Hoover increased government involvement and bailed out financial institutions

KingCondanomation

KingCondanomation

New member
"The Bush administration proposes to intervene in financial markets on a scale that our nation has done only once, during the Great Depression of the 1930s. The administration proposes purchasing $700 billion worth of devalued and illiquid assets from financial institutions. The Bush bailout resembles a program which inspired it, a program implemented during the Hoover administration.

Let's consider the obvious analogy. What does the Hoover experience suggest will be the likely impact of the Bush plan?

The administration's emergency intervention will not solve the financial system's underlying problems. Things will get worse before they get better.

Consider what happened during the 1930s. In the fall of 1931, the Hoover administration realized that financial institutions no longer held the trust of depositors, investors, businessmen or each other. These organizations were losing deposits so rapidly that the financial system faced complete collapse. These organizations needed to cleanse their balance sheets of assets, which under current conditions, had little immediate value and could not be used to raise cash.

In January 1932, the Hoover administration created the Reconstruction Finance Corp., an entity authorized to extend loans to all depository institutions in the nation. The RFC could accept as collateral a broad array of assets, including those deemed to be of little immediate worth but of potential long-term value. During its first year, the RFC lent nearly $1.5 billion and acquired equity stakes in thousands of financial institutions. As a share of the capital of the financial industry, this lending would be the equivalent of roughly $100 billion today. During its second and third years, the RFC extended loans to banks and acquired equity positions in financial institutions amounting to more than $3 billion dollars, equal to roughly $200 billion today.

The financial crisis slowed temporarily, but the bleeding continued. Bankers restricted lending to entrepreneurs, consumers and each other. Industrial production plummeted. Unemployment skyrocketed. The financial meltdown resumed, forcing the president to declare a national "banking holiday.""
http://www.ocregister.com/articles/financial-administration-institutions-2169159-system-billion

It helped in the short term, exactly as the bailout's advocates correctly state, but in the long term ended up worse.
 
Hoover appointed Atlee Pomerene of Ohio to head the agency in July 1932. Hoover's reasons for his surprising reorganization of the RFC included: the broken health and resignations of M. Eugene Myers, Paul Bestor, and Charles Gates Dawes; the failure of banks to perform their duties to their clientele or to aid American industry; the country's general lack of confidence in the current board; and Hoover's inability to find any other man who had the ability and was both nationally respected and available. (Shriver 1982)

The RFC was bogged down in bureaucracy and failed to disburse much of its funds. It failed to reverse the growth of mass unemployment before 1933. Butkiewicz (1995) shows that the RFC initially succeeded in reducing bank failures, but the publication of the names of the recipients of loans beginning in August 1932 (at the demand of Congress) significantly reduced the effectiveness of its loans to banks because it appeared that political considerations had motivated certain loans. Partisan politics thwarted the RFC's efforts, though in 1932 monetary conditions improved because the RFC slowed the decline in the money supply.


http://en.wikipedia.org/wiki/Reconstruction_Finance_Corporation
 
Desh said:
Hoover appointed Atlee Pomerene of Ohio to head the agency in July 1932. Hoover's reasons for his surprising reorganization of the RFC included: the broken health and resignations of M. Eugene Myers, Paul Bestor, and Charles Gates Dawes; the failure of banks to perform their duties to their clientele or to aid American industry; the country's general lack of confidence in the current board; and Hoover's inability to find any other man who had the ability and was both nationally respected and available. (Shriver 1982)

The RFC was bogged down in bureaucracy and failed to disburse much of its funds. It failed to reverse the growth of mass unemployment before 1933. Butkiewicz (1995) shows that the RFC initially succeeded in reducing bank failures, but the publication of the names of the recipients of loans beginning in August 1932 (at the demand of Congress) significantly reduced the effectiveness of its loans to banks because it appeared that political considerations had motivated certain loans. Partisan politics thwarted the RFC's efforts, though in 1932 monetary conditions improved because the RFC slowed the decline in the money supply.


http://en.wikipedia.org/wiki/Reconstruction_Finance_Corporation
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That is someone's opinion on Wikipedia Desh, my facts above show the RFC did in fact distribute a lot:
"During its first year, the RFC lent nearly $1.5 billion and acquired equity stakes in thousands of financial institutions. As a share of the capital of the financial industry, this lending would be the equivalent of roughly $100 billion today. During its second and third years, the RFC extended loans to banks and acquired equity positions in financial institutions amounting to more than $3 billion dollars, equal to roughly $200 billion today."

What are you arguing here? That Hoover's idea was actually a good one? You can't simultaneously blast Hoover and then argue his ideas.

Let's be honest, the only thing you really want to do is associate Hoover with Bush and McCain, oddly enough you get it right with the association with Bush and now argue against that.
 
Onceler said:
The 2 situations are hardly comparable...
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In what manner? The only differences I see are that Hoover went an extra step and created a new federal department and that the scale of the numbers (adjusted for inflation) are not quite as much.
It's still the same response.
 
The RFC was created in July 1932. It was an FDR policy. Hoover did nothing for four years and then took steps that may have helped four years earlier.
 
Watermark said:
The RFC was created in July 1932. It was an FDR policy. Hoover did nothing for four years and then took steps that may have helped four years earlier.
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LOLOLOL! Who was president in July 1932? FDR didn't even take office until 1933.

"The Reconstruction Finance Corporation (RFC) was an independent agency of the United States government chartered during the administration of Herbert Hoover in 1932"
http://en.wikipedia.org/wiki/Reconstruction_Finance_Corporation

You are gonna keep getting burned so long as you think you can make up bullshit and hope to get away with it because you sound confidently intelligent.
 
KingCondanomation said:
LOLOLOL! Who was president in July 1932? FDR didn't even take office until 1933.

"The Reconstruction Finance Corporation (RFC) was an independent agency of the United States government chartered during the administration of Herbert Hoover in 1932"
http://en.wikipedia.org/wiki/Reconstruction_Finance_Corporation

You are gonna keep getting burned so long as you think you can make up bullshit and hope to get away with it because you sound confidently intelligent.
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Hoover created it and dropped it so fast, it was basically and FDR policy Dano.
 
Watermark said:
Hoover created it and dropped it so fast, it was basically and FDR policy Dano.
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More on the fly made up BS, he never dropped it. Again FDR's own architect is on record saying that they never admitted it at the time but much of the New Deal was just continuing the programs of the Hoover admin.
 
KingCondanomation said:
More on the fly made up BS, he never dropped it. Again FDR's own architect is on record saying that they never admitted it at the time but much of the New Deal was just continuing the programs of the Hoover admin.
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LOL that's a bit of an exageration. The only thing Hoover did was create the RFC and build a few public works projects. The New Deal was much much much much much much larger.
 
Watermark said:
LOL that's a bit of an exageration. The only thing Hoover did was create the RFC and build a few public works projects. The New Deal was much much much much much much larger.
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I'll address that but first:
1. You have just been caught lying about FDR starting it in July 1932 when he was not even in office.
2. You have just been caught lying that Hoover dropped it.

There is no question FDR expanded it and it could be argued it brought short term relief, the unemployment rate dipped to 14.3% but then the next year went back up again to 19%. I don't think ANYONE is debating that the bailout will have positive impact in the short term, I'm sure no one cares more than politicians looking to get reelected this year. It's bad in the long term without question.

Read the article, please.
 
KingCondanomation said:
I'll address that but first:
1. You have just been caught lying about FDR starting it in July 1932 when he was not even in office.
2. You have just been caught lying that Hoover dropped it.

There is no question FDR expanded it and it could be argued it brought short term relief, the unemployment rate dipped to 14.3% but then the next year went back up again to 19%. I don't think ANYONE is debating that the bailout will have positive impact in the short term, I'm sure no one cares more than politicians looking to get reelected this year. It's bad in the long term without question.

Read the article, please.
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Why would anyone vote for this if they were just looking to get reelected?
 
Watermark said:
Why would anyone vote for this if they were just looking to get reelected?
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I'm sure they'd like to because in the months ahead there would be pain and less chance of reelection, but they are hearing it from their constituents and that trumps it....for now.
In other words, they are betting on which will affect them more at the beginning of November. I wouldn't be surprised if there are many who wouldn't vote for it but simultaneously hope it passes.
 
KingCondanomation said:
I'm sure they'd like to because in the months ahead there would be pain and less chance of reelection, but they are hearing it from their constituents and that trumps it....for now.
In other words, they are betting on which will affect them more at the beginning of November. I wouldn't be surprised if there are many who wouldn't vote for it but simultaneously hope it passes.
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Uh-huh. Go on.
 
http://en.wikipedia.org/wiki/Herbert_Hoover#Great_Depression


President Hoover, in 1931, urged the major banks in the country to form a consortium known as the National Credit Corporation (NCC).[17] The NCC was an excellent example of Hoover's belief in volunteerism as a mechanism in aiding the economy. Hoover encouraged the member banks of the NCC to provide loans to smaller banks in order to prevent them from collapsing. Unfortunately, the banks within the NCC were often reluctant to provide loans, usually requiring banks to provide their largest assets as collateral. It quickly became apparent that the NCC would not be capable of fixing the problems it was designed to, and it was abandoned in favor of the Reconstruction Finance Corporation.

By 1932, the Great Depression had spread across the globe. In the U.S., unemployment had reached 24.9%[18] , a drought persisted in the agricultural heartland, businesses and families defaulted on record numbers of loans, and more than 5,000 banks had failed[19]. Tens-of-thousands of Americans found themselves homeless and they began congregating in the numerous Hoovervilles (also known as shanty towns or tent cities) that had begun to appear across the country. The name 'Hooverville' was coined by their residents as a sign of their disappointment and frustration with the perceived lack of assistance from the federal government. In response, President Hoover and Congress approved the Federal Home Loan Bank Act, to spur new home construction, and reduce foreclosures. The plan seemed to work, as foreclosures dropped, but it was seen as too little, too late.

Prior to the start of the Depression, Hoover's first Treasury Secretary, Andrew Mellon, had proposed, and saw enacted, numerous tax cuts which cut the top income tax rate from 73% to 24%. As the depression worsened, Congress, desperate to increase federal revenue, enacted the Revenue Act of 1932. The Act increased taxes across the board, and the percentage increased with income, to near pre-1928 levels for top income earners. It also implemented a 13.75% tax on corporations. The unintended result of the Act, was decreased spending among consumers and businesses alike, and the country sank deeper still into the Great Depression.

The final attempt of the Hoover Administration to rescue the economy was the passage of the Emergency Relief and Construction Act which included funds for public works programs and the creation of the Reconstruction Finance Corporation (RFC) in 1932. The RFC's initial goal was to provide government-secured loans to financial institutions, railroads and farmers. The RFC had minimal impact at the time, but was adopted by Franklin Delano Roosevelt and greatly expanded as part of his New Deal.
 
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Desh said:
http://en.wikipedia.org/wiki/Herbert_Hoover#Great_Depression


President Hoover, in 1931, urged the major banks in the country to form a consortium known as the National Credit Corporation (NCC).[17] The NCC was an excellent example of Hoover's belief in volunteerism as a mechanism in aiding the economy. Hoover encouraged the member banks of the NCC to provide loans to smaller banks in order to prevent them from collapsing. Unfortunately, the banks within the NCC were often reluctant to provide loans, usually requiring banks to provide their largest assets as collateral. It quickly became apparent that the NCC would not be capable of fixing the problems it was designed to, and it was abandoned in favor of the Reconstruction Finance Corporation.

By 1932, the Great Depression had spread across the globe. In the U.S., unemployment had reached 24.9%[18] , a drought persisted in the agricultural heartland, businesses and families defaulted on record numbers of loans, and more than 5,000 banks had failed[19]. Tens-of-thousands of Americans found themselves homeless and they began congregating in the numerous Hoovervilles (also known as shanty towns or tent cities) that had begun to appear across the country. The name 'Hooverville' was coined by their residents as a sign of their disappointment and frustration with the perceived lack of assistance from the federal government. In response, President Hoover and Congress approved the Federal Home Loan Bank Act, to spur new home construction, and reduce foreclosures. The plan seemed to work, as foreclosures dropped, but it was seen as too little, too late.

Prior to the start of the Depression, Hoover's first Treasury Secretary, Andrew Mellon, had proposed, and saw enacted, numerous tax cuts which cut the top income tax rate from 73% to 24%. As the depression worsened, Congress, desperate to increase federal revenue, enacted the Revenue Act of 1932. The Act increased taxes across the board, and the percentage increased with income, to near pre-1928 levels for top income earners. It also implemented a 13.75% tax on corporations. The unintended result of the Act, was decreased spending among consumers and businesses alike, and the country sank deeper still into the Great Depression.

The final attempt of the Hoover Administration to rescue the economy was the passage of the Emergency Relief and Construction Act which included funds for public works programs and the creation of the Reconstruction Finance Corporation (RFC) in 1932. The RFC's initial goal was to provide government-secured loans to financial institutions, railroads and farmers. The RFC had minimal impact at the time, but was adopted by Franklin Delano Roosevelt and greatly expanded as part of his New Deal.
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There is no question FDR expanded it and it could be argued it brought short term relief, the unemployment rate dipped to 14.3% but then the next year went back up again to 19%. I don't think ANYONE is debating that the bailout will have positive impact in the short term. It's bad in the long term without question.

Read the article, please.
 
KingCondanomation said:
There is no question FDR expanded it and it could be argued it brought short term relief, the unemployment rate dipped to 14.3% but then the next year went back up again to 19%. I don't think ANYONE is debating that the bailout will have positive impact in the short term. It's bad in the long term without question.

Read the article, please.
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It was too little too late.


The whole idea is to make the trough shallower guys.

Instead of a steep shorter trough you have a longer shallower trough.

It fucking saves the little guys asses when you do that.
 
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