The New Deal
Banking Act of 1933
Above all else, the Great Depression negatively affected the U.S. population economically. As part of the New Deal, President Roosevelt passed many economic reforms to prevent a similar economic disaster from occurring in the future. Among the most important areas targeted by these reforms were those concerning the monetary system. Prior to the New Deal, banks were notoriously unstable, with up to 500 million banks failing per year, and the government offered no insurance on bank deposits.[1] The fact that citizens and their investments were completely unprotected if a bank were to fail led to waves of widespread panic and massive deposit withdrawals, or bank runs, that essentially drained the banking system and caused depositors to lose over 540 million dollars. These issues were first target by the New Deal with the Emergency Banking Act of 1933. In order to develop and enact necessary reforms, the act gave FDR the power to shut down all U.S. banks by declaring a national bank holiday. The temporary act was eventually replaced by the more permanent Banking Act of 1933. Under these acts, FDR created a system that allowed stable banks to reopen under U.S. Treasury supervision and created the Federal Deposit Insurance Corporation (FDIC), which insured deposits up to $2,500 at the time, thus preventing any future bank runs.[2] By the end of 1933, more than 4,000 banks with total deposits around 3.6 billion were permanently closed, merged into larger banks, and used to return the deposits of citizens at an average of 85 cents per each dollar lost.[3] The acts helped to relieve the economically devastated U.S. population by returning much needed investments and protecting citizens from future instability in the banking system. As explained by Roosevelt in the first of his fireside chats, “Your Government does not intend that the history of the past few years shall be repeated. We do not want and will not have another epidemic of bank failures.”[4]
Above all else, the Great Depression negatively affected the U.S. population economically. As part of the New Deal, President Roosevelt passed many economic reforms to prevent a similar economic disaster from occurring in the future. Among the most important areas targeted by these reforms were those concerning the monetary system. Prior to the New Deal, banks were notoriously unstable, with up to 500 million banks failing per year, and the government offered no insurance on bank deposits.[1] The fact that citizens and their investments were completely unprotected if a bank were to fail led to waves of widespread panic and massive deposit withdrawals, or bank runs, that essentially drained the banking system and caused depositors to lose over 540 million dollars. These issues were first target by the New Deal with the Emergency Banking Act of 1933. In order to develop and enact necessary reforms, the act gave FDR the power to shut down all U.S. banks by declaring a national bank holiday. The temporary act was eventually replaced by the more permanent Banking Act of 1933. Under these acts, FDR created a system that allowed stable banks to reopen under U.S. Treasury supervision and created the Federal Deposit Insurance Corporation (FDIC), which insured deposits up to $2,500 at the time, thus preventing any future bank runs.[2] By the end of 1933, more than 4,000 banks with total deposits around 3.6 billion were permanently closed, merged into larger banks, and used to return the deposits of citizens at an average of 85 cents per each dollar lost.[3] The acts helped to relieve the economically devastated U.S. population by returning much needed investments and protecting citizens from future instability in the banking system. As explained by Roosevelt in the first of his fireside chats, “Your Government does not intend that the history of the past few years shall be repeated. We do not want and will not have another epidemic of bank failures.”[4]
The Social Security Act of 1935
Although much of the New Deal consisted of economic reforms, it also marked a shift in U.S. domestic policy concerning government aid, industry regulation and social programs. Unlike citizens of economically similar countries, people in the United Sates faced the devastation of the Great Depression with a government that provided its citizens with little to no financial aid or social security. Furthermore, perhaps the most important piece of legislation of the New Deal was the Social Security Act of 1935. The act was drafted by Frances Perkins, the first female cabinet member in U.S. History, and established the first ever permanent system of retirement pensions, or Social Security, unemployment insurance, and welfare benefits for children in need, the handicapped, and families without a father present.[1] Conservatives opposed and criticized the act for going against long-standing U.S. beliefs in individualism and small government. In order to protect the act from future repeal, Roosevelt’s administration decided that most of the funding to support the legislation would come from the citizens as income taxes.[2] As quoted by FDR, “We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”[3] Furthermore, the act provided much needed aid for citizens devastated by the Great Depression and set up a system for future economic security that became the framework for the current U.S. welfare system.
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The Fair Labor Standards Act of 1938
Just as the U.S. government had little to no policies in place to regulate the banking system or provide aid, there was also no legislation to ensure fair labor conditions prior to the New Deal. With unemployment at an all time high, employers took advantage of desperate employee’s by paying them meager wages, drastically cutting or increasing work hours, forcing them to work under harsh and sometimes hazardous working conditions and exploiting child labor. As the last piece of legislation passed under the New Deal, the Fair Labor Standards Act of 1938 targeted these and other issues in what Roosevelt described as the “the most far-reaching, far-sighted program for the benefit of workers ever adopted in this or any other country.”[1] The act applied to most industries and established the first federal minimum wage, a maximum number of hours in a work week, overtime pay of time and a half, and banished child labor of persons under 16 with some exceptions.[2] Furthermore, this act helped combat the negative effects of the Great Depression because it increased their ability to regain financial stability and guaranteed labor rights and protection still in place today.
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Overall, the Great Depression had a devastating global, social, and economic impact on U.S. citizens. Through a series of landmark programs and reforms collectively known as the New Deal, President Roosevelt and his administration provided support for the struggling population. These reforms and policies setup up systems of relief, regulation and protection still in place today, such as social security, unemployment insurance, insurance on bank deposits, financial aid for the needy, federal minimum wage, and much more. In conclusion, the New Deal helped resolve many of the issues faced by Americans as a result of the Great Depression and marked a monumental change in U.S. domestic policy.
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