The Depression also made many banks collapse and go bankrupt. This was because people so many people withdrew all their money very quickly, so the banks didn’t have enough money to carry on going. In 1929, 659 banks went bankrupt. A lot of public confidence was lost in the banks after these incidents. Then in 1930 1352 banks went bankrupt, including the Bank of United States in New York where 400,000 immigrants and half of New York had their savings. If everyone had to keep their money at home it would be no good to the economy, then in 1931, 2294 banks went bankrupt. This was a very big problem because thousands of people lost all their savings which made thousands poor and the economy needed their money. This lost a lot of trust from Americans and Roosevelt had to take action so he introduced ‘The Emergency banking Act’, he closed all the banks that were affected and had them checked by government officials. If they were safe they were reopened with government help, but many banks had to be permanently shut down because they were so badly hit. This Emergency Banking Act did succeed but for many Americans it was too late because they had already lost their savings. Some people had lost all their money and some lost their homes. Also it was an important problem for the New Deal to tackle because without stable banks, the economy would not be able to recover.
Another reason the New Deal was introduced was the agricultural crisis. Farmers had been overproducing so prices were low during the 1920’s as well. Due to over producing and droughts, in the southern states, millions of acres of farming land became infertile and dusty. This was called a ‘dust bowl’. This resulted in many farmers going bankrupt and the total farm income fell to just $5 billion. So many farmers were unable to pay mortgages, and when sheriffs arrived to re-posses their farms they set up protests. They armed them selves with pitch forks etc. but many were still forced to leave and had to live in trucks on roads. This made the dust bowl worse. So in order to improve things, Roosevelt set up the ‘Agricultural Adjustment Administration’ (AAA) which set limits for how much each farmer was allowed to produce, if they had had too much produce, it was destroyed and the farmer was given compensation. Because the farmers were so poor, this also helped them with their mortgages and taught those in need, better methods of farming to preserve the soil. As the dust bowls were such a problem and farming played a big part in the economy, the AAA’s intervention was successful in that it stopped the dust bowl. This resulted in prices becoming higher because they were producing less which was good for the farmers and the whole economy. In addition, many of farmers received compensation. Many farm labourers lost jobs because farmers were being paid to produce less. It was too late for the farmers who had already lost their farm or home. By improving poverty amongst farmers, the New Deal was contributing to the recovery of the USA as this is a significant group of people. The New deal did achieve its aims in this area.
A further issue that the New Deal was instructed to address was homelessness. Due to the Wall Street Crash, many people had no jobs and were forced out of their homes, this means they were not paying taxes and had no money, and many began to starve. They also did not contribute anything to the economy. Because there were so many homeless, it became a big problem and needed to be sorted out. ‘Home owners Loan Corporation’ (HOLC) was set up to help people keep their homes. This allowed home owners to make smaller payments and reduced their interest rates. The HOLC helped thousands of people keep their homes and it meant the banks were still getting some payments. But the HOLC was too late for some who had already lost their homes.
The Wall Street Crash had made the American economy collapse, the banks were bankrupt, there were thousands of homeless and unemployed and Roosevelt had the job of getting it back on its feet. This situation was the key reason Roosevelt introduced the New Deal. He set up the ‘Alphabet Agencies’ (e.g. AAA, CCC, HOLC…) each one was trying to solve one of the problems of the depression, e.g. the civilian conservation corps (CCC) was set up to provide jobs for unemployed young men on environmental projects.
Another reason for the introduction of the New Deal was because president Hoover’s ideas of ‘Laissez faire’ did not work, as unemployment carried on escalating. He soon lost all of the public’s trust, and a president with no public trust is almost no use at all.
Franklin Delano Roosevelt introduced the New Deal when he became president in 1932 at the time of the great depression, to get America’s economy back to normal. He had to sort out the unemployment problem and help millions of Americans get jobs, restore banks, and also the public’s faith in the banks, and stop America over-producing. Also he had to restore public confidence in the government because of the damage president Hoover had done, and regain the confidence that Hoover had lost.
