President Hoover’s Response


In the immediate aftermath of Black Tuesday, Hoover sought to reassure Americans that all was well. Reading his words after the fact, it is easy to find fault. In 1929 he said, “Any lack of confidence in the economic future or the strength of business in the United States is foolish.” In 1930, he stated, “The worst is behind us.” In 1931, he pledged federal aid should he ever witness starvation in the country; but as of that date, he had yet to see such need in America, despite the very real evidence that children and the elderly were starving to death. Yet Hoover was neither intentionally blind nor unsympathetic. He simply held fast to a belief system that did not change as the realities of the Great Depression set in.

Hoover believed strongly in the ethos of American individualism: that hard work brought its own rewards. His life story testified to that belief. Hoover was born into poverty, made his way through college at Stanford University, and eventually made his fortune as an engineer. This experience, as well as his extensive travels in China and throughout Europe, shaped his fundamental conviction that the very existence of American civilization depended upon the moral fiber of its citizens, as evidenced by their ability to overcome all hardships through individual effort and resolve. The idea of government handouts to Americans was repellant to him. Whereas Europeans might need assistance, such as his hunger relief work in Belgium during and after World War I, he believed the American character to be different. In a 1931 radio address, he said, “The spread of government destroys initiative and thus destroys character.”

Likewise, Hoover was not completely unaware of the potential harm that wild stock speculation might create if left unchecked. As secretary of commerce, Hoover often warned President Coolidge of the dangers that such speculation engendered. In the weeks before his inauguration, he offered many interviews to newspapers and magazines, urging Americans to curtail their rampant stock investments, and even encouraged the Federal Reserve to raise the discount rate to make it more costly for local banks to lend money to potential speculators. However, fearful of creating a panic, Hoover never issued a stern warning to discourage Americans from such investments. Neither Hoover, nor any other politician of that day, ever gave serious thought to outright government regulation of the stock market. This was even true in his personal choices, as Hoover often lamented poor stock advice he had once offered to a friend. When the stock nose-dived, Hoover bought the shares from his friend to assuage his guilt, vowing never again to advise anyone on matters of investment.

In keeping with these principles, Hoover’s response to the crash focused on two very common American traditions: He asked individuals to tighten their belts and work harder, and he asked the business community to voluntarily help sustain the economy by retaining workers and continuing production. He immediately summoned a conference of leading industrialists to meet in Washington, DC, urging them to maintain their current wages while America rode out this brief economic panic. The crash, he assured business leaders, was not part of a greater downturn; they had nothing to worry about. Similar meetings with utility companies and railroad executives elicited promises for billions of dollars in new construction projects, while labor leaders agreed to withhold demands for wage increases and workers continued to labor. Hoover also persuaded Congress to pass a $160 million tax cut to bolster American incomes, leading many to conclude that the president was doing all he could to stem the tide of the panic. In April 1930, the New York Times editorial board concluded that “No one in his place could have done more.”

However, these modest steps were not enough. By late 1931, when it became clear that the economy would not improve on its own, Hoover recognized the need for some government intervention. He created the President’s Emergency Committee for Employment (PECE), later renamed the President’s Organization of Unemployment Relief (POUR). In keeping with Hoover’s distaste of what he viewed as handouts, this organization did not provide direct federal relief to people in need. Instead, it assisted state and private relief agencies, such as the Red Cross, Salvation Army, YMCA, and Community Chest. Hoover also strongly urged people of means to donate funds to help the poor, and he himself gave significant private donations to worthy causes. But these private efforts could not alleviate the widespread effects of poverty.

Congress pushed for a more direct government response to the hardship. In 1930–1931, it attempted to pass a $60 million bill to provide relief to drought victims by allowing them access to food, fertilizer, and animal feed. Hoover stood fast in his refusal to provide food, resisting any element of direct relief. The final bill of $47 million provided for everything except food but did not come close to adequately addressing the crisis. Again in 1931, Congress proposed the Federal Emergency Relief Bill, which would have provided $375 million to states to help provide food, clothing, and shelter to the homeless. But Hoover opposed the bill, stating that it ruined the balance of power between states and the federal government, and in February 1932, it was defeated by fourteen votes.

However, the president’s adamant opposition to direct-relief federal government programs should not be viewed as one of indifference or uncaring toward the suffering American people. His personal sympathy for those in need was boundless. Hoover was one of only two presidents to reject his salary for the office he held. Throughout the Great Depression, he donated an average of $25,000 annually to various relief organizations to assist in their efforts. Furthermore, he helped to raise $500,000 in private funds to support the White House Conference on Child Health and Welfare in 1930. Rather than indifference or heartlessness, Hoover’s steadfast adherence to a philosophy of individualism as the path toward long-term American recovery explained many of his policy decisions. “A voluntary deed,” he repeatedly commented, “is infinitely more precious to our national ideal and spirit than a thousand-fold poured from the Treasury.”

As conditions worsened, however, Hoover eventually relaxed his opposition to federal relief and formed the Reconstruction Finance Corporation (RFC) in 1932, in part because it was an election year and Hoover hoped to keep his office. Although not a form of direct relief to the American people in greatest need, the RFC was much larger in scope than any preceding effort, setting aside $2 billion in taxpayer money to rescue banks, credit unions, and insurance companies. The goal was to boost confidence in the nation’s financial institutions by ensuring that they were on solid footing. This model was flawed on a number of levels. First, the program only lent money to banks with sufficient collateral, which meant that most of the aid went to large banks. In fact, of the first $61 million loaned, $41 million went to just three banks. Small town and rural banks got almost nothing. Furthermore, at this time, confidence in financial institutions was not the primary concern of most Americans. They needed food and jobs. Many had no money to put into the banks, no matter how confident they were that the banks were safe.

Hoover’s other attempt at federal assistance also occurred in 1932, when he endorsed a bill by Senator Robert Wagner of New York. This was the Emergency Relief and Construction Act. This act authorized the RFC to expand beyond loans to financial institutions and allotted $1.5 billion to states to fund local public works projects. This program failed to deliver the kind of help needed, however, as Hoover severely limited the types of projects it could fund to those that were ultimately self-paying (such as toll bridges and public housing) and those that required skilled workers. While well intended, these programs maintained the status quo, and there was still no direct federal relief to the individuals who so desperately needed it.