America's Money Machine

The New Thermopylae 167
(N. Y.), offered a bill providing $750 million as an emergency measure
to "prevent starvation and distress in the present crisis."
Hoover resisted all these efforts to involve the federal government,
holding that the principal service the federal government could perform
was to balance the budget. This position he held to, and it remained the
core of the Administration's policy until toward the end of 1931. However,
the Administration did support certain actions in what had long
been accepted as the proper field of government policy. The Federal
Reserve attempted to·stimulate business by a further lowering of the
discount rate from 5 to 4 1/2 per cent and by the open market purchase
of $500 million of securities. In December, 1929, Congress authorized,
at Administration request, a reduction of 1 per cent in the income tax,
and to cope with falling farm prices the Federal Farm Board advanced
$500 million to marketing cooperatives.
Meanwhile, the domestic problem was complicated by the economic
deterioration abroad, and when the Credit-Anstalt ofAustria failed, there
began a general crumbling of credit. In June, 1931, Hoover took the
initiative in obtaining a one-year moratorium on German reparation payments
but on September 21 the over-valued pound sterling became no
longer supportable, and England went off the gold standard. Sweden,
Norway, Denmark, Finland, Australia, India and Egypt followed in October.
Hoover now responded to the pressure for more decisive government
intervention, but again pretty much on his own terms and in line with his
views ofthe limited functions ofgovernment. He announced on October
6, 1931, that he would recommend the creation of an agency similar to
the War Finance Corporation with "available funds sufficient for any
legitimate call in support of credit."
OnJanuary 22, 1932, Congress authorized the Reconstruction Finance
Corporation with a limited life of two years (that stretched out for a
quarter century and longer) with a revolving lending fund of $2 billion.
It could lend to bank and other credit institutions and to railroads, but
not to new enterprises.
At the same time, Hoover opposed measures that brought the government
in contact with the problems ofindividuals. He resisted the demand
for immediate payment of the veterans' bonus, which was not due for
another fifteen years, and vetoed a bill to.lend them half the sums due.
He opposed direct unemployment relief, holding this was a state and
local responsibility. In July, 1932, however, Hoover did agree to the
Emergency Relief and Construction Act which authorized $300 million