New Deal

  • President Hoover tried to restore confidence so he urged businessmen to keep wages as high as possible and asked congress to vote money for new roads and buildings.
  • Congress set up reconstruction finance corporation to lend money to banks, railroads and factories at low rate of interest.
  • Hoover called off war debt payments for a year as the depression spread to Europe.
  • These measures improved business conditions and saved people from disaster.
  • Hoover was the first President to use this method to fight depression but unfortunately these measures were not enough as the prices kept going down and unemployment increased as many factories closed.


❖ In 1932 Presidential election, the Democratic Party candidate Franklin D. Roosevelt won.

❖ The democrats and Roosevelt promised to fight depression and to help farmers, new laws for railroads, laws for banks, laws to control stock exchange and project to give people jobs.

❖ He called this as programme New Deal.

❖ He championed the cause of common man even though he was born of wealthy parents, he opposed privileges and strove hard to help the people of the country.

❖ He was educated by tutors at Groton and Harvard and served as assistant secretary of the Navy during administration of Woodrow Wilson.

❖ He was the Democratic nominee for vice-president in 1920.

❖ In 1921 he suffered infantile analysis.

❖ In 1928 he was elected as the governor of New York.

❖ His eagerness and enthusiasm to experiment gained for him the attention of the country and was nominated as many the Democratic candidate.

❖ He was destined to be re-elected in 1936,1940,and 1944 a distinction gained by no other President.


Domestic policy : New Deal


❖ The depression hit rock bottom and the business sunk by 46% to 1929 level.

❖ Exports had dropped by nearly 15 m. People were unemployment, banks started closing throughout the country ( 1400 banks crashed during 1932).

❖ Some states shut their banks as precautionary measure.

❖ He declared “bank holiday” by ordering all banks to close. He proposed the Congress a new law to protect banks and to allow sound banks to open again.

❖ Roosevelt’s bank bill was passed by both Houses of Congress and signed by him.

❖ During the “Hundred days” from 9th March to 6th June 1933, vital legislative measures were passed.

❖ The New Deal was the turning point in American History.

❖ From 1933 onwards the Federal government undertook many tasks which were left to the states.

❖ As problems raised Depression became complicated and separate states could not solve this by acting separately.


The steps made up the New Deal is of two kinds

  • Some laws were passed to end depression and were temporary.
  • Some were long reforms and many became permanent.


The action taken by Roosevelt administration began in 1933 and ended in 1938. It had three aspects they are


  1. Relief which simply provided food and cash to millions
  2. Recovery which was a remedy for depression
  3. Reforms which planned to create a controlled industrial and social system which would guarantee security to all who want to do business and to work.


❖ There was a great opposition both to goals and methods of New Deal long-range reforms.

❖ The New Deal was not a revolution and was not even planned ; for the democrats who came to power in 1933 had no definite plan or secret intention when they carried out reforms.

❖ The New Deal grew out of experimental attempts to solve the problems of united states.

Roosevelt was a liberal and stated his liberal views in these words “What we seek is balance in our economic system BALANCE between agriculture and industry and balance between the wage earner, the employer and the consumer “.


BANKING: The administration tried to restore public confidence in banking, the emergency and relief act gave the President power to regulate the value of money. It also provided for Federal inspectors to go to each bank if the bank was strong enough to resume business.


▪ Depositors in these banks lost their savings. But the banking crisis was over. Thus the act had done much to restore faith in financial system of the country.


REFORM MEASURES: The banking act of 1933 was the third great reform.


  • Forbade the commercial banks from engaging in investment business
  • Restricted speculative use of bank credits.
  • Extended the control of the Federal reserve bank.


STOCK AND SHARES: Federal securities act of 1933 regulated the working of stock exchange and held the directors of corporation liable for furnishing any false information to the shareholders. The securities and exchange act of 1933 set up the securities and exchange commission (SEC) of 5 members to regulate the sales operation of securities.


CURRENCY: Roosevelt tried to reduce the value of dollar. He abandoned the gold standard and reduced the gold content of dollar by 41% in relation to the gold. The government brought silver at prices above the market value. The paper dollar was devalued to less than 60%.


DEPOSITS: The Federal deposit insurance act of 1935 created the Federal deposit insurance corporation ( FDIC) under which savings deposit up to $5,000 which was later increased as $10,000 were insured.