History Chapter 17 Questions

Why did Hoover offer government help to banks and businesses and not to individuals? What did he think this help would do?

*Hoover feared that direct government handouts would destroy personal initiatives.* (On Test!) He hoped that restored financial health at the top of the economic pyramid would eventually trickle down to relieve unemployment at the bottom of it.

Why did the foreign market for American products go bad?

Policies such as the Fordney-McCumber Tariff, combined with an insistence on collecting war debts, interfered with world trade and destroyed foreign markets for American products, especially in agriculture.

How did the President want the government to help farmers in 1929?

President Hoover wanted the government to help farmers use their own organizations to market produce more efficiently and adjust to demand.

What happened to Prohibition in the late 1920's?

Prohibition was continued in the late 1920's.

Define armory, securities, speculation, on margin installment buying.

armory - place or building where arms and military equipment are stored securities - stocks bonds and other financial instruments traded on a stock exchange speculation - risky business venture involving buying or selling in the hope of making a large, quick profit on margin - method of buying stock with a small cash down payment and the rest borrowed from a stockbroker; stockbroker holds shares of stock as collateral for the loan; borrowed repays broker from stock resale profits installment buying - system of paying for goods at regular intervals, usually with interest added to the balance

What led to the development of the Nazi and Communist parties in Germany?

heavy war debts and riding unemployment caused great discontent among the German people

Define moratorium.

moratorium - official authorization to suspend payments, as with a debt; officially authorized period of waiting

Who was blamed for the Depression?

the current president, Herbert Hoover

What was the core of the smear campaign against Smith?

Religion was the core of the smear campaign against Smith. He was Catholic.

Who was Henry L. Stimson, and what did he want?

Secretary of State Henry L. Stimson wanted that *war debts and reparations be canceled completely, but Hoover refused*.

What were the Garner-Wagner Bill and the Norris Bill? How did Hoover feel about them?

The Garner-Wagner Bill gave direct aid to the unemployed. The Norris bill put the government in the business or producing and selling electricity in the Tennessee Valley, thus setting up direct competition with private companies. Hoover vetoed both.

Why didn't, withdrawing troops from Nicaragua and staying out of the affairs of Latin America win Hoover a little good-will?

The Hawley-Smoot Tariff had hurt Latin America's economy, and the region's resentment of the power of the US did not disappear.

How did people buying less add to the Depression?

People stopped buying luxuries, causing the manufacturers of those luxuries to close down or make them only run part-time. Thousands of workers were laid off.

Explain how speculation caused the stock market to rise.

As the prices of securities rose, more people began speculating as a way of easy money. This speculating caused the stock market

Why did the banks fail after the stock crash?

Banks loaned money to brokerage houses, which in turn brought stock themselves or loaned money to investors for speculative stock purchases. When loan payments were not forthcoming, many banks went bankrupt. In result, millions of people who had money in the bank that never brought stock lost everything because the banks closed.

How did corporations avoid tariff problems with other nations?

Corporations avoided tariff problems with other nations by establishing factories overseas.

How did agriculture lead to the Depression?

Farmers were in debt to the banks, which held mortgages for farms. The declining value of farms made it harder for farmers to get credit. The banks invested heavily in farm mortgages were in danger of falling. Also, huge farm surpluses produced a drop in farm prices so great that farmers spent more money producing than selling.

What happened to famer's income between 1929 and 1932?

Farmers' income was cut by more than half between between 1929 and 1932; their burden of debt became unbearable.

In the 1928 Presidential election, who were the two candidates, and what groups did they represent?

Herbert C. Hoover was the Republican candidate, who won, and Alfred E. Smith was the Democrat candidate.

State two reasons Hoover won the presidential election in 1928.

Hoover campaigned for prosperity and appealed to rural Protestant voters.

Summarize why Hoover disapproved of relief programs and direct involvement in business.

Hoover feared that too much reliance on federal actions would result in "paternalism" and "state socialism." He believed it would weaken the self-respect of those who received it, undercut the efforts of private charity, and that it would destroy the tradition of local responsibility for the unfortunate.

Why did Hoover oppose direct Federal Relief for unemployment?

Hoover opposed direct Federal Relief for unemployment because he believed if would weaken the self-respect of those who received it, undercut the the efforts of the private charity, and that it would destroy the tradition of local responsibility for the unfortunate.

Why was Hoover known as the "most widely traveled man to occupy the White House"?

Hoover visited every continent and knew many foreign leaders personally.

Why did Hoover want to suspend Germany's war debts to the U.S. for one year?

Hoover wanted to protect US investments in Germany and to save the German Republic from collapse, as well as to stimulate international trade.

Why didn't Hoover's proposed disarmament work?

Hoover's proposed disarmament didn't work because the US wasn't willing to join an alliance of nations committed to "collective security," whereby members would all agree to come to the aid of any member nation who was threatened with aggression.

How was Over-Production and Under-Consumption a cause for the Depression?

In Over-Production, machines produced more products than the American people could consume. For a while, consumer purchasing power was bolstered by installment buying. By the late 1920's, most consumer who could buy expensive items had bought them on an installation plan. Therefore, consumer spending decreased. In Under-Consumption, the rich got richer faster than the rest of the people. The families at the top of the "economic pyramid" had as much income as the families at the bottom. Although production increased, employment stood still and workers' wages slowly increased. There was insufficient purchasing power to support the nation's mass-production industries.

What caused Congress to be hostile to Hoover's policies?

In the election of 1930, the Democrats made gains in the Senate and won control of the House of Representatives. Hoover had an unwillingness to budge on certain issues. This power shift led to Congress being hostile to Hoover's policies during the last two years of his administration.

Why were people speculating in the Stock Market?

People bought shares they thought would rise in price quickly, and after prices went up they would sell the stocks for a profit. It tripled between 1925 and 1929.

What was Black Tuesday, and what happened to Security's prices by mid November?

On October 29, Black Tuesday, some 16 million shares were sold, causing such a collapse that by mid-November the average price of securities had been cut nearly in half. This cost investors about $30 billion, almost one-third of the value of all goods and services produced in the US in 1929. This loss was equal to the total wages of all Americans in that year.

What happened on October 24, and how did brokers react to it?

On Thursday, October 24, almost 13 million shares of stocks were frantically traded. As stocks' values dropped below the amounts borrowed to purchase them, brokers demanded that investors repay their loans. If they couldn't the brokers offered the stock for sale.

List four causes of the Great Depression.

One cause is the banks for lending the money to the speculators for buying stock on margin even though they were advised not to. Another cause is the speculators for buying the shares. They also made a third cause by not being able to pay their debts. Another cause is the value of securities rising very high.

Identify Wickersham Commissions, Agricultural Marketing Act

One of Hoover's commission, headed by former Attorney General George W. Wickersham, devoted 2 years to investigating Prohibition. The 11 members of the commission disagreed among whether prohibition should continue; as a whole, the commissions recommended that Prohibition be continued. The Agricultural Marketing Act of 1929 created a Federal Farm Board with $500 million at its disposal to help existing farm organizations.

What did the Agricultural Marketing Act of 1929 do?

The Agricultural Marketing Act of 1929 created a Federal Farm Board with $500 million at its disposal to help existing farm organizations and to form new ones.

What was the Clark Memorandum?

The Clark Memorandum, written by Under-secretary of State J. Reuben Clark, argued the position that the {Roosevelt Corollary to the Monroe Doctrine had no historical basis}.

How did the Farm Board try to help farmers? What did this help do?

The Farm Bloc tried to maintain the price of wheat and cotton by buying up the surplus of these crops. It also attempted unsuccessfully to persuade farmers to plant less, in order to reduce the amount of farm produce frown and this prevent further surplus crops. They did this without success. The immense quantities of wheat and cotton held by the government drove down the prices; unfortunately, the buyers feared that the government would sell these surpluses as soon as the prices rose.

What did this new board do to help farmers?

The Farm Board established national cooperatives, such as the National Livestock Marketing Association and the American Cotton Cooperative Association, and then loaned these organizations money to help keep prices stable.

What did the Federal Reserve Board do in order to restore stability?

The Federal Reserve Board tried to restore stability to the market by advising banks not to loan money for buying stocks on margin, but few banks listened.

Identify Hawley-Smoot Tariff, Reconstruction Finance Corporation, Clark Memorandum, Hoover-Stimson Doctrine.

The Hawley-Smoot Tariff started as a protection for farmers, but turned into the highest protective tariff in peacetime history. It raised the average duty on raw agricultural materials and other items above the Fordney-McCumber Act levels. The Reconstruction Finance Corporation made loans to hard-pressed railroads, insurance companies, banks, and even state and local governments, but not to individuals. It favored projects that were "self-liquidating"; that is, projects designed to pay their way so the government would eventually get back its money. The Clark Memorandum, written by Under-secretary of State J. Reuben Clark, argued the position that the Roosevelt Corollary to the Monroe Doctrine had no historical basis. The Hoover-Stimson Doctrine, designed to enlist world opinion against aggressor nations.

What did the Mellon Tax do to wealth distribution?

The Mellon Tax contributed to the uneven distribution of wealth. The rich got richer and the poor got poorer.

What was the R.F.C, and what did it do?

The R.C.F. was the Reconstruction Finance Corporation. It made loans to hard-pressed railroads, insurance companies, banks, and even state and local governments, but not to individuals. It favored projects that were "self-liquidating"; that is, projects designed to pay their way so the government would eventually get back its money.

What did the Republican campaign slogan, "Two Cars in Every Garage", mean?

The Republican campaign slogan, "Two Cars in Every Garage," meant that if Herbert Hoover is elected as president, everyone will be prosperous.

What message did the United States and its allies send by not taking action against Japan?

The U.S. and its allies just irritated Japan.

Why was the desire for world peace so strong by the U.S., and Hoover?

The desire for world peace was so strong was because preparation for war was costly and because few had forgotten the horrors of WWI.

Who was to blame for stock market speculation? Explain.

The speculators are to blame for stock market speculation because they are the ones who were speculating. The banks and stockbrokers are also to blame for lending the money to the speculators.

How did buying stock on margin work? (give a detailed example)

To buy stock on a margin, one made a small cash down payment and borrowed the rest from a stockbroker. For example, for $2,000 a person could buy 100 shares on margin rather than pay cash for 10 shares of stock at $200 per share. The purchaser simply put down 10 percent of the price (or $20 per share) and borrowed the other $1,800 from a broker, who would then hold the shares of stock as collateral for the loan. So long as prices continued to rise, investors could sell the stock later, repay the loan, and reap the profit.