The Great Depression, the most devastating economic
B crisis in United States history, indicated at least a partial
failure of America's economic system. A wave of panic selling
on the New York Stock Exchange in October l929 was an indicator
of several past years of bad monetary policy by the federal
government. Gloom and fear replaced the optimism of the pros-
perous twenties as thousands of middleclass families lost their
incomes, savings, homes and self-respect. This was not to be
a short-lived panic as some thought. Instead it was a world-
wide depression lasting until World War II.
In past economic emergencies local governments and private
organizations provided relief for the unemployed. Federal
money was not made available for what was considered by local
and state authorities to be their responsibility. It was soon
evident that this was not like any past emergency and that
past relief methods were no longer viable. Local authorities
were unable to provide relief for the increasing numbers of
unemployed because of the difficulty in raising the necessary
funds to defray the cost. A clamor arose for outside assist-
ance. Under the weight of the massive numbers needing
assistance state governments began to assist local authorities
in providing relief._ By June 1931 four states aided local
governments. Seven additional states gave assistance by June
1932 and fifteen more began direct support in 1933, including
Kentucky. In Washington, DC however, the clamor fell on the
I deaf ears of President Herbert Hoover.
Confronted with this national crisis shortly after his
election in 1928, Hoover affirmed his belief that the nation's
economy was basically sound and that government should not
directly interfere with business. His belief that relief
measures were local responsibilities in which the federal
government should not become involved led him to rely on the
voluntary cooperation of business, labor, and farmers with
government rather than initiate large-scale federal relief pro-
grams. Government could also try to restore the nation's
confidence in business through public pronouncements and private
By late 1931 Hoover seemed to realize the enormity of the
‘ crisis. He still opposed, and would continue to oppose,
Congressional efforts to provide direct federal relief for the
unemployed. However, through the insistence of Eugene Meyer,
Governor of the Federal Reserve Board and former head of the
War Finance Corporation, Hoover proposed to Congress establish-
ment of a Reconstruction Finance Corporation (RFC). Beginning
in January 1932 the RFC loaned $1.5 billion to banks and other
credit agencies; a like amount was loaned for a self-liqui-
dating public works program; and $300 million was loaned to
local governments as direct supplement to relief funds.