The New Deal

• Roosevelt was inaugurated in March 1933
• In the 4 months between Roosevelt being elected and taking office, the depression worsened further
• Roosevelt was dynamic and people were excited for him
• Roosevelt brought a new style of presidency
• Roosevelt gave twice-weekly press conferences, where he learnt the names of the press, explained carefully and invited questions
• The press were on Roosevelt's side, reducing information leaks and criticism
• Roosevelt gave weekly 'fireside chats' by radio to the country. They were popular and people listened
• 50 people had to be employed to handle Roosevelt's mail. By contrast, Hoover only needed 1
• Roosevelt's advisors were the best qualified, regardless of political affiliation, forming his 'Brains Trust'
• Henry A Wallace, a farming expert, was appointed Secretary for Agriculture
• Roosevelt encouraged rivalries and disputes, as they made his advisors more dependant on him to resolve them
• Roosevelt inspires loyalty, energy and enthusiasm
• Roosevelt asked Congress for emergency wartime powers and called them for a 100-day long special session
• 40 banks were closing a day and many state governors, such as the Governor of Nevada, were declaring bank holidays
• From January to March 1932, the nation's gold reserves fell from $1.3 billion to $400 million
• Banks only had $6 billion available for $41 billion of deposits
• There were mass bank withdrawals: $500 million in 2 days before the inauguration
• Roosevelt closed all banks on 6th March 1932 for 4 days while the Emergency Banking Relief Act was passed
• Hoover had already considered the Emergency Banking Relief Act's measures but had decided against them
• Roosevelt was accused of acting unconstitutionally with the Emergency Banking Relief Act
• The Emergency Banking Relief Act aimed to restore confidence in banks by giving the Treasury the power to investigate all banks and authorising the RFC to buy stock in banks to help them repay their debts
• Roosevelt had his first 'fireside chat', where he reassured people and asked them to put their money back in banks
• By April 1932, $1 billion was returned to bank deposits
• The 1933 Glass-Steagall Act banned commercial banks from speculating in investment, disallowed bank officials from taking personal loans from their banks, transferred authority over open-market operations from the Federal Reserve Banks to the Federal Reserve Board and insured individual deposits up to $2 500
• Open-market operations included buying and selling government securities
• The insurance fund was administered by the Federal Deposit Insurance Corporation (FDIC)
• Some criticised Roosevelt for not being radical enough and using the ideas and officials of the Hoover administration to implement change
• Some thought banks should have been nationalised rather than helping them
• Roosevelt didn't nationalise banks because his primary goal was to safeguard American capitalism
• Roosevelt wanted to stop the flow of gold out of the country and increase the currency in circulation to raise prices
• Roosevelt took the dollar off the gold standard in March and April 1933 by forbidding the export of gold, prohibiting the trading-in of gold and requiring the return of gold to the Federal Bank for $20.67 an ounce
• Roosevelt intended to bring down the value of the dollar abroad so foreigners could afford American goods
• Following Roosevelt's changes, foreigners could buy 15% more
• On 22nd October 1933, Roosevelt announced the RFC would buy gold above the market price ($31.36 an ounce)
• As the price of gold rose, the value of the dollar fell
• On 30th January 1934, the Gold Reserve Act fixed the price of gold at $35 an ounce, a 60% devaluation since March 1933
• Prices rose a little after the Gold Reserve Act, but this didn't support any major economic recovery
• Roosevelt sought to raise prices by introducing more silver, where prices were at at an all-time low. The government began to buy silver in 1933 at artificially high prices
• The June 1934 Silver Purchase Act stated the Treasury would buy silver until it had reached 33% of the value of gold or what its monetary value should be
• The Silver Purchase Act only really subsidised the domestic silver industry and had no significant economic impact