During Hoover's presidency, the financial state of American wasn't that great. Hoover tried to help the banks without it seeming that the government was interfering. He did this because his ideals included voluntaristic and nongovernmental approaches. This meant that he didn't support government interference in financial and social problems. His first solution was the National Credit Association, which was a pool of private bankers, who were urged to create $500 million in credit to support weaker institutions and banks. This failed terribly, as one by one the banks started withdrawing.
Later, he created the Glass - Steagall Act of February 1932. and the Federal Home Loan Bank Act of November 1931. Both of these acts had the purpose of thawing millions of dollars frozen in assets. Unfortunately, even though Congress supported him reluctantly, they weakened his bill by including additional security requirements. This delayed the passage of the Federal Home Loan Bank Act to July 1932.
The Reconstruction Finance Corporation was by far the most effective and widely liked solution that Hoover came up with. It was based on the War Finance Corporation, which financed military plants. The RFC completely went against his ideals, but made sure that the weak institutions were getting the support they needed.
Basically, the RFC made taxpayers' dollars directly available to private financial institutions that needed support. To begin the process, Congress gave $500 million to the RFC and authorized it to borrow $1.5 billion besides than amount. This allowed it to give loans to banks, building-and-loan societies, railroads and agricultural stabilization corporations.
There were two reactions to the passage of this bill.
One half of the people were hopeful and glad for this bill because of the financial support it was giving them. But that wasn't the only reason. They wondered that if Hoover had interfered with the financial system, and gave them 'bank relief', wouldn't he do the same for the unemployed and give them jobs?
Unfortunately, not many people were happy with this bill either. The supporters of Hoover and his ideals were upset about his interference because he had always described himself as believing that, "the government is best which governs least". They feared that if he stepped over this idea, what would stop him from interfering with everything?
Sadly, the most torn between these two was Hoover himself. He had only done what was needed to be done, which went against him. He couldn't decide either to be happy about the financial state or to be sad about his interference in the economic system.
American history usually highlights Hoover's ineptitude during the Great Depression. He will be remembered by terms like "Hoovervilles" or "Hoover flags", so it is interesting to see his efforts in helping solve the Great Depression. I wonder how much was Roosevelt inspired by this when he created his famous New Deal. The big difference with Hoover's policy was that he was against government interference. Perhaps that was his mistake as the economic situation of the country was already at a decline.
ReplyDelete