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Great Depression Case

Essay by   •  December 8, 2013  •  Essay  •  769 Words (4 Pages)  •  1,416 Views

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The Great Depression was triggered by the sudden crash of the stock market on Thursday, October 24, 1929. 16,410,030 shares of stock were sold quickly; resulting in the largest depression America had seen and has yet to see. At the height of the Depression nearly 30% of the workforce was unemployed. Faced with no other choices, families split-up or migrated in search of work. Father's killed themselves in need of the insurance money. The Midwest was torn apart by dust storms during this time, ruining crops and farmers lives. The citizens of America were unable to help each other and looked for an outlet in the Federal Government. The Americans citizens finally got help when FDR came into office. At this point Americans finally realized that Harding, Coolidge, and Hoover's laissez faire tactics and the noninvolvement of the Federal Government was the main cause of the Great Depression.

The Federal Government "hands off" belief during the 1920's was the main cause to the Great Depression. This idea of "hands off" government was first displayed when they did not legislate about separating the two different types of banks. These two types of banks are: lending banks and investment banks. During the 1920's these banks were not forced to separate, so you had the same banks lending out money and investing money. The separation of investment and lending banks was finally undone in 1933 when the Glass-Stegall Act was set in place. At the time, "improper banking activity," or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash. According to that reasoning, commercial banks took on too much risk with depositors' money. It was enacted as an emergency response to the failure of nearly 5,000 banks during the Great Depression. The act was originally part of President Franklin D. Roosevelt's New Deal program and became a permanent measure in 1945. It gave tighter regulation of national banks to the Federal Reserve System; prohibited bank sales of securities; and created the Federal Deposit Insurance Corporation, which insures bank deposits with a pool of money taken from banks. Keeping these banks together throughout the 1920's was one of the main causes to the crashing of the stock market. This was all in result because of the noninvolvement by the Federal Government.

The unwillingness of the Federal Reserve was another reason that proves Harding, Coolidge, and Hoover are to blame for the Great Depression. It was their unwillingness to prevent bank failures and to maintain a large supply of money, which then led to the Depression. The Federal Reserve System raised interest in early 1928. This discouraged business borrowing and spending and brought about the decline in spending during the 1928 summer. Furthermore, banks began to fail towards the end of 1930 and the Federal Reserve System did

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