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History That Doesn't Suck
172: Breadlines, Bank Failures, & the Bonus Army: Hoover & the Early Great Depression
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Greg Jackson
History that Doesn't Suck I'm your professor, Greg Jackson, and as in the classroom, my goal here is to make rigorously researched history come to life. As your storyteller, each episode is the result of laborious research with no agenda other than making the past come to life as you learn. If you'd like to help support this work, receive ad free episodes, bonus content and other exclusive perks. I invite you to join the HTDS membership program. Sign up for a seven day free trial today at hts podcast.com membership or click the link in the episode notes. It's Tuesday, November 19, 1929, exactly three weeks since the New York Stock Exchange's crash known as Black Tuesday, and President Herbert Hoover is entering the Cabinet Room at the White House. He takes his seat at the head of a long table as others follow. But the gents gathering here aren't Bert's presidential Cabinet. They're titans of the nation's railroad industry here at the behest of the President. Let me explain as they get seated and situated. While the stock market has continued to go down since its recent crash, no one realizes what economic miseries lie ahead. Most assume it's just the usual bust and boom, an unfortunate but normal economic panic. This includes Treasury Secretary Andrew Mellon, who advises the President to keep government out of the picture and let things run its course. To quote Andrew liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate it will purge the rottenness out of the system. High costs of living and high living will come down, people will work harder, live a more moral life, values will be adjusted, and enterprising people will pick up the wrecks from less competent people. Now, the President will note in his later writings that Andrew Mellon is not heartless. Rather, this entirely hands off thinking reflects his age, as the septuagenarian secretary goes on to explain that this is how previous presidents have acted or not acted and what he's personally seen since his early adulthood in the 1870s. But while this might have worked for Ulysses S. Grant in Grover Cleveland, Burt, who spent the last two weeks studying previous panics, believes that won't fly in the modern nation's more complex, interconnected and no longer majority agricultural economy. As such, Bert's holding meetings or conferences, as he calls them, with movers and shakers in various industries to ask them to step up to the plate and voluntarily do right. Ah, and this process starts with these railway leaders. So back to this conference. We don't have a play by play, but Burke gets after these railway men. He hounds them, to borrow a phrase from the stout president's future biographer, Kenneth White, getting them to agree to spend $1 billion on upgrading construction projects over the next year. Wow, talk about job creation. The New York Times calls this heartening information, and it sings Bert's praise. And Bert Hoover, or the master of emergencies, as he's also known, isn't done. Later that afternoon, he meets with members of the Federal Reserve's Board of Governors. They hear the President's concerns, and like the New York Reserve bank, which lowered its discount rate from 5 to 4.5% last week, the other Reserve banks will lower their rates to make credit flow. The next day, November 20, Burt meets with the nation's most influential business car manufacturer, Henry Ford, Sears Roebuck's Julius Rosenwald, General Electric's Owen Young and others. Burt urges them to remember the people that this is a quote unquote human problem and offers a if they'll avoid layoffs and wage cuts, he'll get labor not to strike. They aren't all as enthusiastic as Henry Ford, who proclaims that he'll even give raises. But they agree, contingent on labor going for it, no problem. The following day, November 21, Bert gets William Green of the American Federation of Labor and other union leaders to say yes. So no layoffs, no cut wages and no strikes. Meanwhile, Bert's creating the Volunteerism Assisting National Business Survey Conference, getting the newly created Federal Farm Board to maintain crop prices, coaxing state and municipal leaders to tackle relief efforts and increase public works programs, and convincing the National Electric Light association to spend $100 million on projects. That's our great humanitarian. The president's also trying to keep things calm by avoiding the word panic. Instead, he's calling this economic downturn a simple depression. Huh. We'll see how that term ages. But right now, it seems Bert's on a roll. And as the month ends, he has the opportunity to show leadership with the State of the Union address. Let's see how it goes. It's the afternoon of December 3, 1929. We're in the U.S. capitol's House Chamber, and congressional clerk William Tyler Page is approaching the daisy. Yes, a clerk. While Woodrow Wilson restored the tradition of the president personally delivering an annual address to Congress shy Herbert Hoover prefers the old method of a clerk reading it with another in the Senate chamber. Reading to that august body, William now faces the 71st Congress's representatives. He reads. The problems with which we are confronted are the problems of growth and of progress. In their solution, we have to determine the facts, to develop the relative importance to be assigned to such facts, to formulate a common judgment upon them, and to realize solutions in a spirit of conciliation. Nice positive framing, Bert. William reads the President's thoughts on foreign affairs. His recommendation to trim the military's budget. Then comes to a subject that the newspapers will really pick up on. Attacks. Cut. The President wants Congress to lower income and corporate taxes by 1% each, even though it will cost the federal government $160 million. Coming to what he calls the general economic situation, Bert addresses the wave of uncontrolled speculation that led to the stock market crash, but assures Congress that this economic downturn will be a smoother ride than previous ones. Bert has full confidence in the Federal Reserve system and the voluntary deals he's been putting together. Our faithful clerk reads out the President's. The sudden threat of unemployment and especially the recollection of the economic consequences of previous crashes under a much less secured financial system created unwarranted pessimism and fear. I have therefore instituted systematic voluntary measures of cooperation with the business institutions and with state and municipal authorities to make certain that fundamental businesses of the country shall continue as usual, that wages and therefore consuming power shall not be reduced and that a special effort shall be made to expand construction work in order to assist in equalizing other deficits in employment. Yes, the President is confident in the strength of these voluntary measures. If at moments like this that the Republican Representatives applaud, the Democrats don't. Stronger enforcement of prohibition, the post Office budget, the development of highways. Burt's address tackles these and more, including a reiteration of his interest in a tariff that he expects will protect American farmers. But will these endeavors, particularly these voluntary measures for which he's currently receiving so much praise, lift the nation from this depression? Only time will tell. Welcome to history that doesn't suck. I'm your professor Greg Jackson and I'd like to tell you a story. I know it sounds like Herbert the master of emergencies Hoover has this economic downturn, this depression in the bag yet as I trust you know, but spoiler alert, if not, the depression will only get worse and come to define Bert's one term presidency. That tragic path is today's story. We'll start where we just Left off, late 1929 with the hopeful nation looking to their famous for disaster relief press president entering 1930 we'll find Burke continues to encourage volunteerism along the lines of what we heard about in this episode's opening and see him face a nasty flood as well as sign the protective Smoot Hawley Tariff into law. Meanwhile, the breadlines keep growing and before the year's end a major bank collapses the not a government institution despite its name bank of the United States entering 1931, we'll find that Americans and President Herbert Hoover are all starting to realize that this isn't a typical economic downturn. We'll listen to Burke continue encouraging the nation's volunteerism with an inspiring speech at Valley Forge, but also see the Great Depression take a nasty turn on the global level as banks fall like dominoes in Europe. As these failures lead Great Britain to give up the gold standard, Bert will follow the conventional wisdom of the day and do what he must to protect America's gold standard and gold supply by 1932. We'll find that Burr is trying new programs, even some that require making space for the federal government in the everyday American's life. Like the Reconstruction Finance Corporation, but with unemployment through the roof, Americans living in shanty towns dubbed Hoovervilles and Great War veterans marching and camping in Washington D.C. to demand their long promise but still not due bonuses be paid. Now can Burke keep the confidence of the American people or will his use of General Douglas MacArthur and the US army to disperse these veterans prove a death blow to the out of step on Prohibition President's chances of re election? So very much to find out. Oh, and one final note. This episode uses a number of economic terms defined in episode 170, like the federal Reserve System, discount rate securities and more. So if you haven't heard that episode, you might want to start there. And with that, let's continue the tale of Herbert the Great Humanitarian, Hoover's presidency at the start of the Great Depression. Here we go. Quick, decisive, hitting the books to understand previous panics or depressions, to use the new term, and how to confront them. Yes, President Herbert Hoover, the man who fed the Belgians during the war, the Russians after, and handled the great Mississippi flood of 1927, sure seems to be living up to his nicknames as the Great Engineer, the great humanitarian and the master of emergencies in the immediate aftermath of the stock market crash of October 1929. As Will Rogers once said, when a man is sick, he calls a doctor. But when the United States of America is sick, they call for Herbert Hoover. Or better still, it's as the New York Times puts it on December 1, 1929, just two days before the state of the Union that we just attended. Quote, too much praise cannot be given to the President for the prompt and resolute and skillful way in which he has set about reassuring the country after the financial collapse. No one in his place could have done more. Very few of his predecessors could have done as much. Now, this same New York Times article also points out that no one should expect this downward economic turn to reverse overnight. To quote it again, Hoover himself would be the first to say that it should not create false hopes. It will be some time before the projected outlays by great corporations can be made concrete in actual employment. Sure. I mean, all the greatest minds know this is merely a run of the mill panic. But even those have to run their course. But as December passes and 1929 fades into 1930, unemployment isn't leveling off, it's going up. And in New York City, one charitable woman is noticing an uptick in those seeking her assistance. It's a chilly winter afternoon just before 4:30 on February 24, 1930. 51 year old Michigan born Miss Marion Spohr pushes aside her wealth of brown curls as she steps out of her chauffeured car and onto the snow and slush of first street between Second Avenue and the Bowery in New York City. She walks toward her usual locale, a small cul de sac called Extra Place, and in doing so passes hundreds of men in a line that wraps up and down the street and much of the block even parting for traffic near the corner of first street and Second Avenue. Some of these men jobless, homeless, perhaps disabled but invariably hungry have been standing here shivering in the cold winter's wind for more than six hours. And they're here to see Marion, or as they and the rest of New York call her, the Lady Bountiful of the Bowery. Once situated in her usual spot, Sergeant David Geraghty and nine patrolmen help Marion distribute tickets. Each one is redeemable for a bowl of stew, a slice of bread and a cup of coffee at the YMCA at 22 E. 3rd St. These tickets are valued at about a nickel a piece, and Marion, a former dentist turned artist famous for supposedly channeling dead artists in her own surrealist works, is handing out roughly $700 worth of these breadline vouchers. She also distributes colored tickets for anyone in need of shoes or medical attention. But as the men come forward, the curly haired brunette artist is likely noticing some faces she hasn't previously seen in her three years of distributing these tickets twice a week. In the weeks ahead, the New York Times will report that breadlines like Marion's are increasingly filled with men not only dressed in army overcoats and navy pea jackets, but suits, ties and white collars. Don't bother asking anyone what brings them here today. They'll all tell you the same thing. I'm out of work. The needs of this crowd aren't just food, though. For these extra cases, as Marion calls them, she uses her office at 24 E. 3rd St. 1 is a French woman who has only a quarter to her name but must pay $30 in rent due today. Marion sends her away with 50 bucks. She then pays the bus fare for a man, his wife and two children to get to Atlantic City, where he has a job lined up. Marion also pays the full $75 for a man to replace his crude wooden leg with a proper prosthetic. When asked by a New York Times reporter about her future plans, she states simply, the breadline will go on just the same. Our Lady Bountiful of the Bowery. Marion Spohr is not the only one working to help the ever growing and even necktie wearing jobless population of New York City. The following month, March 1930, Reverend Dr. Randolph Ray, the rector of the Church of the Transfiguration, announces a breadline to feed 1,000 mouths daily. It's the third time his church has done this, the last being the panic of 1907 and before that during the Civil War. Lt. Col. Wallace Winchell of the Salvation army reports that they're not only busy with meals, but have filled all 611 rooms of the Bowery hotel with destitute people. In fact, there are times when they even pack the corridors and lounging rooms with 400 more who need to escape the cold winter's night. The same is true for Ms. Grace Swan of the St. Barnabas House on Mulberry street. Though normally intended strictly for destitute women and children, Ms. Grace has found herself in recent months opening her doors to families of the unemployed. And of course, William Randolph Hearst, who's never one to miss the chance to get his name in his own newspapers, also operates a charity, breadline. He has two trucks in the middle of Times square distributing soup out of cauldrons from morning until night under massive klieg lights, illuminating the charity. Nor are the breadlines in needy just a big apple thing. It's like this across the nation. For instance, an opportunity for the unemployed to chop wood in exchange for groceries in Boston draws a crowd of 600. Yet despite these and other concerning developments across the nation, it's important for us to remember that at this point, most of the nations supposedly informed, as historian John Garrity puts it, remain convinced that this is a typical panic. Indeed, that same March, 36 states report unemployment at either normal rates, moderately up or even descending. That June, president Herbert Hoover tells a group of clergymen asking him to expand public works projects that you have come 60 days too late. The depression is over. Meanwhile, congress has one of Bert's pre stock market crash economic goals ready for his signature. The Smoot Hawley tariff. Sponsored by senator Reed Smoot and representative Willis Hawley, this tariff isn't actually what the president had in mind. See, Bert wants to help the American farmer. He pushed for last year's agricultural marketing act, which created the federal farm board to help stabilize agriculture markets by purchasing surplus grain and cotton. And in that same spirit, he's pushed for an agricultural tariff that in theory will protect American farmers from foreign imports. But after all the horse trading required to make the Smoot Hawley tariff happen, it's now raising rates on 2,000 items, including a slew of manufactured goods. A lot of economists oppose the tariff, at least 1028 to be precise. And they sign an open letter to the president calling for him to veto it. They note that tariffs are already high and fear this will only anger international trading partners. Hmm, that wouldn't be great considering how important international trade is now that the United States produces 40% of the world's manufactured goods. House of Morgan's senior partner, Thomas W. Lamont, whose office we visited amid the crash in episode 170 later recalls, I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley Smoot Tariff. But Bert's blown so much political capital to make this tariff happen, and it has the flexibility provision that he requested. So on June 17, Burt signs the Smoot Hawley Tariff, or more properly, the Tariff act of 1930. And just as the economists feared, trading partners retaliate with tariffs on American goods. The Smoot Hawley Tariff's actual damage will number among those aspects of the Great Depression that future historians and economists will long debate. That said, few, if any, will call it helpful. But whatever one might think about the Smoot Hawley Tariff, Bert has another problem on his hands. In the summer of 1930, a drought has struck America's heartland. Hold up. An emergency devastating millions of families as crops and livestock die. Well, now we're in the master of emergencies wheelhouse. Assembling the governors of the several afflicted states, Burt calls for establishing the National Drought Relief Committee, which will work with state committees, which will work with county committees as charities like the Red Cross do the heavy lifting. Ah, the Red Cross, not the White House. See, Burr earnestly believes that it is not the federal government's role to heavily intervene in such emergencies. And that's keeping him from applying his natural gift for handling a crisis to this drought. Now that he's president, he expects others to carry America's proud tradition of volunteerism. It's with this limited government thinking that he tells the more relief minded Congress not to send more than $25 million in aid and only as loans for drought stricken farms. Not a government government dole to feed the hungry. But the starving are not interested in ideological technicalities. Neither are all in Congress. And one representative from the devastated state of Arkansas can't help but question why the president, quote, would feed jackasses, but wouldn't feed starving babies. Ooh, not a good look for the man famous for feeding starving Europe. Meanwhile, as we enter late 1930, the depression isn't letting up. With over 4 million Americans out of work, unemployment will average 8.7% for the year. In October, Berk creates the President's Emergency Committee for Employment. Ah, but like the drought committee, it offers no direct assistance to the average American. Instead coordinating with state and local programs. America takes a big step toward the Democrats in November's midterm election. But this is hardly a full repudiation of Herbert Hoover. Republicans still hold a majority in both houses. There's still every reason to expect this slump. This Depression is no worse than the panic of 1920-21 and will soon work itself out. But then the banks start failing. Now, bank failures are not unusual in this era. Even in the Roaring Twenties, hundreds shut their doors every year. The best year was 1922, when only 367 banks went under. But as unemployment rises and productivity drops, bank closures skyrocket. A major culprit is the ethically questionable Caldwell and Company, which has been struggling ever since the crash of 29. When its bank of Tennessee goes down on November 7, it unleashes a cascade of bank closures in the south. The last two months of 1930 alone see 608 banks suspend operations. While this is a national figure, most of these banks are in the drought region, which it seems not only dried up farmland, but bank liquidity. Now, Bert Hoover still has hope. If you ask him, he'd be quick to point out that a full third of these banks reopen before long. And on December 2, his state of the Union address reassures that, quote, the fundamental strength of the nation's economy is unimpaired. But it's hard to quell fear. Amid rumors and failing banks, they create panic and bank runs. It's the afternoon of December 10, 1930. We're at the corner of Southern Boulevard and Freeman street in the Bronx, New York City, where a massive crowd has gathered outside the bank of the United States. The reason is that earlier today a small time merchant came to this bank that despite its name, is not connected to the US Government and found the publicly traded institution unwilling to cash out his stock in it. Or so some say. Others claim that the bank merely advised the merchant not to sell because their stock is such a good investment. But whatever the truth, it doesn't matter right now because these terrified account holders converging on the bank are all set on one thing. Getting their money out before this bank fails and they lose everything. Mounted police patrol as some 20,000 people, mostly spectators, but including thousands of account holders, crowd the bank's doors. Bodies choke off the entrances as unmanageable lines pour inside, where bank tellers do their best to reassure customers who more often than not nonetheless choose to withdraw. The accounts come in all sizes, including one man who waited two hours just to withdraw $2 from a savings account. By the end of the day, the panic has led to bank runs on the institution's other branches, like those in Brownsville and Brooklyn. Bank of The United States VP Herman Gottlieb estimates that some 2,500 customers have withdrawn $2 million from this location in the Bronx alone. That evening, a group of financiers meets at the Federal Reserve bank of New York to discuss how they might save the bank of the United States from closing its doors. But come morning, they have to admit that they can't. The bank runs have it hemorrhaging. It's failed in this era before Federal bank insurance. A bank's failure means its customers simply lose their money. Period. That's why, as the bank of the United States shuts its doors for good on December 11, 1930, George Jealous is so desperate. The 61 year old's $1,000 life savings from his 40 years of work as a janitor was all in that bank. And he was only able to withdraw 200 before it folded. Utterly despondent, he hangs himself from a steam pipe in his apartment, leaving behind a simple note to his son reading, let my wife have all the money if she gets any. Goodbye, George. Be a good boy. While the bank of the United States does manage to pay out a significant percentage of deposits, George's heartbreaking tale is but one glimpse into the damage wrought upon its 400,000 account holders as a great deal of their combined $202,972,469 in deposits evaporate. For some, this bank failure, the first big bank failure, is the moment that the Depression becomes the Great Depression. By the end of 1930, the year has seen over 1,300 banks fail. And as 1931 begins, there isn't an end of this in sight. Increasingly, Americans are recognizing that this temporary economic downturn isn't so temporary after all. And as this reality sinks in, the nation continues to hope that their organizationally gifted president, the master of emergencies himself, the great humanitarian Herbert Hoover, can right the ship.
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Greg Jackson
Historians and economists will forever debate why this economic panic or this depression to again use President Herbert Hoover's new term still isn't self correcting by the start of 1931. But regardless of those debates, the fact is that productivity is down. For instance, the private sector spent about 33% less on construction over the past year, a difference of about $3 billion than it did in the year previous. Unemployment is creeping into the double digits. With the American people still looking to Bert that January, his new Secretary of Labor, William Doak, points the finger at foreigners. Bert gets on board. As the President will later state in his memoirs, he restricts immigration because directly or indirectly, all immigrants were a public charge at the moment. Either they themselves went on relief as soon as they landed, or if they did get jobs, they forced others onto relief. This deportation effort, soon dubbed repatriation, starts with the Department of Labor's Bureau of Immigration sending agents to work with local law enforcement in raids of city centers like La Placita in Los Angeles in February 1931, where more than 400 people are searched by agents looking for what the later government appointed Wickersham Commission will call, quote, supposed aliens without papers. Americans of both major parties find these rates disturbing. Pivoting from those bad optics, then, William Doak's agents go more low key, trying to incentivize those they approach to leave the country on their own. These tactics include denying food relief and medical care or providing a free train ticket out of the United States. In this way, thousands are deported, many of whom are native born US citizens going to countries where they have no homes or families. While various immigrant communities are affected, including Japanese and Chinese Americans. Repatriation primarily targets Mexican Americans, especially in Southern California, and will continue into the 1940s. Shortly after repatriation starts in March 1931, construction begins on the largest American public works project to date, a dam in the Colorado River's Black Canyon that will allocate water to several southwestern states and generate hydroelectricity. Now, not to take away from this nearly 50 million dollar dam, its 70 million dollar power plant and generators, or the ultimate employment of more than 20,000 men to build them. But we should note that this is not Burt directly responding to the ongoing depression. This project has roots going back to his days as Commerce Secretary and will continue well after he leaves the White House. Oh, and is it filled with drama. Yeah, we'll save this story for another day. And so, as the early months of 1931 pass, the American people increasingly want their talented president to take direct action. But Bert largely holds to his philosophical belief that the federal government should not do what the American people might do. Through volunteerism. In his mind, volunteerism is how he fed war ravaged Europe. It's how he's accomplished so many of the great deeds on his resume. And as for his power moves as head of the U.S. food Administration, well, that was different because the Great War was going on. Burt draws that distinction while speaking at Madison Square Garden, calling Woodrow Wilson's wartime presidency a centralized despotism while asserting that, quote, however justified in time of war, if continued in peacetime, it would destroy not only our American system, but with it our progress and freedom as well. Yes, Burt is sure that the American people can voluntarily uplift each other and thereby overcome this depression. They just need inspiration, a new narrative. And that's just what he plans to give the nation this Memorial day. It's about 10:30 in the morning, Saturday, May 30, 1931. Exiting their flower filled private car, the first couple, Herbert and Lou Hoover, wave to the crowd gathered around their motorcade escort in Valley Forge, Pennsylvania. What a crowd it is. Cars are backed up for miles. The Red Cross has stations set up ready to attend to any who succumb to the late morning's heat. There are after all, some 20,000 people here today. They've all come to this most famous and sacred of Revolutionary War winter camps for the same reason. To listen to Burt deliver a Memorial Day address. The first couple walks through a lane of soldier to soldier, Pennsylvania National Guardsmen all standing to quote the Philadelphia Inquirer. Rigid as carven statues, they form a path to the red, white and blue platform prepared for Byrd's speech. As the presidential couple proceeds through their well protected column, First Lady Lou Hoover finds herself returning the salutes from what the papers call her own troops, that is the Girl Scouts. Every time the first lady raises her hand to her black straw hat, she puts an ear to ear grin on the face of yet another young uniformed girl. The President ascends the platform. The crowd goes wild. As he does so, you can barely hear the 21 gun salute from 107th Field Artillery or the horns of the 108th Field Artillery Band taking the stand. Burt basks in the shadow of an ancient maple and looks at the sea of faces before him, including in the front row, Civil War veterans. I wonder if he notices the black Union soldier seated next to the 80 year old gray clad former Confederate. Well, with two microphones before him, one for the radio broadcast and one for for the talking motion picture of this event, Burt begins speaking. And it doesn't take long to see why the Great Depression president has chosen this sacred, hallowed ground. For today's remarks, this national shrine needs no description. The events enacted here require no recounting. To the American people. The very name Valley Forge swells within us a pride of nationality. These peaceful fields hold a glory peculiarly their own. The sufferings of Washington's army and that dreadful winter of privation have made this place famous among all men. It was not the glory of battle for which these fields are remembered. No great battle was fought here. A thousand other fields mark the courage, the glory, the valor, the skill, the martial triumph of our race. Yet it is a shrine to the themes of the spirit and of the soul. It was the transcendent fortitude and steadfastness of these men who, in adversity and in suffering, through the darkest hour of our history, held faithful to an ideal. Here men endured. That a nation might live this peculiar significance of Valley Forge in our American annals should strike us all with a special force. In this particular moment of our national life. The American people are going through through another Valley Forge at this time. To each and every one of us, it is an hour of unusual stress and trial. You have each one your special cause of anxiety. So too have I. The whole nation is beset with difficulties incident to a worldwide depression. Valley Forge meant such a challenge to steadfastness in times and terms of war. Our test is to meet this challenge in times. In terms of peace. We are enduring sufferings and we are assailed by temptations. We too are writing a new chapter in American history. If we weaken, as Washington did not, we shall be writing the introduction to the decline of American character and the fall of American institutions. If we are firm and farsighted, as were Washington and his men, we shall be writing the introduction to a yet more glorious epic in our nation's progress. God grant that we may prove worthy of George Washington and his men of Valley Forge. It's a touching speech. Unfortunately, these inspiring words can't stop Europe's economic meltdown, nor the ramifications it will bring to America's shores. Now, before I get into the specifics of European fiscal failures, let me remind you that Post World War I, America's financial system is much more enmeshed in Europe's economy than it was before. As we know from episode 147, 1919's Treaty of Versailles required Germany to pay astronomical reparations to Britain and France. Germany's new Weimar Republic answered by printing money to make payments, which caused hyperinflation. This was fixed, however, in 1924 by the Dawes Plan. We covered this in episode 156. But in short, then Vice President Charles Dawes plan created a triangular cash flow. The US loans Germany money, which enables Germany to make payments to Britain and France and that in turn helps Britain and France pay its war debts to the US well this plan was followed by another early in Herbert Hoover's presidency called the Young Plan. Led by Owen D. Young of General Electric, the Young Plan kept the same international cash flow while laying out a plan for Germany to make its last reparations payments in 1987 and floated the Weimar Republic another $300 million loan. All that to say the aftermath of World War I has a lot of money flowing between the U.S. germany, Britain and France. And this means that if one fails, it could have a disastrous domino effect. And with all of these nations apart from France feeling a financial pinch over the last year or so, it's less a question of if this happens than when. A little less than three weeks before Burt's Valley Forge speech. In other words, on May 11, 1931, the first international domino fell. Austria's Great bank, perhaps the biggest bank in central Europe, Credit Arnstadt, failed. Now Austria may not be a part of the Dawes or Young Plan trade triangle, but as a major trading partner with neighboring Germany and no stranger to trade with the US credit Arnstadt's closure contributes to more US banks failing. 167 fail that June alone and Germany seeing enough bank closures and destabilization for its president Paul von Hindenburg to fear a communist or fascist coup. Yikes. On June 5th, House of Morgan's senior partner Thomas W. Lamont calls President Herbert Hoover, suggesting a bank holiday on war debts and reparations. Treasury Secretary Andrew Mellon hates the idea, but Bert's on board. On June 20, the President officially calls for this one year moratorium on war payments. Come July 6, all nations and parties required to agreed to it have. And the Hoover Moratorium as it's known, goes into effect. It really is a great idea, but it's too late. Later that same month, July 13, one of Germany's largest banks, the Dane bank, goes under. That's right, the second domino. Wall street panics. U.S. institutions are heavily invested in German securities. In fact, investors of the world over panic as their gaze shifts across the English Channel. After all, Germany and Britain are so enmeshed financially, what ramifications will this German failure have? In London? Not waiting to find out, investors start dumping the already troubled British pound sterling, sending the gold backed currency reeling. Between July 6 and July 30, the bank of England's gold fund falls from an equivalent of $807 million US to only 158 million. It's all too much. On September 21, Britain abandons the gold standard. 25 other nations follow suit. While John Maynard Keynes celebrates his and his fellow Britons quote, breaking of our gold fetters. Britain's relief is a third domino that slams into the United States. Why? Because the US Is still holding to the gold standard and to prevent its gold holdings from being drained internationally. In the wake of Britain's move, the Federal Reserve has to tighten credit. Now, tightening credit is the exact opposite of what a nation's central banking system should do in the midst of a depression. In the 21st century, most would call this throwing gasoline on a fire. But there's no way Bert, or indeed most experts in 1931, would risk a path that might take the United States off gold standard. Like Britain, protecting it is a given. So to that end, the Federal Reserve banks begin tightening credit by raising discount rates. The New York Fed's discount rate climbs from a historically low 1.5% in May to 3.5% by October. Britain's departure from the gold standard further convinces Bert that he can't keep cutting taxes and running deficits, both radical experiments that he's done over the protests of Treasury Secretary Andrew Mellon. The President's sure that next year he has to balance the budget, and that means raising taxes again. Doing this during a depression might sound crazy to our 21st century ears, but that's not understood yet. Congress hardly flinches at the ask. Meanwhile, the President is still trying with his volunteerism policies. In August 1931, Bert reorganizes his earlier President's Emergency Committee for Employment into the President's Organization for Unemployment Relief. The intent is to remake this effectively toothless relief coordinating committee into one with more direct control. But newspapers across the country view this largely as just a name change, and, well, that's a fair assessment. In October, Bert announces the creation of a voluntary association of banks that, with a pool of $500 million, will serve as a lender of last resort to banks. A supplement to the Fed, if you will. Unfortunately, the banks involved are hyper conservative. With these funds, the NCC does, as historian William Lucktenberg puts it, and I quote, next to nothing. The 1930 drought, the Smoot Hawley Tariff, failing domestic banks, Bert's strong preference for volunteerism over direct federal assistance, the chain of international fiscal disasters, the rising of discount rates and taxes. Historians and economists will likely never stop debating the weight of each and how they did or didn't interact with each other to extend or exacerbate the financial woes first made palpable by 1929 stock market crash. But whatever the exact restaurant recipe is, it's a powerful cocktail, one that's knocking Prohibition, feigning Uncle Sam out and forcing even the famously well paying Henry Ford to cut wages by the end of 1931. 2,300 banks have failed that year alone, with over 8 million out of work. Unemployment is over 15%, and as more struggle to even put a roof over their heads, many Great War veterans aside, they've had enough.
- [44:26]
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- [44:55]
Greg Jackson
I'M James McComb, reporting live from home in my bathrobe in slippers. Tonight we're talking Dunkin Poehler Peppermint Coffee. Gene's here with the latest. Gene, do you copy?
- [45:08]
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The home with Dunkin is where you want to be.
- [45:20]
Greg Jackson
Entering 1932, President Herbert Hoover signed some milestone legislation, some of which show that the old man of volunteerism is learning some new tricks. Perhaps no piece of legislation more embodies that than the creation of the Reconstruction Finance Corporation or the RFC that January. Effectively, the RFC gives loans to various financial institutions, including traditional banks, federal land banks, insurance firms, railroads, and more. As author Charles Rapalai puts it, the RFC represents a complete capitulation from Bert, who himself says of it, certainly the public will not blame the administration if, upon inability of private enterprise to save the situation, the government should do it. It must be humbling for Bert. And yet the RFC was his idea. Congress passes it with bipartisan support. In the months ahead, the RFC will expand its game, lending to state relief programs and public works projects as well. That will start with the passage of the Emergency Relief Construction Act. In February, Bert signs the Banking act of 1932, or the First Glass Steagall act, as it will come to be known. This expands the type of assets upon which Federal Reserve Banks may rely to make loans to its member banks, albeit at a higher interest rate, and allows reserve banks to use government securities, not just gold to issue federal reserve bank notes. That is cash money. So basically uncle sam sticking with his gold standard diet, but now has cheat day once a week. And as alluded to earlier, Burt signs his tax raising revenue act of 1932 that summer. But he also tries to help home ownership through the federal home loan bank act. It's a good call. The struggle to maintain or get a home is evident as the number of Americans counting themselves among the nation's hobo population rises. No one can say where the term originated, but hobos are very much a class and culture unto themselves. They're typically migrant workers, usually restless white males aged 20 to 50, who get around by riding the rails. While the glory days of hobo life are past, that era ran roughly from 1870 to 1920. The Great Depression is giving the life a resurgence. These days, hobos are often catching rail cars out west with hopes of finding work in mines, lumber camps, or harvesting fields. A willingness to work is important. To quote one unnamed hobo loafs and sits, tramps, loafs and walks. But a hobo moves and works, and he's clean. But a willingness to work doesn't mean the hobo won't, shall we say, been the rules. When needed, especially when work isn't to be found, they'll beg, borrow, or steal if required to make a mulligan stew. That's why hobo camps, or jungles, as they're also called, aren't popular with locals. Such jungles are popping up in city parks and vacant lots all over the country. But perhaps none are more noteworthy than the hobo camp at Chicago's grant park. Its occupants have a sincere humor. Their tents and scrap wood houses are set up like a city unto itself, with roads like easy street and hard times avenue. They even have their own unofficial mayor, Mr. Mike Donovan. And naturally, if you're going to have a mayor, the unofficial town should have a name. They call it by a new term that the democratic national committee's publicity pro, Charles Michelson, has coined for their campsite, hooverville. Oh, and does it catch on in the south? The tipton times reports that, quote, hobos in St. Louis created a new addition to that city known as hooverville. In Oregon, the klamath news tells its readers about hooverville, the hobo town beyond the viaduct, Close quote. Yes, a decade and change remains removed from the war years when to hooverize was a positive expression for saving and economizing. Charles michelson has successfully made Burt's last name a negative term for the shantytown so rapidly spreading across the country, but ubiquitous as these Hoovervilles are becoming, no camp of the downtrodden will gain more attention or reflect more poorly on the President than the one filled with Great War veterans and their families in Washington, D.C. now, I don't expect you to remember this. It was brief. But back in episode 156, I mentioned that in 1924, Congress overrode President Calvin Coolidge's veto to pass the World War Adjusted Compensation act, also known as the Bonus act, which promised Great War veterans, excluding most commissioned officers, a bonus for their time in the service. In short, it entitled doughboys serving between April 1917 and July 1919 to $1 per day of stateside service and $1.25 per day of overseas service, with the stipulation that the amount of the credit of a veteran who performed no overseas service shall not exceed $500 and the amount of the credit of a veteran who performed any overseas service shall not exceed $625. But payday wasn't immediate. It wasn't intended to come until 1945. No wonder some doughboys call it a tombstone bonus. And yes, if they've passed, their estate will get paid. That said, the Bonus act did allow the vets to take out loans against this promised payment starting in 1927. Well, as you can imagine, banks aren't terribly interested in giving such loans in 1932. And yet many of these veterans desperately need the money. At a meeting of the National Veterans association in Portland, Oregon, former Sgt. Walter Waters tells the assembled vets his story. He lost his job and still needs to provide for two children. He tells his fellow Doughboy vets that a letter writing campaign just won't cut it. It's high time for them to demand their bonus in person, to march like the soldiers they are to Washington, D.C. and demand their payments now when they need it most. Walter is so incensed, he says he'll lead the March himself. Soon, 300 vets are following him across the continent to the capital, traveling by hitchhiking thumb train or foot. It takes them about a month to get to D.C. and thousands of likewise frustrated veterans swell their ranks all along the way. Arriving in the nation's capital, the Doughboy veterans set up camps, and the best known is in the city's southeast area, called the Anacostia Flats. The vets named this one Camp Bartlett, in honor of the landowner allowing them to stay here. Now, you will be hard pressed to find anyone calling this camp a Hooverville, since its inhabitants are vets here for a specific Purpose as opposed to migrant working hobos or other classes of the homeless. But the site of these former doughboys tents and shacks close enough for some like the Miami News to describe Hoovervilles as quote, somewhat after the manner of the Anacostia settlement of the Bonus Army. But President Herbert Hoover isn't having it. Paying out these veterans will cost the already running a deficit federal government a fortune. That won't help balance the budget, which as we know Burt believes is what needs to happen for the nation to recover financially. With some of his closest advisors suggesting they meet the Bonus army with bayonets, Burt answers that would almost certainly end in bloodshed. Instead he sticks to his talking points, stating in a speech that the imperative moment has come when the increase in government expenditures must be avoided. Narrowly enough of Congress agrees. While the House votes in favor of the bonus bill's proposal to shell out $2.4 billion to the doughboys immediately, the Senate does not. It kills the bonus bill. On June 17, 1932, much of the Bonus Expeditionary Force, a name riffing off of these vets service in the American Expeditionary Force during the Great War, leaves at this point. But not all of them. After all, what's Congress compared to the horror of Belleau Wood, the Marne or the Meuse Argonne? These most insistent of former doughboys figure they've lost the battle but not the war. They declare that they're staying until payments come, even if that's in 1945. And that's when things escalate. In July, President Herbert Hoover says that the veterans have to go home, even if that's by Force. It's 4:10 in the afternoon, July 28, 1932. We're in the open green space of Washington D.C. ellipse just south of the White House where Army Chief of Staff General Douglas MacArthur is surveying a several hundred strong force from the US army now preparing to evict Bonus army vets. It's a tense situation. Just this morning the police shot and killed two while attempting to evict veterans from buildings along Pennsylvania Avenue. Now Doug is tasked with driving those former doughboys holding buildings north of the Anacostia river back to their more southern camp in the Anacostia Flats. With all that attention, Doug turns to Brigadier General Perry L. Miles, the direct commander of these forces. Perry addresses the officers. Gentlemen, the so called Bonus marchers are occupying certain government properties in Washington and are successfully resisting efforts by the police to evacuate them. This command has been called upon to clear those properties. You will use such force as is necessary to accomplish your mission. Tear gas will be used. Women and children who may be found in the affected area will be accorded every consideration and kindness. And with that, they prepare to move out. 20 minutes later, this force is moving down Pennsylvania Avenue. 200 carbine bearing cavalrymen ride at the front, their sabers drawn. Behind them roll the trucks carrying five tanks. These are followed by 400 infantry and finally two staff vehicles. Generals Douglas MacArthur and Perry Miles ride in one, while Major Dwight D. Eisenhower and Captain Thomas Jefferson Davis are in the other. As they move, locals wonder, is this a show of force alone, or do they mean business? Proceeding down Pennsylvania avenue to about 3rd street, the Army approaches several dilapidated, half standing three to four story buildings. A few shacks are here too. All of these will be raised in the near future, but right now they're filled with bonus army vets. Doug is shocked. He expected a small group them then, nope, there are thousands here. And worse is the complicated variety of people. As Captain H.W. blakely will later describe. The street is filled with, quote, a fantastic mixture of rioters, spectators, shoppers, streetcars, baby carriages, police, infantry and officers in civilian clothes. The force is ordered to halt. They fix bayonets. A veteran sees this and shouts at the soldiers, the last time I saw them bayonets, I was going through the marn. But none of the soldiers laugh. An officer at the center of Pennsylvania Avenue shouts into the shanty town, you got three minutes to clear out. Three minutes, I warn you. Soldiers start to put on their gas masks. Then a rock flies and that's it. Immediately, soldiers hurl gas grenades into the crowd of veterans. The troops then proceed to push the bonus marchers southward toward their main camp across the Anacostia River. But as they do, the wind ensures that innocent bystanders and spectators are soon exposed to the gas as well. Amid coughs, shouts and cries, most of the veterans run, but some stand their ground. They throw bricks and rocks at the soldiers, only to be met by cavalrymen who slap at them with the broadsides of their sabers. Gas mask wearing infantry continue to lob gas grenades almost carelessly as tanks roll forward and shacks are set ablaze. Major George S. Patton will later recall the sight. From atop his horse, bricks flew, sabers rose and fell with a comforting smack, and the mob ran. While the President gave the green light to evict these vets, this is not what he had in mind. Yet worse comes later that night as Douglas MacArthur pushes south of the Anacostia river and into the main bonus army camp. He does so while refusing to receive messengers from Secretary of War Patrick Hurley, trying to tell the General not to cross the bridge and drive south of the river. Doug does so anyway and over the protestations of Major Dwight D. Eisenhower. Instead, Doug insists that he must quell what he dubs an insurrection and heads south over the bridge. Writing about this later, Burt says that I did not wish them driven from their camps. Our military officers, however, having them on the move pushed them outside the District of Columbia. But neither Douglas MacArthur's assurances that his actions were composed completely necessary nor Bert Hoover's insistence that this was not his plan changed the fact that Washington DC's hospitals are filled with wounded veterans. While many newspapers are content with the response that communists had taken over the bonus march on the ground reporting isn't as kind. The Washington Daily News writes, quote, what a pitiful spectacle is that of the great American government, mightiest in the world, chasing unarmed men, women and children with army tanks. Close quote. Yeah, that hits hard. And it's going to hit Bert even harder politically. As Americans head to the ballot box this November, things really aren't looking good for Bert's reelection. The gross national product is down to 60 billion from 1931's 75 billion, which is already down from 1929's 105 billion. The Dow Jones industrial average has fallen from its pre crash record high at the start of Byrd's presidency. 381.2 all the way down to 41.2. Unemployment has surpassed 20% with over 12 million out of work, which is to say nothing of those who are employed but have seen their wages cut. It's hard to capture the prevailing sentiment better than the Miami News does. Two months before the election in a September 1932 article, and I quote, a chicken in every pot was the promise. Hooverville is the performance. Harsh criticism comes for Herbert Hoover both immediately and through the decades ahead. They include things like his almost endless faith in volunteerism, the Smoot Hawley tariff, his response to Britain leaving the gold standard with higher taxes and a drive to balance the budget, his handling of the bonus army, and of course his shy personality and support of prohibition didn't help. In fact, odd as it may seem to our 21st century ears so focused on the Great Depression, Prohibition costs Bert votes more than any other issue. Yet much of the criticism that will come after the fact forgets that up until 1932 the nation was largely with Bert. That the era's experts were just as baffled as anyone at this. Inexplicable depression. It may also be that for future Americans familiar with the successes of President Franklin D. Roosevelt's later New Deal, it's hard to see just how much Bert did push the boundaries and try new things. As historian David M. Kennedy so succinctly puts it, his Hoover's failure in the face of the Depression has obscured his achievement as an activist president who pointed the way to the New Deal. Hoover was no mossback conservative in the Harding Coolidge mold. Long sympathetic to the progressive wing of his party, he had supported labor, urged closer business government cooperation, established government control over the new technology of radio, and proposed a multi billion dollar federal public works fund to offset downswings in the business cycle. And indeed, while historian William Lichtenberg is quick to remind us that Bert was quite loath to give up on volunteerism and most certainly should not be seen as a fan of expanding government, it is true that Burr intervened in the economy to an unprecedented degree for a president up to his time, and that he planted some New Deal seeds. As Rex Tugwell of FDR's Brain Trust will say decades later. We didn't admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started. So did Bert the great humanitarian, the master of emergencies, simply come up against a catastrophe that no one could have beaten? Was it just bad luck? Well, that'll be his take. But presidents don't have the luxury of excuses or even legitimate reasons. The nation judges by outcome. Period. And after winning the White House by a landslide in 1928, Bert loses it by a landslide in 1932. America now turns to a man who, as governor of New York, has proven a capable executive even even in the midst of the Great Depression. A man who exudes the kind of charisma and hope that a nation so desperately craves in these hard times. A man who offers a fresh face but a familiar name. Welcome to the story. President Elect Franklin Delano Roosevelt. History that Doesn't Suck is created and hosted by me, Greg Jackson. Episode researched and written by Greg Jackson and Will Bulldozer Keen Production by Airship Sound design by Molly Bach Theme music composed by Greg Jackson Arrangement and additional composition by Lindsey Graham of Airship for bibliography of all primary and secondary sources consulted in writing this episode, visit htdspodcast.com HTDS is supported by Premium Membership fans. You can join by clicking the link in the episode description My Gratitude to youo Kind Souls Print providing additional funding to help us keep going and a special thanks to our members whose monthly gift puts them at producer status. 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- [65:05]
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