2024 - O/N - 9489/11 | Q1

Source A

A newspaper cartoon published in February 1929.

Source B

The causes of the current crisis in our stock markets are well known. They are greed, incompetence, dishonesty and above all a lack of effective regulation. This situation has been worsened by the inactivity of the President and his administration. The President makes vague plans and suggestions to Congress about public works and economy drives, designed to restore confidence. There is no action. Congress is in a mood to act, is prepared to act, but it needs the leadership which the President is unwilling to provide. The President looks to Treasury Secretary Mellon, a man of great influence in these matters, for solutions, but he also is not prepared to act. Both men evidently believe that inactivity by government is the best solution to the problem.

From an article written by a successful businessman and economic historian, August 1930.

Source C

In 1927, the Governors of the Banks of England, France and Germany put enormous pressure on the US Federal Reserve Board to cut its interest rates and lend more money. The Board gave in to this foreign pressure. This was one of the most costly errors made by any banking system in the past seventy-five years. This meant millions of dollars were made available to help finance the purchase of millions of shares in the United States. Provided with this cheap money, Americans rushed wildly into their stock markets. From that date the situation got totally out of control and led to the crisis of 1929.

Evidence given by a member of the Federal Reserve Board to a Senate Committee investigating the 1929 crisis, March 1933.

Source D

Our banks were the weakest link in our whole economic system. We were slow to recognise the many dangers present in them before 1929. They included a weak and badly organised system of deposits and a willingness to lend money to anyone. There were no safety or security measures, and, above all, a lack of honesty amongst some of the leading bankers. I had regularly urged Congress to reform banking to make it safe for savers, but it would not act. After the crisis of 1929, I recommended co-operation between business and States to prevent speculation. I suggested increased public works and greater economy by government departments to help restore confidence. I urged Treasury Secretary Mellon to do all he could to restore stability and confidence to our banking system, but he had limited powers in that respect. Only Congress had the power to act, and it was reluctant to do so in spite of my requests.

From ‘The Memoirs of Herbert Hoover’ published in 1952.