge of some 170 trade associations. Henry Ford announced, as he emerged from the White House, that he was not only willing to adhere to the president’s standard but actually going
to raise wages. Hoover persuaded railroad executives to step up maintenance projects, and the head of the National Electric Light Association pledged to spend more than $100 million beyond the large sum it had invested in 1929. So euphoric was the mood Hoover generated that the Sears, Roebuck titan Julius Rosenwald expressed concern that the country might soon face a labor shortage. On December 5 Hoover reported to four hundred “key men” what he had accomplished at the November meetings. “The very fact that you gentlemen come together for these broad purposes,” he told them, “is a far cry from the dog-eat-dog attitude of the business world of some thirty or forty years ago.” The collaboration, Walter Lippmann wrote, “was an open conspiracy not to deflate.”
The president took a number of other initiatives. He wired governors to encourage states and counties to accelerate construction. He urged Congress to appropriate $150 million for public works and to approve a tax cut. He coaxed the Federal Reserve Board to expand the money supply and to make more credit available; for the first time in the history of the republic, discount rates fell to under 2 percent. He counted on the Federal Farm Board to sustain crop prices, and for months the board did remarkably well, holding the price of U.S. wheat twenty-five cents or more a bushel above that in Europe. America now realized, said the Boston Globe, borrowing a phrase from Lippmann, “that it has at the White House a man who believes not in the philosophy of drift, but in the dynamics of mastery.”
Despite all the rockets being fired from the White House, though, Hoover intended to limit the role of government. The amount he requested from Congress for construction was modest, and he advised governors that the “pursuit of public works” by the states should be “energetic yet prudent.” Virtually all of the responsibility for the economic health of the nation was left with corporation directors. It was not clear, however, how much leadership would come from the private sector. The National Business Survey Conference contented itself with actions such as recommending that
home owners spark revival by adding on “the extra sunporch.” Moreover, if the system was “fundamentally sound,” there was no need to inquire why the crash had happened or whether reforms might be required.
Hoover believed that the country was going through a shortterm recession much like that of 1921, and hence drastic remedies were not required. Businesses continued to report year-end profits; the stock market gained several points; and, in contrast to past panics, no large bank or corporation had collapsed. Hoover has been roundly criticized for not realizing that the stock market crash signaled the onset of the Great Depression, but no one else—including liberals—had any more perception that the slump would last over a decade. At the end of 1929, the New York Times judged the most important news story of the year to be not the Wall Street blowup but Admiral Richard Byrd’s expedition to the South Pole. The American Economic Association foresaw a brief downturn that could be beneficial. In 1930 the former chief of the War Industries Board, Bernard Baruch, a Democrat who was regarded as a financial wizard, foresaw that Hoover would be “fortunate enough, before the next election, to have a rising tide and then … will be pictured as the great master mind who led his country out of its economic misery.”
Yet even before 1929 ended, cabinet officials were expressing concern about mounting unemployment, and by the spring of 1930 breadlines were familiar sights on city sidewalks. With municipal lodging houses bursting, New York put the homeless on a barge at an East River pier so that they would have a place to sleep. In midtown Manhattan on “one gusty March day in 1930,” the historian Edward Robb Ellis has written, “hungry men stood in a triple line with their backs to the wind like cattle facing away from a storm,” inching toward a soup kitchen in an Episcopal church. Of the two thousand shuffling in the cold, five hundred would be turned away when food ran out. That same month, Hoover claimed that “employment has been steadily increasing.” In April, after the Census Bureau reported more than three million out of work (the figure
was actually closer to four million), he shaved the total to below two million, which, he said, was normal.
Hoover never declared that prosperity was “just around the corner” (that fatuous statement came from the vice president, Charles Curtis), but he did refuse to face reality. In May 1930 he announced that a “great economic experiment” had “succeeded to a remarkable degree.” He told the U.S. Chamber of Commerce, “We have passed the worst, and with continued effort we shall rapidly recover.” When in June a delegation that included bankers as well as bishops arrived at the White House to alert him to the accelerating decline, Hoover, visibly annoyed, told them that the economy was on the upswing and the ranks of the unemployed were dwindling. “Gentlemen,” he said, “you have come sixty days too late. The depression is over.”
Disappointment in the president deepened. “By the rough judgments of politics,” wrote Lippmann, “Mr. Hoover finds himself set down as an irresolute and easily frightened man.” In July his public relations man in the 1928 campaign wrote him bluntly: “If you were running in New York today, I am sure … you could not carry the election. The public, … without regard to party, thinks the administration to date has been a failure.” Later that season, the Canadian chargé d’affaires in Washington reported to Ottawa that Hoover was being “harassed and oppressed by difficulties the nature of which he is unfitted by his training and character to comprehend.” Even Hoover’s business allies found fault with him. New York’s archconservative Commercial and Financial Chronicle concluded:
The brilliant conferences held in Washington last fall did a little good, no doubt, but only a little. They did not prevent unemployment, which increased almost steadily thereafter. They did not stabilize the prices of commodities, which have fallen since. They did not increase building operations beyond the appropriations for public buildings and roads … . They did not keep up the price of wheat, which is now … at
exceedingly low levels. They did not prevent a recurrence of stock smashes, for at least one other of large dimensions has occurred since.
For Hoover, troubles never descended singly, but in twos and threes. That summer, at the same time muted factory whistles were testing his mettle, a devastating drought of historic proportions seared much of the heartland. A Red Cross investigator reported on conditions in eastern Arkansas: “Barefoot and without decent clothes, no meal, no flour in the bin, ragged children crying from hunger … nothing but … misery … far worse than the Mississippi flood.” As in 1927, Hoover galvanized local communities and turned to the Red Cross, though he believed that reports of suffering were grossly exaggerated. So, too, did the Red Cross, which, thinking that starving supplicants were fakers, refused to spend much of the meager fund it had.
State authorities placed the need in the range of $120 million (almost certainly an underestimate), but the Hoover administration lowered the sum for federal aid to $25 million and specified that none of it could go for food. An Arkansas congressman wanted to know why the national government “would feed Jackasses but wouldn’t feed starving babies.” Many found it strange that a man who had made his reputation as an almoner in the Volga region not many years before would scruple about providing for his fellow citizens. Hoover, said Senator Tom Connally of Texas, had asked Congress for millions to feed “hungry Bolsheviks … with long whiskers and wild ideas,” but now denied sustenance to hungry Americans.
Hoover’s policies toward distress—in the drought-stricken counties and across the nation—reflected an aversion to the omnipotent state and a belief in “local government responsibilities.” Even more important was the tradition of private giving. Grants from Washington, he contended, would impair the character of recipients and would deny benefactors the opportunity to sacrifice. The poor,
Hoover contended, could always count on their neighbors. Curiously, he was convinced that federal relief would debauch the poor, but handouts from private agencies or from local politicians would not. Hoover’s hostility to federal intervention, William Allen White concluded, derived from “his passionate, almost bigoted, belief in America.”
As the days dragged on, the inadequacy of this approach became more apparent. By autumn, cities were staggering under mounting job losses, and the countryside was devastated. At street corners across America men on the ragged edge set up stands to sell apples to passersby. New York City alone had six thousand vendors. Letters from desperate women to “Kind Mrs. Hoover,” “Dear First Lady of the Land,” or “Most Excellent Lady” told her, “Winter soon will be here and we just about barefooted no work can we find we do not have enough to eat you all have a plenty,” or “Just a line to let you know i am a poor girl and i want to go to school and i ain’t got the closes … . will you please send me some you old closes and thing you don’t want?”
Hoover, though, had small patience with appeals to set off on a different path. When the president of General Electric urged him to call a special session of Congress to “request it to issue a billion dollars of bonds … to allay the tragic circumstances of unemployment,” Hoover was incensed. Some time later, he received an accurate accounting of why federal relief was imperative: “Communities are impotent; state governments are shot through with politics … ; local charities are jaded, discouraged, bankrupt, disorganized, discredited. Their task is too great. Their support is gone.” Hoover could barely contain himself in drafting a response: “This nation did not grow great from feeding upon the malignant pessimist or calamity mongers or weeping men, and prosperity for all our people will not be restored by the voluble wailings of word-sobbers nor by any legislative legerdemain proposed by theorists.” He decided to abbreviate this note rather than give full throat to his fury.
Not until October 1930—a full year after the crash—did Hoover establish a President’s Emergency Committee for Employment, and
its main function was not to ease hardship but to create enough impression of motion to stave off growing demands for the dole. Modeled on the committee set up in the 1921 recession, it was headed by Colonel Arthur Woods, who had been in charge of the makeshift operation then. Though unemployment had climbed past the five million mark, the PECE did not give a penny to any local government for relief. Instead, it churned out press releases with pap topics such as urging people to hire men to “spruce up” their homes. Woods did not even try to collect trustworthy statistics on the extent of joblessness and of local resources. Asked by governors to send them the committee’s plan to cope with unemployment, the PECE responded that it had no plan.
The flush of confidence in Hoover’s program in the fall of 1929 had also dissipated. “We are living in a fool’s paradise,” the head of U.S. Steel told the American Iron and Steel Institute, “if we think every steel manufacturer in the United States has maintained … the current rates of wages.” Frequently, when management did hold fast on wage rates, it reduced hours, so that weekly pay envelopes shrank. In 1930 factory payrolls plunged 35 percent; Detroit turned out two million fewer cars than it had the year before; and more than twenty-five thousand businesses failed—another unwelcome record. In these circumstances, Hoover’s affirmations of success lost credibility. With unconscious humor, Simeon Fess, chairman of the Republican National Committee, stated in October 1930: “Persons high in Republican circles are beginning to believe that there is some concerted effort on foot to utilize the stock market as a method of discrediting the Administration. Every time an Administration official gives out an optimistic statement about business conditions, the market immediately drops.”
In these dark hours, the nation looked to the president for guidance, comfort, and good cheer—but looked in vain. “If you want to get the gloomiest view of any subject on earth,” his wife once said, “ask Bert about it.” His blighted youth had taken a dreadful toll. Even in his
final days, he still remembered “the harshness of Murdstone,” and said of him and other Dickens characters, “I have met them alive many times in after years.” Hoover, wrote a journalist who knew him well, “is charged with an essential unassuaged loneliness.” Pessimism was his everyday companion. Gutzon Borglum, the sculptor of Mount Rushmore, said, “If you put a rose in Hoover’s hand it would wilt.”
Hoover saw no point in strutting on the stage to rally the nation. “You can’t make a Teddy Roosevelt out of me,” he told his staff. In his memoir Forty-two Years in the White House, the chief usher recalled that Hoover “would go about, never speaking to any of the help. Never a good-morning or even a nod of the head. Never a Merry Christmas or a Happy New Year. All days were alike to him. Sunday was no exception, for he worked just as hard on that day if not harder than on any of the others. There was always a frown on his face and a look of worry.” He needed to devote himself wholly, Hoover believed, to scrutinizing economic events and devising remedies.
The president had no sense of how to reach out to a desperate nation. Hoover, observed Sir Wilmot Lewis, Washington correspondent of the Times of London, “can calculate wave lengths, but cannot see color … . He can understand vibrations but cannot hear tone.” The biographer Henry Pringle thought Hoover “lamentably bad” when he spoke to large crowds because “inhibitions seem to rise in his throat and to choke his vocal cords.” Pringle added: “He has not a single gesture … . He reads—his chin down against his shirt front—rapidly and quite without expression … . He can utter a striking phrase in so prosaic, so uninspired and so mumbling a fashion that it is completely lost on nine out of ten of his auditors.” In his infrequent broadcasts, he droned on with no awareness of his unseen audience. As one analyst has observed, “To Hoover, the millions who listened over the radio were just eavesdroppers.”
The country got its first opportunity to render a verdict on the president’s policies in the November 1930 midterm elections, and the returns further disheartened Hoover. The administration could point out that the party in power usually loses seats in off-year
contests, but that was whistling in the dark, for progressives had done well and Hoover loyalists had fared poorly. The Republicans’ big majorities in Congress had been wiped out, with the GOP’s seventeen-seat advantage in the U.S. Senate reduced to one. The party also lost fifty-two seats in the House, which, when the Seventy-second Congress convened in December 1931, Democrats would control for the first time since 1919. There was one other worrisome feature. In 1928 Franklin D. Roosevelt had barely slipped into the governorship of New York State with a 250,000 vote plurality. In 1930 he won reelection by three-quarters of a million votes, immediately becoming the front-runner to oppose Hoover in the next presidential race.
Instead of serving as an alarm siren, the election results hardened Hoover’s determination to dig in his heels. When Woods strongly recommended that he ask Congress to appropriate several hundred million dollars for public works, Hoover ignored him. “The volume of construction work in the Government is already at the maximum limit warranted by financial prudence,” he asserted in his December 1930 State of the Union message. “Prosperity,” he declared, “cannot be restored by raids upon the public Treasury.” He further incensed congressional Democrats by charging that they were “playing politics at the expense of human misery.” Senator Robert F. Wagner of New York inquired what had happened to the man who had once favored public works planning for hard times.
Hoover also rejected Woods’s advice to inform Congress that “our fellow citizens are facing a desperate emergency,” with “our industrial system … in a grave, tragic, stupid and anomalous situation.” Expressing pride that “local communities through their voluntary agencies have assumed the duty of relieving individual distress and are being generously supported by the public,” Hoover said that there was “minimum actual suffering.”
The State of the Union address came at a perilous moment when the financial system had begun to hemorrhage. In the last two
months of 1930, six hundred banks failed. The shutdown of the Bank of United States on December 11 wiped out the life savings of four hundred thousand depositors, primarily Jewish garment workers—many of them recent immigrants who had placed their trust in an institution whose name suggested that it was an arm of the government. It was the worst collapse in the history of the republic.
These misfortunes reinforced the president’s resolve to quiet anxieties in the financial community by balancing the budget. “The primary duty of the Government,” said Hoover, who for so long had favored stimulating the economy, was “to hold expenditures within our income.” Americans, he maintained, were “suffering … more from frozen confidence than … from frozen securities.” To encourage investors, he sought to rein in the “big government” spenders. When Congress early in 1931 passed Senator Wagner’s bill to rehabilitate the virtually useless United States Employment Service, his advisers (including Colonel Woods) urged Hoover to sign it, but he killed it with a pocket veto on the specious grounds that he wanted to “prevent a serious blow to labor during this crisis.” Even the Republican press was appalled. One economist said, “It is not likely that any veto message of an American president ever exceeded this one in misstatements of fact,” and another dismissed Hoover’s rationalization as “one of the most dishonest documents I have ever read.”
The year 1931 also saw rising anger at the president’s attitude toward relief. Hoover continued to insist that communities were caring admirably for the impoverished at a time when over a million Americans were seeking refuge in freight cars—named derisively “Hoover Pullmans”—and when regiments living from hand to mouth were building shelters of scrap in empty lots in big cities—miserable shantytowns named “Hoovervilles.” That winter the novelist Thomas Wolfe reported from New York: “I saw half naked wretches sitting on park benches at three in the morning in a freezing rain and sleet: often I saw a man and a woman huddled together with their arms around each other for warmth, and with
sodden newspapers, rags, or anything they could find over their shoulders.” A committee named by Hoover found “desperate distress” in Kentucky and West Virginia, with “deserving men, women, and children … suffering from hunger, exposure, and cold,” and a Kentucky coal miner wrote: “We have been eating wild green … . Such as Polk salad, Violet tops, wild onions, forget me not wild lettuce and such weeds as cows eat as a cow wont eat a poison weeds.” In April, recognizing that Hoover was doing next to nothing for the destitute, Woods quietly resigned.
As the PECE limped along without Woods, unemployment rose to eight million. In Chicago, behind high-priced restaurants, desperate men fought over leavings in garbage pails, and hundreds of women slept each night in Grant and Lincoln parks. Starting in April, Chicago’s schoolteachers went without pay for eight of the following thirteen months. Though Hoover never wearied of citing the triumph of local initiative, the executive director of the Federation of Jewish Charities in Philadelphia reported to the annual convention of the National Conference of Social Work in June: “Private philanthropy is no longer capable of coping … . It is virtually bankrupt in the face of great disaster. With the bravest of intentions, the community chests … are altogether unequal to the task ahead of us.”
By the middle of 1931, the man hailed on inauguration day as the “Great Engineer” had become the “Great Scrooge.” In June, William Allen White wrote a novelist, “You bet I’ll read your book. I see by the blurb that your heroine goes out west and falls in love with a mining engineer. She took an awful chance. America did that not long ago and now look at her.” A month later, the White House correspondent of the New York Times, Arthur Krock, concluded: “Mr. Hoover thus far has failed as a party leader. He has failed as an economist … . He has failed as a business leader … . He has failed as a personality because of awkwardness of manner and speech and lack of mass magnetism.”
During this spring, Hoover’s agricultural program—the showpiece of his 1929 initiatives—ended in fiasco. Over the previous
year the Grain Stabilization Corporation had been buying wheat, only to find that prices continued to tumble and that it was stuck with a huge store it could not readily dispose of. Purchasing cotton had a similar outcome; prices skidded from 17½¢ to 8¢—with no way to deal with a huge glut because Hoover refused to sanction production controls. The board eventually reached the point of urging growers to plow under every third row of cotton, but, as the historian Albert Romasco later wrote, “Despite the Farm Board’s exertions to … sow among farmers the seeds of the new individualism, it succeeded in reaping only thistles and thorns.”
In June the board gave up. Its Grain Stabilization Corporation stopped buying surpluses and dumped 257 million bushels on the market, driving down the price of wheat still further. From its $500 million revolving fund, the board had suffered losses of $345 million with nothing to show for it. Cotton prices eventually slumped to a sickening 4½¢ per pound. The government had financed the removal of 3.5 million bales from the market but saw 10 million bales added to the surfeit. After the board’s capitulation, Hoover, who thought the government had already departed too far from sound principles, did nothing at all to sustain rural America. The farmer faced ruin and, because of his importance to the economy of Main Street, threatened to pull hundreds of banks down with him. Before Hoover’s term was over, one-fourth of American farmers lost their holdings—their fields, their stock, their barns, their homes—some of which had been in one family for generations.
After the short session of Congress ended, Hoover turned aside pleas to bring legislators back, even though the Depression was worsening. “I do not propose to call an extra session of Congress,” he announced in May. “I know of nothing that would so disturb the healing process now undoubtedly going on … . We cannot legislate ourselves out of a world economic depression.” To believe that congressional action could speed recovery, Hoover told an Indianapolis gathering in June, resembled thinking that one could “exorcise a Caribbean hurricane by statutory law.” So with Congress away
from March 4 to December 7, 1931, Hoover assumed full responsibility for coping with hard times—and for all that went wrong.
Either out of conviction or in self-defense, Hoover increasingly offered a new explanation for why recovery was so slow in coming. “The major forces of the depression now lie outside of the United States,” he had announced in December 1930, “and our recuperation has been retarded by the unwarranted degree of fear and apprehension created by these outside forces.” In June 1931 he located the sources of these woes in “the malign inheritances in Europe of the Great War—its huge taxes, its mounting armament, its political and social instability, its disruption of economic life by the new boundaries.” He had become so convinced of the validity of this hypothesis that he stated flatly, “Without the war we should have no … depression.”
This reasoning had important implications. Two of them were advantageous to the president. Blaming Europe for the Depression liberated Hoover, never one to admit error, from acknowledging that the policies he was pursuing at home were languishing. In addition, he got high marks as a statesman for attempting to resolve problems abroad—especially on the Continent, which was encountering an acute financial panic in the spring of 1931. He was to find, however, that involving himself in overseas imbroglios only compounded his troubles.