Welcome back to part two of lecture 13. We ended the last video by talking about
some of the factors that led to the
stock market crash. And now I want to
talk about a few of the issues that led
to this being a sustained problem. The
market could have just gone down
temporarily and then bounced right back
up. Now there's been books written on
this topic. So I'm dramatically
oversimplifying things. Just understand
that. But some of the main points that I
want you to understand is that we're
going to start to see bank failures
throughout the country. During normal
times people store their money for
safekeeping in banks. Well, as many
Americans were losing money in the
market and increasingly starting to lose
their job as corporations start to
layoff employees in a bid to save money - 
we're going to start seeing so-called
bank runs - people coming into their local
bank and withdrawing every cent of money
from their savings and taking it home.
This is catastrophic for the banking
industry. Banks need more people
depositing money into the bank than they
need people withdrawing money from the
bank. Remember, too, that some of these
banks had given out loans to private
investors, to corporate investors in the
run-up to Black Tuesday. And now these
banks are also losing money. Not only
are the loan amounts not being
repaid. But they're not getting interest
from them either. This makes for many
banks getting into a financial situation
in which they are literally forced to
shutter at their doors. And during this
period there are no safeguards for
people to be able to recoup or get back
their savings accounts. If a bank closes
during this period, your money is just
gone. There's no one to appeal to for
help
or restitution of funds. Therefore, as
word got out that banks are starting to
close, this exacerbated these bank runs.
Now people are saying "Oh my gosh. I've
got to get to the First Bank of Omaha.
I've got to get there and get
money". And this only speeds up the
collapse of many banks throughout the
country. Without banks future businessmen
cannot go and apply for business loans
to open up new businesses. Future
homeowners have nowhere to go to apply
for mortgages. So the fact that we have a
massive banking collapse in the country,
it really just stymies new innovation,
new businesses. It prevents people from
getting loans for homes.
It has a far-reaching effect for years.
Another issue that deepens this crisis
over time rather than alleviating it was
the fact that even before Black Tuesday
we have what's known as an existing
maldistribution of wealth in the United
States. If you've heard of the phrase "the
rich getting richer and the poor getting
poorer", that was what was taking place
during the 1920s. Not everyone was
sharing equally in the stock market
build-up. For instance, during this period
the top 5% wealthiest in the United
States owned 30% of the
nation's aggregate income. This was aided
by the Coolidge administration's tax cut
for the wealthy, which only increased the
proportion of the national wealth
concentrated in the hands of fewer and
fewer. Therefore, when the Great
Depression finally arrived after Black
Tuesday the spending power of the
average American was much less. They
could now not afford items such as cars
or household appliances, consumer goods -
that before had really powered the bulk
of the U.S.'s manufacturing before this
period. There's no one to buy these items
now. As this economic crisis began to
drag on for weeks and then months and
gradually into years, we start to see
American employers laying off workers by
the tens of thousands and then by the
millions.
The unemployment rate began to spike
precipitously despite the fact that
President Hoover tried to coax these
business leaders into not doing that. He
said "Let's just stay the course - the market
will correct itself sooner rather
than later. Don't do anything rash like
laying off a lot of employees".
But business leaders were unconvinced.
And here's where we really see the
ripple effect of what started on Wall
Street now affecting your average
American. Now individuals who didn't even
know what the stock market was, had never
gambled with their money in that fashion,
are finding that they no longer have a
job at RCA or Ford or Westinghouse. And
so while they were not directly tied to
the stock market crash, they are very
much feeling the effects of this
economic collapse. So by the time we get
to 1932 we have another presidential
election rolling around. Hoover will be
seeking a second term in the White House.
But he's losing popularity rapidly.
Hoover remained very reluctant to use
the power of the federal government to
directly intervene in the economy - the
sort of laissez-faire view that we've
already talked about. Instead, Hoover
emphasized that Americans should rely
upon private charitable organizations to
turn to for help in case they needed
housing or clothing or food, and that
American businesses should stay the
course. In other words, that they should
not lay off any more people - they should
just continue on ahead and that
the country will soon pull out of this.
That was what Hoover maintained when he
was on the campaign trail in 1932.
However, public sentiment continued to
turn against him. He was booed and jeered
at campaign stops. He had rotten
vegetables thrown at him. The American
people were now unconvinced that there
was going to be any quick solution to
this problem. And they also believed that
the president was increasingly tone-deaf,
that he just didn't seem to care about
the plight of people starving to death
on street corners. His campaign slogans
such as "The worst is past" or
"Prosperity's just around the corner" rang
hollow for most Americans. Worse, from the
standpoint of Hoover's reelection
campaign, we'll see a public relations
nightmare unfold during the summer of
1932.
We have thousands of veterans who had
served their country bravely in the
Great War who are out of work,
down-on-their-luck, homeless in some
cases. And they are owed a pension check
from the US government for their service
on behalf of their country. The big
problem from their standpoint is is that
their military pension checks - or bonus
checks - were not due to be paid to them
until 1945, more than a decade in the
future. For many of these veterans they
said "I may not be alive a decade from
now. My family is homeless and starving
today. We can't wait. " So during the summer
of 1932, you're going to see what becomes
known as the Bonus Expeditionary Force
or the Bonus Army converging on our
nation's capital. That year thousands of
veterans from across the country began
descending upon the capital and setting
up camp like an informal shanty town on
the steps of Capitol Hill in Washington
DC. They wanted to be a very visible
reminder to their legislators -  their
Senators, their Congressmen  -that we're
not going anywhere until you approve
early payment of our military pension.
For President Hoover, who, again, is
seeking re-election, this does not look
good. You can imagine there were droves
of reporters talking to these men,
getting their hard-luck stories and
reprinting them in newspapers across the
country. So for Hoover he will make an
unfortunate decision. He's going to call
out the US Army to disperse the veterans
on the steps of Capitol Hill.
the US Army will not treat its veterans
very nicely in this case. The veterans
are not willing to move. So the Army will
deploy tear gas to try and force them
out. They'll manhandle some of these
veterans. They'll ultimately set this
shantytown on fire. I don't know how well
you can make out in the picture on the
slide but this was a famous photograph
of the fires raging on the steps of
Capitol Hill. If you look in the
background through the mists of
smoke you can just make out the Capitol
rotunda here in the background. So to a
public that already believed that their
president was being callous and not
providing federal aid to people who
needed it, this treatment of veterans was
the icing on the cake for them.
They do not want Hoover as their
president any longer.
