Herbert Hoover

F

Secretary of Commerce

When Ohio Senator Warren G. Harding became president in 1921, he appointed Hoover secretary of commerce, a small office that Hoover strengthened until he resigned in 1928. During his seven years as head of the Department of Commerce, Hoover extended its control over mines and patents. He promoted the growth of trade associations and chambers of commerce to make industry more efficient. Hoover did not believe in either the traditional laissez-faire policy, in which the state had no involvement in the economy, or in government intervention in the economy. Instead he preached a doctrine of voluntary cooperation in which private citizens would organize to achieve a goal. The government would support but not control these organizations. He did, however, expand government regulation in two areas involving new technology, radio broadcasting and commercial aviation. He made federally collected statistics more available and encouraged manufacturers to standardize parts and supplies. Hoover saw the Department of Commerce as an important support for the expansion of American business overseas, and in the area of foreign commerce the department expanded its operations tremendously—at the expense, some felt, of the State Department's traditional role.

Hoover did not lose his reputation as a humanitarian. During the Russian famine of 1922 and 1923 he organized the distribution of millions of dollars' worth of American food, and he directed relief after the Mississippi River flood of 1927.

G

Election of 1928

President Calvin Coolidge's withdrawal from the 1928 presidential race left the Republican Party nomination wide open. Hoover had been making plans to seek the presidency, and his personal organization began an active hunt for delegates. When the national convention assembled in Kansas City, Missouri, in June 1928, the delegates and their bosses recognized the attractiveness of Hoover's name to voters and nominated him for president on the first ballot. Hoover received 837 votes to only 74 for his nearest rival, former Illinois Governor Frank O. Lowden.

The convention adopted a conservative platform and chose United States Senator Charles Curtis of Kansas as the Republican candidate for vice president. Hoover had previously declared himself in favor of vigorous enforcement of the 18th Amendment (which banned alcoholic drinks) “a great social and economic experiment, noble in motive and far-reaching in purpose.” (see Prohibition).

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Opposing Hoover was the Democratic nominee, Governor Alfred E. Smith of New York. Smith was a product of New York City's Tammany Hall, a political organization whose name had become synonymous with corruption. He was also Roman Catholic, considered a handicap in the preponderantly Protestant nation. Smith also opposed the 18th Amendment, which made him unacceptable to numerous rural regions in the South and West.

In contrast, Hoover's name was known everywhere, and he rode on the crest of Republican prosperity, for which Hoover, as secretary of commerce, was the symbol. In November, Hoover won in a landslide, with 444 electoral votes to Smith's 87, and 21,437,277 popular votes to Smith's 15,007,698. Hoover carried every Northern state except Massachusetts and Rhode Island. He also broke the traditional hold of the Democratic Party on the South by winning five Southern states: Virginia, North Carolina, Florida, Tennessee, and Texas.

IV

President of the United States

A

Farm Legislation

Hoover was inaugurated on March 4, 1929, and during the first six months of his administration, the economic prosperity that had characterized the country during the 1920s continued. One industry, however, did not enjoy the fruits of this economic success: agriculture. An increase in efficiency and in the amount of land being farmed around the world had driven prices down. Farmers desperately tried to produce more crops to maintain their standard of living, but further increases in efficiency only made prices lower.

In response to the plight of farmers, Hoover called Congress into special session in April 1929 to enact farm relief legislation and to revise the tariff. His farm program, embodied in the Agricultural Marketing Act of 1929, established the first large-scale government system to aid the farmer in peacetime, but it avoided production control. The act set up the Federal Farm Board of eight members to make loans to marketing cooperatives. The board could also establish corporations to buy farm surpluses and thus to raise prices.

Within six months, however, the Great Depression sent farm prices to new lows. Until the summer of 1931, wheat and cotton prices were kept slightly higher than world levels. By 1932, government funds had been spent, and the Farm Board warehouses were full. Farm prices plunged to a new low.

B

Hawley-Smoot Tariff

Congress also passed the Hawley-Smoot Tariff Act, which raised agricultural duties and tariffs, or import taxes, on manufactured goods. Economists generally protested against the Hawley-Smoot tariff, warning that it would invite retaliation by European powers, but Hoover signed the tariff into law in June 1930.

C

Stock Market Crash

Following a short recession after World War I (1914-1918), the United States had enjoyed an economic boom in which both production and consumption increased. During this period many citizens had invested savings and earnings in speculative ventures, particularly the buying of stocks “on margin.” In these cases, the buyer put up as little as 3 percent of a stock's price in cash and borrowed the remainder from the broker. The growing demand for stocks and the prosperous state of the nation as a whole caused stock prices to rise, which in turn encouraged more stock purchases.

Stock prices reached their height in the so-called “Hoover bull market” during the first six months of the Hoover administration. Individuals invested billions of dollars in the stock market, obtaining money by borrowing from banks, mortgaging their homes, and selling solid government securities, such as Liberty Bonds.

Buying stock on margin was a risky bet that the price of that stock would continue to increase. In August 1929 approximately 300 million shares of stock had been purchased on margin. During normal business periods a share of stock would be purchased mostly for the dividend it paid, but during the bull market, people bought stocks in order to sell at a higher price. Unfortunately, industry sales had begun to slow down, an indication that stock prices might drop because companies would pay smaller dividends. In September 1929 some investors began selling stocks, and stock prices began to fall. The decline in prices especially threatened those who had purchased on margin, because they owed their broker the amount of the original price of the stock—even if that stock was now worth only half as much.

By October the feverish buying had given way to desperate selling. Prices dropped rapidly, and thousands of people lost all they had invested. Many were completely ruined financially. On October 29 the New York Stock Exchange, the largest in the world, had its worst day of panic selling. By the end of the day stock values had declined by $10 billion to $15 billion.

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