TEN

Fighting the Depression

As the 72nd Congress opened, both parties looked forward to the 1932 presidential elections. The outcome of the 1930 congressional elections made it more difficult to blame Hoover for the deepening Depression. After deaths and subsequent new elections in some districts, the Democrats ended up with a slim majority in the House, which enabled them to elect as Speaker John Nance Garner of Texas. The Republicans organized the Senate with a bare majority after a long standoff during which Progressive Republicans divided their votes to prevent any candidate from receiving a majority. Finally, Bertrand Snell of New York was elected to lead the upper house, defeating John Q. Tilson of Connecticut. The Democrats approached the session without a single national spokesman and with no leader by consensus. They decided to wait for Hoover to propose legislation and then to caucus over how to respond. Both houses were splintered, as in the previous, 71st, Congress, by a bloc of mostly Western mavericks who called themselves Progressives, yet, lacking a national program, were more appropriately insurgents, concerned primarily with protecting the interests of their agricultural constituents. They often voted with the Democrats. Divided government during the course of the worst depression in the nation’s history left each party chained by the idiosyncrasies of the other. The chief imbroglio arose over whom to blame if legislation stagnated, which, in fact, it did not, at least not to the degree expected. The Democrats walked a tenuous tightwire; they did not want the Depression to end on Hoover’s watch; but neither did they want to be so obviously obstructionist as to receive blame themselves. The Democrats struck a wildcat well of ready cash, but it spurted from a single source: the party’s national chairman, John J. Raskob, chief owner of General Motors, who financed the Democrats almost single-handedly and thereby gained a dominant role in determining policy and candidates. Not since Mark Hanna bankrolled William McKinley had a business magnate bet his fortune on politics.¹

The 72nd Congress marked the second phase in Hoover’s war on the Depression, and he took the offensive with the most ambitious legislative agenda of any president to that time. He also grew far more assertive in pushing through his unified, integrated, holistic healing balm to the economic infection. From beginning to end, he strove to dispose as well as to propose, talking regularly with influential congressmen, the GOP National Committee, and anyone who might pave the highway to passage, including members of the opposition. He did not dislike Garner, and they struck a number of deals, although he did not entirely trust him either, especially because the Texan coveted his party’s presidential nomination. Garner usually limited his interference with Hoover’s bills to amending or delaying them, not defeating them outright. He was a savvy politician with no inclination to damage his own presidential aspirations. Congress did not assemble until December 8, for Hoover’s State of the Union address, and then the chief executive bombarded it with a succession of subsequent messages on specialized topics including the budget, foreign relations, law enforcement, and reorganization of government. All speeches were read to joint sessions by the House clerk, as was the tradition at that time, and then congressmen were given printed copies. Thus, the formal reading of the messages was less important than the study of the content by the legislators in their offices. During the formal reading they lolled in the lobby or cloakroom, where they smoked, gossiped, and occasionally commented on the task ahead. Some were intimidated, or at least made uneasy, by the fusillade of legislation and its scope. The Republican insurgents wanted Hoover to spend more, especially on agriculture, while most Democrats wanted less spending.²

The president was both a fiscalist, who wanted to expand the money supply, and a monetarist, who wanted to increase spending via public works. While Hoover had severe reservations about opening the Pandora’s box of insatiable demand and limited supply that outright doles would create, he had no reservations about work relief on a larger scale than had ever been attempted. The centerpiece of his economic program was the Reconstruction Finance Corporation (RFC), a government corporation for loaning money to banks, businesses, and railroads to prevent failures and stimulate trade and commerce, especially construction. Before Congress convened, the president had experimented with the National Credit Corporation, a fund of $500 million, which he prodded large private banks to create, to be made available to prop up weaker, smaller banks in danger of being swept away by the undertow of bank failures. The venture failed for several reasons. The fund was too small to make a major impact, and the bankers were wary of risking their own liquidity by making loans to failing banks. The proposed RFC was more expansive and more expensive, had the weight of the government behind it, and went far beyond the mission of bolstering banks. It remained an integral fixture in the American economy throughout the subsequent New Deal era. The RFC also had antecedents in the War Finance Corporation of World War I, created by the Wilson administration to help stimulate war production. It was resurrected briefly during the Harding recession of 1921–22.³

Second on the president’s agenda was the Glass-Steagall Act. Its chief purposes were to save the gold standard, stabilize exchange rates, maintain wages, and increase the money supply, because only gold-backed dollars could circulate. The gold standard was severely stressed. Hoover instructed the Treasury to pay gold for currency, as required by law, and the precious metal was simultaneously depleted by foreign creditors and by Americans, who consequently hoarded it, diminishing money in circulation. The chief executive could not reveal at the time how close the nation was to defaulting on the gold standard, for fear of inciting panic. The mechanism by which the legislation worked was relatively simple, at least superficially. It permitted a portion of paper currency to be backed by certain types of Federal Reserve notes, in essence expanding the supply of gold. The psychology, given the circumstances, was providential. All the Hoover economic proposals were like interlocking puzzle pieces. The chief executive asked for a system of home loan discount banks to save homes from foreclosure and for additional capital to fund federal land banks to make low-interest loans available to farmers. He called for reorganization of failing railroads, legislation to reorganize the executive branch, and authority to lease Muscle Shoals for private development to revitalize the region. The Chief wanted to be frugal and called for a moderate tax increase to bring the soaring deficit under control, though he was willing to tolerate modest deficits. He requested legislation to make assets of closed banks available to depositors and for the legalization of branch banking. The Chief requested a widespread program of public works to be spread throughout the country, strategically placed where unemployment was greatest. He said he would follow up by designating specific public works. He also called for increased restrictions on immigration to save jobs for Americans and for labor legislation that would prohibit the use of injunctions to outlaw strikes. No one else in either party proposed such a sweeping program. There was urgency in the president’s series of messages. There were some things he cautioned against: no direct doles, no general revision of the tariff, no further benefits to veterans, and no repeal of antitrust laws.⁴

Shortly after his series of addresses the chief executive summoned a large group of congressmen to the White House to explain the rationale behind his program and to ask for their aid. Although action was essential, this was no time to panic, he cautioned. He had already submitted some sixty-three major and minor bills for their thoughtful consideration. Hoover pointed out that progress had been made in public health. There were fewer ill and dying than during normal times. The president indicated that he hoped for additional progress in arms reductions, which would liberate funds for job-creating domestic public works. During his series of talks the president had requested additional money for law enforcement but had taken no stand regarding Prohibition, an issue increasingly dividing the nation, especially within the Republican Party. He felt that precious resources must be husbanded and targeted where they could do the most good, and he eschewed demagogic or emotional tangents. The Californian observed that the hardship was real, yet in a relative sense America was faring better than most of the world and was virtually self-sufficient in raw materials. The chief executive also urged Congress to consider consolidating all public works into a single Department of Public Works in the cabinet. He repeatedly emphasized the importance of railroads, especially for farm products, and warned that their bankruptcy would disrupt transportation. For the foreseeable future, they remained vital. Hoover prioritized his legislation for the congressmen, emphasizing the need for prompt action on the Glass-Steagall Act and the RFC. The suffering, as well as the potential bounty of the land, would have to be shared. Hoover strove to cultivate a conciliatory atmosphere. Indeed, through March, the 72nd Congress was less divisive than the 71st Congress had been and the period was the most productive of his presidency, despite the forthcoming election. Hoover proved an effective bipartisan leader over the course of the 72nd Congress and usually ended up achieving about what he wanted in the general form he wanted it. At the end, the landscape did not lie littered with shipwrecked legislation, though the Depression stubbornly persisted. Hoover’s defenders argued that without his exertions it could have been worse. In fact, in many places, it was.⁵

Congress moved relatively expeditiously to enact the RFC. The only significant opposition came from Progressives, who based their resistance on class arguments. Senator Fiorello La Guardia of New York termed the loans to salvage banks a “millionaire’s dole” and the Western insurgents wanted more money for agriculture. La Follette and Burton Wheeler passionately opposed the bill, though their own constituents stood to benefit. Hoover explained that he was more interested in saving depositors than in rescuing banks. However, when banks failed, depositors lost their savings. Congress deleted specific provisions, such as placing a limit on the amount that could be loaned to large banks, and permitting loans to bankrupt banks to repay ruined depositors. Senator Carter Glass of Virginia, who took paternalistic pride in the Federal Reserve System, which he had helped create, balked at some of the provisions. The president appeased most of his critics. He permitted Democratic leaders, Garner in the House and Robinson in the Senate, to appoint one member each to the board of directors, which was bipartisan, divided equally by party affiliation. Reaching out to farm interests, Hoover accepted an amendment permitting the RFC, through the secretary of agriculture, to loan up to $50 million to farmers. Another amendment permitted the new agency to loan money to railroads upon permission of the Interstate Commerce Commission. The chief executive named Federal Reserve governor Eugene Meyer to chair the RFC board and former vice president Charles G. Dawes to become president of the new agency. Hoover, later depicted as a passive archreactionary by some critics, actually wanted more power vested in the new federal agency than Congress was willing to authorize. Some major magazines condemned the measure as a step toward socialism. Without question, creation of the RFC marked a landmark shift toward a more powerful government. The bill included a total appropriation, in direct money and bonds, of some $2 billion, the largest relief bill passed by Congress up to that point. Over time, the agency would operate for eight years and loan $50 billion. Hoover believed the aphorism that necessity is the mother of invention and that serious emergencies require unorthodox approaches. The spirit of urgency and willingness to compromise stood out more than the decibel level of the Progressive dissenters. The RFC bill proved that bipartisan cooperation was possible and that Congress could act during an emergency. On January 22, Hoover signed the bill he had dispatched to Congress on December 7. It passed the Democrat-controlled House by 335–55 and the Senate by 63–8. In the Senate, where only five Democrats and three insurgents voted nay, the body invoked cloture several times to speed the process. Nonetheless, as one journalist observed, thousands of banks could have been saved from failure if the measure had been enacted two years earlier. However, Hoover remained convinced that his approach, as pathbreaking as it might be, remained within the parameters of restoring old, permanent jobs rather than making the economy the tail of a dog embodied by the federal government.⁶

A lesser yet nonetheless important facet of Hoover’s program was an appropriation of an additional $125 million for the federal land banks, which supported mortgages on farm properties and homes, some already in default. The appropriation passed Congress and was signed on January 23, 1932. The additional capital helped farmers keep their land and enabled homeowners to remain in their homes while preserving the liquidity of the local banks that held the home and land mortgages as collateral. The funding drove home another peg in the president’s plan to ease credit and deter deflation, one of the chief ogres intimidating recovery. The land banks complemented the role the Federal Reserve played for larger commercial banks. Complementing the land banks were twelve home loan discount banks, which discounted home mortgages. These institutions also supported smaller savings banks, insurance companies, and savings and loan associations. The Federal Home Loan Bank bill proposed on November 13, 1931, by the president was not approved until July 1932, near the end of the session. The delay caused the failure of thousands of banks and homes lost to mortgage foreclosures.⁷

In the fall of 1931 the U.S. economy was staggered by another crisis after Britain left the gold standard on September 21. For generations, the British pound sterling, backed by gold, had been the glue of the world economic system. Gold maintained exchange rates and controlled the amount of currency in circulation. After Britain abandoned gold’s backing, many felt it would become impossible for importers and exporters to plan ahead, especially those marketing perishable products. The prospect frightened businessmen into paralysis. European investors, fearing America might jettison bullion-backed currency next, began to drain the U.S. Treasury. France alone withdrew about $790 million in gold. By the end of 1931, some 2,294 American banks had failed, double the number of failures the previous year. Americans holding gold certificates withdrew the metal, and the rash of bank failures inspired panic withdrawals by depositors of currency, who hoarded their cash. There could be no wage stability or industrial recovery under such deflationary pressure. By the winter of 1932 the United States possessed only $430 million in bullion, with $1.3 billion outstanding to creditors. Hoover acted vigorously, warning Congress that it must enact legislation expeditiously to save America’s gold standard. Meanwhile, the Treasury paid out gold on demand to foreign and domestic creditors presenting gold bonds or certificates. The president did not reveal publicly how little remained to meet obligations, yet the payments helped calm the world financial community. The drain slowed, and some of the bullion began to flow back on the reassurance that America was a safer haven than most alternatives. Yet unless Congress enacted a permanent solution, the wolf at the door would remain famished.⁸

To resolve the issue, Hoover devised a plan to permit the backing of currency and government gold obligations with certain types of extremely reliable paper, known as “eligible currency,” as was already done in some countries. This would, in effect, stretch the supply of gold, making it back a larger sum of currency. Economically, the problem was largely psychological. If people considered the scheme reasonable and trustworthy, it would work. The proposal was certainly feasible from an economic viewpoint. The bigger problem was political. Hoover knew he had to persuade a Congress controlled primarily by the opposing party, during a presidential election year, to pass legislation that would doubtless help the nation but also might help Hoover’s presidential prospects. To accomplish this he recruited Democrats respected for economic acumen, Carter Glass of Virginia in the Senate and Henry Steagall of Alabama in the House, to sponsor the measure, known as the Glass-Steagall Act. Both Southerners were more conservative than Hoover, especially Glass, who embraced a phobia of large banks. Yet the president massaged egos and did not seek to hog credit. He had to compromise, because he preferred a more vigorous approach than his chief sponsors. Moreover, the Progressives, as usual, railed against the bill, claiming the president pandered to millionaire bankers while neglecting the poor and hungry. Hoover reacted cautiously, discreetly pointing out that when banks failed, depositors lost their money. Eventually, what became the Glass-Steagall Act navigated the legislative shoals successfully and Hoover signed it on February 27, 1932. It was among the most important acts of the Hoover administration, and the timing was crucial. To Wall Street, bankers, and many businessmen, the measure was even more important than the RFC. It helped restore a degree of business confidence, at home and abroad. Now only America and France, of the major powers, remained on gold. It is small comfort to say things could have been worse, yet they could have been. Hoover demonstrated patience and political finesse but received only a limited amount of credit. In fact, as his legislative achievements mounted during the winter and spring of the 72nd Congress, blame mounted simultaneously. As the 1932 campaign approached, the rival parties increasingly resembled the Donner party.⁹

Along with its blockbuster legislation such as the RFC and the Glass-Steagall Act, the 72nd Congress enacted a multitude of lesser bills. For example, on February 16 the House adopted the Lame Duck Amendment, already passed by the Senate, shortening the long interregnum between the election and inauguration of a president from early March to January 15. This permitted a more rapid transition of power, because a defeated outgoing president operated in a power vacuum during the long waiting period and the newly elected incoming president was officially powerless.¹⁰

The division between the branches of government during a presidential election year, occurring in the midst of the nation’s worst domestic crisis, left the ship of state virtually rudderless at times, and when political paralysis resulted, the reaction was to blame the opposing party. The Democratic leadership, headed by Garner in the House and Robinson in the Senate, was, on the whole, more conservative than Hoover. Garner and Robinson were Southerners, and a large bloc of their supporters had Southern roots. Unified on the objective of defeating Hoover, from 1930 through 1932 the Democrats sought to destroy the president politically. The Democratic National Committee employed poison-pen journalist and playwright Charles Michelson to write scathing diatribes against Hoover, which were delivered in Congress by Democratic politicians and planted in the Congressional Record and in Democratic newspapers and popular magazines. Hoover was accused of being insensitive to human suffering, of consorting with millionaires to foist the Depression upon the nation, of delighting in the plight of the hungry, and of cackling maliciously while Wall Street crashed. In addition to blaming the president for the Depression, Michelson belittled Hoover’s achievements during the Great War and as commerce secretary. The scorn was bitter and personal, some of it pure invention. The Progressives, many of them nominally Republicans, were often comparably abusive. Hoover refused to respond. He believed that if he did the right things, the politics would take care of itself. In his later years, Hoover said he had forgiven all his former enemies except Michelson. Garner, who fought Hoover to win at all costs, later became an admirer of the ex-president, writing, “If he had become president in 1921 or 1937 he might have been ranked with the great Presidents.” He added, “Today, I think Herbert Hoover is the wisest statesman on world affairs in America. He may be on domestic affairs, too.”¹¹

Perhaps more time and rhetoric were devoted to balancing the budget during the 72nd Congress than to any other single issue. Many politicians, as well as the American public, believed sound government required a balanced budget. Yet businessmen, and many consumers, opposed any tax increases—unless they fell exclusively on someone else. Every congressman who favored higher taxes or budget cuts in general opposed any that affected his constituents or powerful interest groups such as veterans, government employees, or labor unions. The president was troubled. Congressmen pledged themselves to balanced budgets and then voted against tax hikes or for projects that made that objective impossible. Some $2.5 billion of the $4.4 billion in government expenditures was earmarked for fixed expenses. The Depression had scoured a $2 billion hole in government revenues. Hoover was satisfied to settle for a less-than-completely balanced budget during hard times. He called for $1.6 million in tax increases. Part, but not all, of the remainder could be recouped by slicing fat. He submitted a bill for streamlining government by reorganization and paring, which was rejected. When he proposed placing government employees on a five-day week, with no pay for the day off, Congress initially balked but ultimately gave way. Hoover believed expenditures should be targeted, while some congressmen considered them Christmas presents for constituents. The president agreed to take the blame for reorganization that dismantled unpopular programs, but Congress mistrusted the chief executive to shelter their constituents’ booty. As the session wound down, the government was trapped in a vise. Tax receipts had fallen by 50 percent, while spending for job-creating public works had soared. Unemployed people paid few or no taxes while they soaked up relief. At one point a grand bargain seemed in the works for a national sales tax, which gained support in both parties but faltered. The final version of the economy bill passed the Senate rancorously on June 8, 1932, the House concurred on June 28, and the president signed the final measure on June 30, only days before the session adjourned. The measure empowered the president to implement some reorganization, but only following the November presidential election, after which many expected him to become a has-been. Estimates of final savings trimmed from the budget were about $130 million, falling far short of the $300 million Hoover had requested.¹²

While Hoover’s most important programs marched through the legislative chambers, several senators and representatives proposed relief programs that would expand federal involvement, though most had a short shelf life. In principle, Hoover agreed with strengthening the RFC, which he wanted to make the engine driving economic recovery by creating jobs and lubricating business and banking with credit. Realizing that private charity was failing to completely fill the necessities of the people, he was now amenable to spending a small amount for doles funneled through the states, allotted on the basis of prioritizing according to the local unemployment rate. Though he was still unconvinced that federal dollars could meet all needs, Hoover’s willingness to spend outpaced that of most legislators, who wanted to move prudently at this point in the Depression, although most lusted for additional federal public works in their own districts. A small group considered the president overly penurious. In February 1932, two liberal senators, Edward P. Costigan, a New York Democrat, and Robert M. La Follette, a Wisconsin Republican, cosponsored a measure to provide $75 million in direct relief to be channeled through the states, which was handily defeated. Next, three Democrats, Hugo L. Black, Thomas J. Walsh, and Robert J. Bulkley, also submitted a $75 million bill for doles distributed by the states, but this bill, too, was defeated. Senator Robert Wagner’s more grandiose measure authorizing the RFC to issue $1.5 billion in bonds to finance public works was quickly axed, as was his similar $500 million bill. Clearly, there was no consensus. Journalist Walter Lippmann joined the chorus of those who cautioned against spendthrift programs as a quick fix.¹³

The contest for scarce federal dollars and a fair means of raising and distributing the money heated up in late spring once the battle of the budget had ended. Senators Joseph T. Robinson and Robert Wagner had plans with which Hoover partially agreed. All of them concurred that work relief was preferable to doles and that the projects constructed should be useful and, if possible, self-liquidating. The president objected to Wagner’s technique of financing by a bond issue and distribution by population, regardless of the unemployment rate, designed to court vote-rich constituencies.¹⁴ However, in the latter phases of the session, the president’s chief rival in devising an acceptable measure was the opportunistic Garner. Hoover complained that many congressmen wanted to convert the RFC into a pork-barrel factory designed to make risky loans to companies domiciled in their districts. An old-fashioned spoils politician, Garner loaded his bill, introduced in late May, with provisions for special interests, trolling for votes. The president pointed out that when such unreliable companies defaulted, American taxpayers would be stuck with the debts. Garner retorted that the entire RFC was no more than a pork-barrel factory.¹⁵

Over the course of the skirmish, several versions of the Garner bill evolved. Hoover vetoed Garner measures that passed Congress on June 6 and June 11. The initial bill contained provisions for hundreds of public works scattered throughout the country, many of them post offices, to be built chiefly by mechanical labor, concentrated in middle-class, vote-rich areas of medium unemployment. Hoover contended that Garner’s public works would employ only 100,000 of a pool of 8 million jobless, none of them in permanent jobs. Garner proposed that all RFC loans be handled directly by the small RFC board of directors, which would overwhelm the six members, bypassing private banks, which had much greater resources, and effectively putting independent banks out of business. Further, the chief executive desired to focus on remunerative public works that would provide some permanent jobs and repay the costs of construction and maintenance over time, such as toll highways, tunnels and bridges, docks and harbors, dams for generating and selling electricity, and trees that could be planted and later harvested. Hoover framed a bill of his own, which included most of these provisions, but it was killed in a House committee. Congress was deadlocked; the need for legislation was urgent; the nominating conventions had met, Garner had been chosen for vice president on the Democratic ticket, and adjournment lay only days away. With the help of Senators Robinson and Wagner, Hoover and his allies cobbled together a last-minute compromise deleting most of the objectionable provisions in the Garner bill and giving Hoover most of what he wanted. One troublesome provision remained. The clerk of the House, with the consent of the Speaker, could publish the names of banks that had received RFC loans. This might ignite a run on banks by panicked depositors. Hoover did not believe the provision would be used—it was too patently self-destructive. Ultimately, the Emergency Relief and Construction Act of 1932 was passed by the House on July 14 and by the Senate on July 16, and Hoover signed it on July 21.¹⁶

The bold step failed to save Hoover politically, and recovery would take time. It was subsequently undermined by Garner’s publication of recipients of RFC loans, fueling a runaway banking panic during the winter of 1932–33. Yet the law itself stood as a Mount Everest–sized testimonial compared to some of the previous, less vigorous attempts to lift the economy. It showed how far Hoover was willing to go and how far he had come, and it left a blueprint for his successors. In fighting this final battle over a desperately needed landmark measure, Hoover had proved his mettle. Both firm and flexible, a seminal thinker, he had grown into an accomplished legislator, working under unforgiving deadlines and enormous stress. Yet there was no gloating in the White House in July 1932. Whether America would emerge from its economic collapse as Europe was doing, and whether the president faced a Waterloo at the polls, remained to be seen.¹⁷

For a divided Congress functioning in an election year during hard times, the 72nd Congress had remarkable achievements to its credit. Unemployment relief from self-liquidating public works projects totaled about $700 million. Other important bills were enacted, including ones limiting uses of injunctions for labor disputes, reorganizing procedure in federal juvenile cases, and rendering kidnapping a federal crime. Yet much time had been lost in endless debates, even as banks collapsed and mortgages fell due. Congress, and the president, could have done more and acted more expeditiously. Bankruptcy reform was not passed until after the 1932 election and budget reform was not enacted until June 1932. Congress failed to act on railroad reorganization. Nonetheless, with his program fleshed out, Hoover felt the pieces were in place for recovery. Long-term confidence, however, had not yet been achieved. Perhaps without the inflammatory oratory of the campaign that followed, the national economy might have lifted off, for there were glimmers of recovery, especially in the stock market, during the summer of 1932. But the economy remained fragile, and fear threatened to upset the delicate balance. The foremost accomplishment of this productive session was the RFC, which hurled $5 billion into the vortex of the Depression. The Glass-Steagall Act helped stabilize world currency exchanges. Near the end, Hoover and Garner became fierce antagonists, as the savvy Texan injected the rhetoric of class war into the clash. As recovery inched forward, yet buckled amid the scathing invective surrounding the campaign, progress continued throughout much of the world. The United States remained potentially the world’s mightiest nation, but the glimmer of a sunrise in the summer of 1932 proved merely a firefly in the night.¹⁸

President Hoover spent more time seeking a solution to farm poverty than to any other issue during his tenure. A Jeffersonian in his view of the yeoman farmer, Hoover—like historian Frederick Jackson Turner, one of his contemporaries who shared many of the president’s beliefs—considered the family farm the crucible of democracy. If democracy were to survive, farming would have to change, but farming was so ingrained in the roots of American traditions that the family farm as an institution must endure. Hoover proposed to amalgamate farms not by selling off small plots but by connecting them into cooperatives in which independent farmers acting in unison could practice economies of scale. These farmer-owned cooperatives were to resemble a pyramid, with the base at the grass roots. Hoover had evangelized for such a cooperative movement while secretary of commerce, and by the time he became president the movement had grown rapidly.¹⁹

In light of the spike in rural poverty caused by the Great Depression, Hoover renewed his push for a holistic farm program based on cooperatives. Hoover’s program was interlocking. Cooperatives would provide better negotiating power on the marketplace, in selling and purchasing. The key features were warehouses and grain elevators, constructed with government loans, which could store nonperishable crops and allow them to be released gradually rather than flooding the market at once, competing against one another. Hoover’s wide-ranging program also included reduced rail rates, a system of inland waterways for bulk traffic, and a St. Lawrence Seaway to connect the hinterlands with the Atlantic. Hoover urged farmers to diversify rather than overproducing staples such as wheat, corn, and cotton. Some agriculture advocates viewed exports as the solution. Yet, abroad, prices were lower, due largely to cheaper labor overseas, and foreigners would not buy at the high American prices. Unfortunately, the simple cure-alls evoked more political pizzazz than Hoover’s more scientific program. The Farm Board created during the 1929 special session enjoyed substantial success in recruiting members to the cooperative movement, and by October 1929 more than one-third of farmers belonged to co-ops. During the winter of 1930 the board began purchasing bales of cotton and bushels of wheat to prevent them from overwhelming the market and driving down prices ruinously. Gradually, the stabilization program expanded, yet farm prices still continued to plummet. Prices never reached a level where the board could recoup its original purchase price, and the board ended up selling at a loss, negotiating cheap foreign sales, and using the surpluses for disaster relief or giving them away to the Red Cross. By October 1931 wheat prices had fallen an additional 29.5 cents per bushel in a single year. Farmers suffered more than city people financially but ate a more plentiful diet. Industrial unemployment drove two hundred thousand people back to the countryside in 1931 alone, despite grim conditions in rural regions. The Farm Board proved a valiant experiment, but the law of supply and demand defeated efforts to legislate it out of existence.²⁰

Among the most infamous episodes of the Great Depression was a march of some twenty thousand veterans to lobby for immediate cash payment of a bonus for their service in the Great War. During the Harding administration, legislation was enacted to pay them $3.4 million twenty-five years later, when many of them would approach retirement age. The government placed $112 million yearly into a fund, supporting bonds that would mature in 1945. However, with the Depression, the vets demanded immediate cash payment, not at the 1932 value, but with future accrued interest at the 1945 value. Hoover felt sympathy for the veterans and had been a better protector of their interests than any recent president, constructing twenty-five new veterans’ hospitals, extending pensions for many disabilities not related to combat, and consolidating the Veterans’ Bureau and the veterans’ homes into the streamlined Veterans’ Administration, which provided prompt and efficient care. Hoover should have been the most popular recent president among veterans. In 1931 Congress passed over Hoover’s veto a bill loaning 50 percent of the value of the bonds to veterans immediately but did not appropriate any funds, conveniently blaming Hoover for the lack of money. Not all veterans were impoverished; in fact, some were wealthy. The president supported legislation that would pay needy veterans alone, but the vets insisted on all or nothing. The issue heated up in 1932, an election year. In January 1932, Representative Wright Patman, a Texas Democrat, submitted a bill to pay the veterans’ bonus in full, based on $2.4 billion in unbacked greenbacks. Hoover pointed out that this would make it impossible to help many of the truly needy nonveterans. However, Congress was aware that the truly needy were not an organized voting bloc glamorized by military valor. Hoover was labeled stingy and unpatriotic. The president pointed out that the cost of the plan, $2.4 billion, was more than half the entire national budget of $3.7 billion. Basing the payment on unbacked currency would devalue the worth of all assets, including salaries, bonds, and the veterans’ own pensions. It would create chaotic inflation and disrupt exports. Commodities produced by Americans would be worth less and banks would fail. There would be no faith in government credit.²¹

Meanwhile, unemployed veterans journeyed from the West Coast, picking up supporters along the way. Traveling from town to town, from state to state, by foot, auto, truck, or train, and sometimes transported by local police and civil authorities to keep them moving, some twenty thousand eventually set up ramshackle camps just across the District of Columbia line on the Anacostia Flats. A few camped out in abandoned buildings scheduled for demolition along Pennsylvania Avenue. Some men even brought along their families. Hoover provided army tents, food, and milk for young children covertly, lest he inspire other disaffected groups to march on Washington. The throng’s purpose was to lobby for passage of the Patman bill. The House passed the measure, but it was rejected soundly by the Senate, 62–18. Had it cleared both chambers, Hoover’s veto pen awaited. Hoover never doubted that many of the veterans were sincere, honest, patriotic Americans who believed in their cause. Yet among them were agitators, including a handful of Communists, who wanted to exploit the situation and inflame the public in order to destabilize capitalism. After the Senate defeated Patman’s bill, all but some five thousand of the veterans departed, and Congress, at the president’s request, appropriated money providing full rail fare home. Congress adjourned and left Washington. The stragglers now lacked a tangible reason to remain in the capital. At the orders of District of Columbia commissioners, the district police attempted to evict the squatters in the abandoned buildings along Pennsylvania Avenue. A scuffle erupted, and two veterans were killed by a capital policeman after one of them tried to seize his revolver. The district commissioners asked the president, in writing, to mobilize a contingent of the army to remove the veterans from all of Washington. Hoover instructed his immediate assistants, Secretary of War Patrick J. Hurley and Chief of Staff Douglas MacArthur, to use minimal force, including nightsticks but not rifles. On his own authority, Hurley decided that the outnumbered troops would be endangered, and he armed them with rifles. Assisting MacArthur were Major Dwight D. Eisenhower and Major George S. Patton. With MacArthur commanding, only tear gas was used; no bullets were fired; and there were no deaths or serious injuries. The army drove the retreating men, who called themselves the Bonus Expeditionary Force, to the district line at the Anacostia River, where Hoover had ordered MacArthur to stop. MacArthur halted for dinner and rest, then crossed the bridge as the campers fled. Accounts vary as to whether the troops, the campers themselves, or both, burned the camps, already in ruins. After returning, MacArthur received two stern tongue-lashings from an irate Hoover, who also rebuked Hurley for going beyond his orders.²²

Democrats and opposition journalists inflamed the issue, and FDR allegedly gloated, “This will elect me.” Yet in reality, while the episode hurt Hoover marginally, it had occurred near the beginning of the presidential campaign season. The unfortunate affair might have changed some individual votes, but it is unlikely that it changed a single electoral vote.²³