Hoover worked at a pace that was so unprecedented that Congress largely followed his lead, including limiting tariffs. The same Republican Senators that were so bothersome for Coolidge (led by George Norris), were in at least temporary retreat with Hoover in office. Hoover kept Congress in an extra session in April 1929 in order to, among other things, get meaningful tariff reform and agricultural relief before it became too hot to remain in DC during the summer. The Agricultural Marketing Act was the most comprehensive and sweeping agricultural law ever to that point, authorizing $500m in a replenished fund to be administered by cooperatives (by the farmers themselves). Hoover signed the bill into law on 15 June 1929. In so doing, Hoover was able to fulfill a campaign promise, and he believed the agricultural sector had become far more organized to his vision of what it should have been long ago. However, during the process of passing that bill into law, the Norris-led Senators made their presence known, which showed that Hoover’s working majority in the Senate was anything but rock solid.
In terms of tariff reform, what Hoover really wanted was flexibility in adjusting specific tariffs, instead of waiting for Congress to act. However, Hoover was vague with his wishes, and on 7 May 1929, Representative Willis C. Hawley (R; OR) introduced a lengthy tariff bill to the House which went further than Hoover wanted, raising tariff rates favoring industry over agriculture. Hoover expressed his displeasure with Hawley’s bill, but it was to no avail since special interests were at work pressuring Congressmen to advance the tariff bill. When the proposed increases were made public, the demand for additional tariff increases on more goods followed; in every case the justification was to protect jobs in the US in competitive global industries. Foreign governments such as Canada, America’s largest trading partner, were aghast at these suggested tariff rates. Also under attack in the House was Hoover’s request that he be able to adjust the tariff rates as President.
In terms of tariff reform, what Hoover really wanted was flexibility in adjusting specific tariffs, instead of waiting for Congress to act. However, Hoover was vague with his wishes, and on 7 May 1929, Representative Willis C. Hawley (R; OR) introduced a lengthy tariff bill to the House which went further than Hoover wanted, raising tariff rates favoring industry over agriculture. Hoover expressed his displeasure with Hawley’s bill, but it was to no avail since special interests were at work pressuring Congressmen to advance the tariff bill. When the proposed increases were made public, the demand for additional tariff increases on more goods followed; in every case the justification was to protect jobs in the US in competitive global industries. Foreign governments such as Canada, America’s largest trading partner, were aghast at these suggested tariff rates. Also under attack in the House was Hoover’s request that he be able to adjust the tariff rates as President.
Hoover met with Hawley and other Congressmen to warn them of the consequences of excessive protectionism, and that the majority of newspaper editorials were against the tariff bill. After the meeting, Hoover didn’t have any confidence that anything he said got through to Hawley and the others. A final House vote on the Hawley bill was scheduled for 29 May 1929, and over 90% of the members of the House were in their seats ready to vote on that day. It was the first time in three Congressional sessions in which that high a percentage of the House was present for a vote on a bill. The Hawley tariff bill easily passed by a vote of 264 - 147, with the vote falling almost entirely along party lines. Even to those that had supported and voted for the tariff bill, there was a feeling that they had failed in protecting the broader interests of US citizens. House Republicans actually dreaded what would happen once the Senate Republicans got their hands on the tariff bill.
Hoover’s “Summer White House” along the Rapidan River in VA wasn’t far from DC. Hoover fished and enjoyed solitude, but the location also meant that he could be in DC whenever he wanted, and since the President was near-and-in DC, those in the Executive Branch had to be on the clock. Hoover accomplished some things with Congress out of session, including reducing overcrowding and improving conditions in prisons, focusing on Leavenworth. However, the fate of the tariff bill heading towards the Senate took most of Hoover’s attention that summer. Hoover took some solace that the chairman of the Senate Finance Committee, Reed Smoot
(R; UT), voiced concerns similar to Hoover’s over the House tariff bill. However, Smoot was an evangelist of Protectionism, and he badly wanted to have his name attached to a significant tariff act. The Senate Finance Committee worked during the summer, hearing from over 1000 witnesses, with most of them clamoring for tariff rate increases. It soon became apparent that Hoover was closer to the Democrats than the Republican insurgents in terms of tariffs.
Hoover’s “Summer White House” along the Rapidan River in VA wasn’t far from DC. Hoover fished and enjoyed solitude, but the location also meant that he could be in DC whenever he wanted, and since the President was near-and-in DC, those in the Executive Branch had to be on the clock. Hoover accomplished some things with Congress out of session, including reducing overcrowding and improving conditions in prisons, focusing on Leavenworth. However, the fate of the tariff bill heading towards the Senate took most of Hoover’s attention that summer. Hoover took some solace that the chairman of the Senate Finance Committee, Reed Smoot
(R; UT), voiced concerns similar to Hoover’s over the House tariff bill. However, Smoot was an evangelist of Protectionism, and he badly wanted to have his name attached to a significant tariff act. The Senate Finance Committee worked during the summer, hearing from over 1000 witnesses, with most of them clamoring for tariff rate increases. It soon became apparent that Hoover was closer to the Democrats than the Republican insurgents in terms of tariffs.
During August 1929, Smoot and his committee emerged with their version of the tariff bill that raised agricultural tariff rates while lowering selected manufacturing tariff rates, which was a bill that Hoover could accept. But the time for any meaningful compromise on tariff reform had vanished, and grumblings were heard from both the House and the Senate about what the other chamber had done with the tariff bill. Hoover chose to remain on the sidelines, but he didn’t appear to be rattled by the impasse between the House and the Senate. However, there were enough Senate Republicans, unafraid of Hoover’s electoral mandate or veto power, to strike from Smoot’s bill the flexible tariff provision, which was a serious and direct message to the President. After making a public statement on the Smoot bill, Senator William Borah (R; ID), a man that had worked hard to get Hoover elected President, now basically taunted Hoover for interfering with Congress; still, Hoover chose to remain on the sidelines.
On 2 October 1929, actually still in the extra session from April, the Senate voted 47 - 42 on an amendment to get rid of the Presidential flexible tariff rate adjustments. The remaining seven weeks of that Congressional session led to nothing more than a vocal stalemate between the House and Senate over the two tariff bills. On 22 November 1929 (about a month after the Stock Market Crash), the extra session ended after fruitless weeks trying to bring Smoot’s tariff bill to the Senate floor for a vote. The performance of the Republicans in both chambers, and Hoover choosing to be on the sidelines, came under intense scrutiny. Hoover’s veneer of invulnerability was pierced, and Democrats started to directly attack the President. The tariff bills were the most hotly debated topic in DC, and Hoover badly erred in choosing to remove himself from the intense debates.
On 2 October 1929, actually still in the extra session from April, the Senate voted 47 - 42 on an amendment to get rid of the Presidential flexible tariff rate adjustments. The remaining seven weeks of that Congressional session led to nothing more than a vocal stalemate between the House and Senate over the two tariff bills. On 22 November 1929 (about a month after the Stock Market Crash), the extra session ended after fruitless weeks trying to bring Smoot’s tariff bill to the Senate floor for a vote. The performance of the Republicans in both chambers, and Hoover choosing to be on the sidelines, came under intense scrutiny. Hoover’s veneer of invulnerability was pierced, and Democrats started to directly attack the President. The tariff bills were the most hotly debated topic in DC, and Hoover badly erred in choosing to remove himself from the intense debates.
Hoover was mostly an amateur in how to effectively deal with Congress, having never held elected office before entering the White House. Hoover didn’t know the inner workings of Congress or DC, or how to be a Legislative President, shepherding or blocking bills. Hoover was also tone-deaf to the rising discord among the ranks of the Republicans as his Presidency unfolded. Hoover’s years as SecCommerce had not prepared him for the maelstrom that awaited him as President in dealing and working with the House and the Senate. And Hoover’s desire to not deal with patronage meant that, at least in part, he didn’t have any leverage over members in Congress, which was an area in which Harding excelled. Hoover, in his initial approach to the Presidency, practically invited legislative failure, which led to a vacuum of leadership on the tariff bill, of which protectionists were only more than happy to exploit. So the situation was this: could Hoover learn and adjust fast enough to regain his lost momentum in Congress and DC.
By mid-summer 1929, it was also apparent that Hoover wasn’t able to rein in the Stock Market. Bankers in NYC scoffed at accusations that the Stock Market was unsound. The head of the New York Stock Exchange (NYSE) answered to the governor of New York, Franklin Roosevelt, not to Hoover, and he turned a blind eye towards the excessive speculation. However, the Federal Reserve did put pressure on the major NYC banks to quit making loans on margin. But when those banks stopped doing so, banks outside the authority of the Fed filled the void; then the NYC bankers rejoined the fray in issuing loans on margin, deathly afraid that they would miss out on gargantuan profits. In response, the Fed raised the Discount rate from 5% to 6%, trying to temper the excessive speculation.
By then Hoover had reached the point where he felt the only corrective to the irrational exuberance was financial disaster, so Hoover did not support the Fed’s interest rate hike, seeing it as bad for business. There were almost immediate signs that the Fed had pushed too far with the interest rate hike, in that real output fell 2% from August to October 1929, and foreign central banks raised their interest rates in order to protect their gold supplies. Those tight money policies by the central banks pushed Central Europe further into economic depression.
By mid-summer 1929, it was also apparent that Hoover wasn’t able to rein in the Stock Market. Bankers in NYC scoffed at accusations that the Stock Market was unsound. The head of the New York Stock Exchange (NYSE) answered to the governor of New York, Franklin Roosevelt, not to Hoover, and he turned a blind eye towards the excessive speculation. However, the Federal Reserve did put pressure on the major NYC banks to quit making loans on margin. But when those banks stopped doing so, banks outside the authority of the Fed filled the void; then the NYC bankers rejoined the fray in issuing loans on margin, deathly afraid that they would miss out on gargantuan profits. In response, the Fed raised the Discount rate from 5% to 6%, trying to temper the excessive speculation.
By then Hoover had reached the point where he felt the only corrective to the irrational exuberance was financial disaster, so Hoover did not support the Fed’s interest rate hike, seeing it as bad for business. There were almost immediate signs that the Fed had pushed too far with the interest rate hike, in that real output fell 2% from August to October 1929, and foreign central banks raised their interest rates in order to protect their gold supplies. Those tight money policies by the central banks pushed Central Europe further into economic depression.
On 3 September 1929, the Dow Jones Industrial Average reached 381.2, which was a 500% increase from 1921. What followed was a series of corrections, but nobody knew if worse was to come. Hoover was in MI for the dedication of the Edison Institute as well as the 50th anniversary of the incandescent light bulb when the Stock Market Crash occurred. On 23 October 1929, the Dow gave up 6.33% of its trading value, and the ensuing panic on the floor that followed the next day was called “Black Thursday”. On 24 October 1929, the trading volume surpassed 6 million shares, and over $4 billion was lost, more than the annual federal budget. The great sell-off occurred at a rate of 2.6 million an hour; irrational exuberance had now been replaced by irrational panic. Records were broken for the number of shares traded, price drops, money lost, telegrams delivered, and telephone calls made. During the succeeding days, the declines continued, with sellers far outnumbering buyers. The losses in the Stock Market totaled over $30 billion, which was more than twice the national debt.
Hoover viewed the Stock Market Crash as an opening to implement the countercyclical policies that he had long advocated, and it was just the kind of emergency in which Americans believed that Hoover would once again come to the rescue. Hoover, using data from the Panic of 1907, tried to limit the financial damage to the Stock Market. Hoover told the nation that the economy was sound, and that the Federal Reserve had been created in 1913 largely to avoid repeating the mistakes that led to the Panic of 1907. The Fed, not unlike after 9/11, acted quickly to try and restore confidence. Among the actions of the Fed was to reduce the Discount Rate to 4.5%, as well as to expedite lending and making it easier to purchase securities. Those measures helped commercial banks stay open, and Hoover correctly credited the Fed . . . but no one, not even Hoover, saw that the Stock Market Crash had weakened most banks to the point where an unprecedented national banking collapse would occur in 1930 . . .
Hoover viewed the Stock Market Crash as an opening to implement the countercyclical policies that he had long advocated, and it was just the kind of emergency in which Americans believed that Hoover would once again come to the rescue. Hoover, using data from the Panic of 1907, tried to limit the financial damage to the Stock Market. Hoover told the nation that the economy was sound, and that the Federal Reserve had been created in 1913 largely to avoid repeating the mistakes that led to the Panic of 1907. The Fed, not unlike after 9/11, acted quickly to try and restore confidence. Among the actions of the Fed was to reduce the Discount Rate to 4.5%, as well as to expedite lending and making it easier to purchase securities. Those measures helped commercial banks stay open, and Hoover correctly credited the Fed . . . but no one, not even Hoover, saw that the Stock Market Crash had weakened most banks to the point where an unprecedented national banking collapse would occur in 1930 . . .