The Great Depression and the New Deal

The Great Depression

Starting with the collapse of the US stock market in 1929, the Great Depression was a period of worldwide economic stagnation and depression. Heavy borrowing by European nations from the USA during World War I contributed to instability in European economies. Sharp declines in income and production occurred as buying and selling slowed down. Widespread unemployment resulted, and countries raised tariffs to protect their industries. America stopped investing in Europe. This led to a loss of confidence that economies were self-adjusting, and President Herbert Hoover was blamed for the crisis.

Hoovervilles

Depression shantytowns were named after President Hoover, whom many blamed for their financial distress.

The New Deal

A series of reforms enacted by the Franklin Delano Roosevelt (FDR) administration between 1933 and 1942 with the goal of ending the Great Depression.

"The 100 Days"

The period from March to June 1933 when Congress passed major legislation submitted by Roosevelt to deal with the Depression.

Civil Works Administration (CWA)

A job creation program established by the New Deal during the Great Depression to create manual labor jobs for millions of unemployed workers.

Glass-Steagall Act (Banking Act of 1933)

Established the Federal Deposit Insurance Corporation (FDIC) and included banking reforms, some designed to control speculation. Repealed in 1999, opening the door to scandals involving banks and stock investment companies.

Securities and Exchange Commission (SEC)

A federal government agency responsible for enforcing the laws concerning the trading of stocks and bonds.

Federal Deposit Insurance Corporation (FDIC)

A federal guarantee of savings bank deposits initially of up to $2500, raised to $5000 in 1934, and frequently thereafter; continues today with a limit of $100,000.

Social Security

(FDR) 1935, guaranteed retirement payments for enrolled workers beginning at age 65; set up a federal-state system of unemployment insurance and care for dependent mothers and children, the handicapped, and public health.

Challenges to the New Deal

Support for the New Deal began to fade in 1935. Roosevelt used deficit spending to pay for his programs. He had to abandon a balanced budget and borrow money for the programs.

FDR's "Court Packing"

An ambitious but failed attempt by FDR in 1937 to stop the conservative Supreme Court from declaring liberal New Deal laws unconstitutional. The plan was to double the size of the Supreme Court, "packing" it with pro-New Deal supporters. Theoretically possible (the number of Supreme Court Justices is set by law) but rejected by his own supporters in Congress because it would upset the constitutional system of checks and balances.