Federal Reserve Chairman Ben Bernanke informed Treasury Secretary Henry Paulson on September 17, 2008, that a considerable amount of public money will be required to stabilize the financial sector. On September 19, short trading of 799 financial stocks was outlawed. Large short positions were also required to be disclosed by companies. The Treasury Secretary also stated that money market funds would form an insurance pool to protect themselves against losses, and that the government would purchase mortgage-backed assets from banks and investment firms. As of September 19, 2008, initial estimates of the cost of the Treasury bailout suggested by the Bush Administration’s draft legislation ranged from $700 billion to $1 trillion US dollars. On September 20, 2008, President George W. Bush requested authorization from Congress to spend up to $700 billion to purchase distressed mortgage assets and stem the financial crisis. The crisis worsened when the bill was rejected by the US House of Representatives, resulting in a 777-point drop in the Dow Jones. Despite the fact that Congress enacted a revised version of the plan, the stock market continued to tumble. Instead of distressed mortgage assets, the first half of the bailout money was utilized to acquire preferred shares in banks. This contradicted some economists’ claims that purchasing preferred shares is considerably less effective than purchasing regular stock.
The new loans, purchases, and liabilities of the Federal Reserve, Treasury, and FDIC, as of mid-November 2008, were estimated to total over $5 trillion: $1 trillion in loans to broker-dealers through the emergency discount window, $1.8 trillion in loans through the Term Auction Facility, $700 billion to be raised by the Treasury for the Troubled Assets Relief Program, and $200 billion in insurance for the GSEs.
As of March 2018, ProPublica’s “bailout tracker” showed that $626 billion had been “spent, invested, or loaned” in financial system bailouts as a result of the crisis, with $713 billion repaid to the government ($390 billion in principal repayments and $323 billion in interest), indicating that the bailouts generated $87 billion in profit.
During the Great Recession, whose president was in office?
In the midst of the Great Recession and a severe financial crisis that began in 2007, President Barack Obama was inaugurated in January 2009. His government continued the previous administration’s financial bailout and auto sector rescue, and promptly implemented the American Recovery and Reinvestment Act of 2009 (ARRA), a $800 billion stimulus package that featured a mix of new spending and tax cuts. By March 2010, the private sector had started adding jobs on a monthly basis, a trend that lasted until the conclusion of his term, although public sector employment recovered more slowly due to budget constraints.
President Barack Obama then signed the Patient Protection and Affordable Care Act (ACA), also known as “Obamacare,” into law in 2010. By 2016, the law has provided health insurance to around 24 million individuals through a mix of state healthcare markets and a Medicaid expansion. It reduced the number of people without health insurance from over 16 percent in 2010 to around 9 percent in 2015. During his time in office, healthcare expenses remained stable. Premiums for individuals covered by employers, for example, increased by 69 percent from 2000 to 2005, but only by 27 percent from 2010 to 2015.
After subsidies, approximately 70% of consumers on the ACA marketplace exchanges could get insurance for less than $75 per month by 2017. The ACA was evaluated by the Congressional Budget Office (CBO) several times, and it was rated as a moderate deficit reducer because it included tax hikes primarily on high-income taxpayers (roughly the top 5% of the population) and reductions in future Medicare cost increases, which offset subsidy costs. The bill received no Republican votes in the House or Senate.
Obama signed the DoddFrank Wall Street Reform and Consumer Protection Act in 2010 to address the banking sector excesses that led to the crisis. This law restricted bank risk-taking and replaced an old regulatory framework that was inadequate in monitoring the non-depository or shadow banking sector, which had surpassed traditional depository banking and was at the heart of the crisis. The Consumer Financial Protection Bureau was also established as a result of this legislation. However, unlike the Glass-Steagall Act, it did not break up the largest banks (which had become even larger due to forced mergers during the crisis) or separate investment and depository banking. Only a handful of Republicans in Congress voted in favor of the bill.
President Barack Obama had a majority in both the House and the Senate during his first two years in office, which coincided with the 111th United States Congress, which is widely regarded as one of the most productive Congresses in terms of legislation passed since Lyndon B. Johnson’s Great Society. The Republicans, on the other hand, captured the House majority in November 2010 and decreased the Democratic Senate majority. Following that, he faced either a divided or Republican Congress, confining his economic legislation to primarily financial issues.
The Great Recession caused federal government revenues to plummet to their lowest level in 50 years as compared to the size of the economy.
At the same time, spending on the safety net (including automatic stabilizers like unemployment compensation and disability payments) and stimulus programs skyrocketed.
As a result, the budget imbalance grew, raising serious financial issues.
As a result, a series of tense debates with the Republican Congress ensued.
With the economy on the mend and key budget measures passed, President Obama turned his attention to a new issue: income and wealth disparity. From 1950 to 1979, the top 1% of the population received around 10% of all income. However, by 2007, this had climbed to 24%, owing to a mix of globalization, automation, and regulatory changes that undermined workers’ negotiating power in comparison to capital (owners). During 2013, he called the rising economic disparity the “defining challenge of our time.” Starting in 2013, his tax increases for higher-income taxpayers lifted their effective tax rates, reducing after-tax income disparity while job creation remained strong.
Wealth inequality had risen in lockstep, with the top 1%’s share of wealth rising from 24% in 1979 to 36% in 2007. While household net worth in the United States increased about 30% from its pre-crisis peak in 2007 to 2016, majority of this increase went to the wealthiest 1% of the population, as it had done before his tenure. By 2015, the richest 1% possessed 42 percent of the world’s wealth.
With infrastructure investment to create middle-class jobs and a federally mandated raise in the minimum wage, President Obama aimed to alleviate inequality before taxes (i.e., market income). While the latter was defeated by the Republican Congress, due in part to his support, numerous states increased their minimum wages. In late 2015, the House and Senate enacted the Fixing America’s Surface Transportation Act, the largest infrastructure bill in a decade, in unusual bipartisan fashion.
Stock markets increased by 180 percent, corporate profits increased by 122%, auto sales increased by 85 percent, home prices increased by 24 percent, real GDP increased by 15%, the number of jobs increased by 8%, and the number of Americans without health insurance decreased by 39 percent from the start of his presidency in January 2009 to late 2016. The yearly government deficit fell by 58 percent, but the national debt increased by 88 percent.
During the 2007 recession, who was president?
Significant income tax cuts in 2001 and 2003, the implementation of Medicare Part D in 2003, increased military spending for two wars, a housing bubble that contributed to the subprime mortgage crisis of 20072008, and the Great Recession that followed were all hallmarks of George W. Bush’s economic policy. Two recessions, in 2001 and 20072009, had a negative impact on the economy during this time period.
Who was President when the Great Depression began?
Franklin D. Roosevelt became President in the midst of the Great Depression, and he helped the American people restore hope in themselves. He instilled hope by promising swift, decisive action and declaring in his Inaugural Address that “the only thing we have to fear is fear itself.”
What exactly was President Franklin D. Roosevelt’s New Deal?
Between 1933 and 1939, President Franklin D. Roosevelt implemented a series of programs, public works projects, financial reforms, and laws known as the New Deal. The Civilian Conservation Corps (CCC), the Civil Works Administration (CWA), the Farm Security Administration (FSA), the National Industrial Recovery Act of 1933 (NIRA), and the Social Security Administration were all major federal programs and agencies (SSA). Farmers, the unemployed, youth, and the elderly were all helped. The New Deal imposed new restrictions and safeguards on the financial industry, as well as efforts to re-inflate the economy following a dramatic drop in prices. During Franklin D. Roosevelt’s first term in office, the New Deal programs included both congressional legislation and presidential executive orders.
The policies centered on what historians call to as the “3 R’s”: unemployment and poverty relief, economic recovery, and financial system reform to avoid a repeat depression. With its base in liberal ideas, the South, big city machines and newly empowered labor unions, and various ethnic groups, the New Deal produced a political realignment, making the Democratic Party the majority (as well as the party that held the White House for seven out of nine presidential terms from 1933 to 1969). The Republicans were divided, with conservatives rejecting the entire New Deal as anti-business and anti-growth, while liberals supported it. From 1937 to 1964, the realignment resulted in the formation of the New Deal coalition, which dominated presidential elections until the 1960s, while the conservative coalition primarily controlled Congress in domestic issues.
What led to the global financial crisis of 2008 and 2009?
The Great Recession, which ran from December 2007 to June 2009, was one of the worst economic downturns in US history. The economic crisis was precipitated by the collapse of the housing market, which was fueled by low interest rates, cheap lending, poor regulation, and hazardous subprime mortgages.
Who was responsible for the financial crisis of 2008?
Deregulation in the financial industry was the primary cause of the financial catastrophe. This allowed banks to engage in derivatives-based hedge fund trading. To support the profitable sale of these derivatives, banks demanded more mortgages.
What caused the global recessions of 2008 and 2009?
- The Great Recession refers to the global financial crisis that occurred in 2008-2009.
- It all started with the housing market bubble, which was fueled by an overabundance of mortgage-backed securities (MBS) that packaged high-risk loans together.
- Reckless lending resulted in an unprecedented number of defaulted loans; when the losses were added up, several financial institutions failed, necessitating a government rescue.
- The American Recovering and Reinvestment Act of 2009 was enacted to help the economy recover.
Why was which president blamed for the Great Depression?
Hoover founded the Reconstruction Finance Corporation (RFC) on January 22, 1932, to grant emergency loans to enterprises in danger of defaulting. The RFC initially only provided money to banks, railways, and a few agricultural groups, but its operations were gradually expanded, and it proved to be an excellent tool for business and industrial stabilization. Hoover passed the Emergency Relief Construction Act into law in July 1932, allowing the RFC to lend the states $300 million for relief programs and $1.5 billion for public works projects. Hoover also convinced Congress to create Federal Home Loan Banks in order to shield homeowners from foreclosure.
The Great Depression had begun to show hints of improvement by the summer of 1932, but many Americans still blamed President Hoover.
With the presidential election coming, New York Governor Franklin D. Roosevelt, the Democratic candidate, oozed hope and optimism, promising the people a “New Deal.”
Hoover comes across as despondent and defeated when defending his record.
Roosevelt won by a landslide in November.
What did Franklin D. Roosevelt accomplish during his presidency?
He was born into the Roosevelt family in Hyde Park, New York, and attended Groton School and Harvard College before attending Columbia Law School and practicing law in New York City after passing the bar test. Eleanor Roosevelt, his fifth cousin once removed, married him in 1905. They had six children, five of whom grew up to be adults. In 1910, he was elected to the New York State Senate, and during World War I, he served as Assistant Secretary of the Navy under President Woodrow Wilson. On the Democratic Party’s national ticket in 1920, Roosevelt was James M. Cox’s running mate, but Cox was defeated by Republican Warren G. Harding. Roosevelt developed a paralytic ailment, thought to be polio at the time, in 1921, and his legs were permanently crippled. Roosevelt established a polio rehabilitation center in Warm Springs, Georgia, while attempting to recover from his disease. Roosevelt returned to public duty after being elected governor of New York in 1928, despite his inability to walk unassisted. From 1929 until 1933, he was governor of New York, when he promoted policies to tackle the country’s economic crisis.
Roosevelt trounced Republican President Herbert Hoover in one of the most landslide victories in US history in the 1932 presidential election. Roosevelt’s administration began in the midst of the Great Depression, and he led unparalleled federal legislative output during the first 100 days of the 73rd Congress. Roosevelt advocated for the establishment of relief, recovery, and reform initiatives. He began implementing these programs within his first year, through a series of executive decrees and federal legislation known as the New Deal. The National Recovery Administration was one of many New Deal agencies that helped the unemployed. Farmers were helped by a number of New Deal programs and government laws, such as the Agricultural Adjustment Act. Roosevelt also implemented important financial, communications, and labor regulation reforms. Aside from the economics, Roosevelt wanted to stop the rising criminality that had been driven by Prohibition. Roosevelt adopted the Beer Permit Act of 1933 and enforced the 21st Amendment after campaigned on a platform to repeal it. As part of the New Deal, tax proceeds from alcohol sales would go to public works. Roosevelt used radio to communicate directly with the American people, conducting 30 “fireside chat” radio broadcasts and becoming the first American president to be televised. Between 1933 and 1936, the economy recovered dramatically, and Roosevelt was re-elected in a landslide. Despite the New Deal’s popularity, several members of the US Supreme Court remained conservative and regularly overturned New Deal policies. Roosevelt responded by advocating for the Judicial Procedures Reform Bill of 1937 (often known as the “court packing plan”), which would have increased the size of the Supreme Court. The bill was defeated by the newly established bipartisan Conservative Coalition, which also wanted to stop additional New Deal legislation; as a result, the economy began to deteriorate, resulting in the 19371938 recession. The Securities and Exchange Commission, the National Labor Relations Act, the Federal Deposit Insurance Corporation, Social Security, and the Fair Labor Standards Act were among Roosevelt’s other key 1930s legislation and institutions.
Roosevelt was reelected for a third term in 1940, making him the first and only president of the United States to serve more than two terms. By 1939, another World War loomed, prompting the United States to respond by enacting a series of legislation asserting neutrality and opposing action. Despite this, President Roosevelt provided China, the United Kingdom, and later the Soviet Union with considerable diplomatic and financial backing. Roosevelt gained a congressional declaration of war against Japan following the Japanese attack on Pearl Harbor on December 7, 1941, which he described as “a date that will live in infamy.” Japan’s allies, Nazi Germany and Fascist Italy, declared war on the United States on December 11th. As a result, the United States formally joined the Allies and entered the war in Europe. With the help of his top advisor Harry Hopkins and widespread public support, he led the Allied Powers against the Axis Powers alongside British Prime Minister Winston Churchill, Soviet General Secretary Joseph Stalin, and Chinese Generalissimo Chiang Kai-shek. Roosevelt oversaw the mobilization of the US economy to aid the war effort and executed a Europe-first strategy, launching the Lend-Lease program and prioritizing the defeat of Germany over Japan. His government oversaw the construction of The Pentagon, spearheaded the creation of the world’s first atomic weapon, and collaborated with other Allied leaders to establish the United Nations and other postwar institutions. During his wartime leadership, the United States rose to become a global superpower.
In the 1944 presidential election, Roosevelt was re-elected on a postwar recovery program. Roosevelt’s physical condition began to deteriorate throughout the last years of the war, and he died on April 12, 1945, less than three months into his fourth term. Vice President Harry S. Truman was elected president and oversaw the Axis forces’ acceptance of capitulation. Several of Roosevelt’s acts, notably as his order for the relocation and internment of Japanese Americans, have been heavily criticized since his death. Nonetheless, he is routinely ranked as one of the nation’s three greatest presidents, alongside George Washington and Abraham Lincoln, by intellectuals, political scientists, and historians.
Background
When Franklin Delano Roosevelt was elected president in 1932, he campaigned on a vow to restore American confidence and pull the country out of the Great Depression. “We have nothing to fear but fear itself,” Roosevelt said in his inaugural address. His goals were to assuage Americans’ anxieties about the economy, establish strategies to address the Great Depression’s difficulties, and secure public support for his initiatives.
Roosevelt began formulating programs to alleviate the economic troubles that the American people were facing almost immediately after his election. These measures were dubbed the New Deal when President Franklin D. Roosevelt pledged a “new deal for the American people” in a campaign speech. The New Deal had three main objectives: poverty relief, economic recovery, and financial reform. Congress passed 15 important pieces of legislation establishing New Deal agencies and programs during the Hundred Days. The Federal Deposit Insurance Corporation (FDIC) was one of them, and it was created to safeguard depositors from losing their money if a bank failed. The Civilian Conservation Corps (CCC) was another program that put thousands of men to work on projects in national forests, parks, and other public resources. During the Great Depression, the Agricultural Adjustment Administration (AAA) was established to help farmers in their terrible situation by adopting a policy of production quotas and federal subsidies. In June 1933, Congress passed the National Industrial Recovery Act (NIRA) to address the issues of industry and labor. In order to foster industrial progress, the NIRA established codes of fair treatment for various industries. The National Recovery Administration was also established as a result of this legislation (NRA). One of the most comprehensive and contentious of the early New Deal programs was the National Rifle Association (NRA). Its goals were twofold: first, to stabilize the economy by establishing “fair” business practices, and second, to increase purchasing power by creating jobs, establishing labor regulations, and raising salaries. The NRA also reflected liberal expectations for comprehensive planning and trade union hopes for safeguarding of basic hour and salary standards. The NRA was led by General Hugh S. Johnson, who suggested a “blanket code” promising all employers to follow the same labor standards. He began a crusade in mid-July 1933 to rally public support for the NRA and its compliance symbol, the “Blue Eagle,” with the phrase “We do our part.” The eagle, which was based on an Indian thunderbird, was displayed in storefronts and branded on items to demonstrate a company’s compliance. In September, there was even a parade down Fifth Avenue in New York with over a quarter-million marchers to show support for the NRA and the “Blue Eagle.”
While developing plans to aid America’s recovery from the Great Depression, Roosevelt also needed to assuage Americans’ worries and restore their trust in the New Deal’s policies, especially the NRA. FDR used the radio, the most direct means of communication with the American people, as one of his methods. Almost every home had a radio in the 1930s, and families would spend several hours a day gathered around the radio, listening to their favorite shows. “Fireside Chats” was the name Roosevelt gave to his radio discussions about public concerns. The informal and easygoing discussions gave Americans the impression that President Roosevelt was speaking directly to them. Throughout his presidency, Roosevelt used fireside chats to address the American people’s fears and concerns, as well as to inform them of the US government’s viewpoints and activities.
The NRA was the subject of the featured document in this class, Fireside Chat on the Purposes and Foundations of the Recovery Program. Although this radio message, broadcast on July 24, 1933, addressed some of the Great Depression’s challenges and issues, it also focused on what industry, employers, and employees could do to help the economy recover.
For a while, the NRA was effective. It offered the American people hope that they might overcome their anxieties of the Depression and the downward trend in salaries and prices. With the daily annoyances of code enforcement, however, resentment among businessmen grew after the recovery began. Within two years, the NRA had gained a slew of adversaries, and by May 1935, it had been declared illegal by the Supreme Court. The NRA’s experiment was widely seen as a failure. Nonetheless, the regulations established new business and worker requirements, such as the 40-hour workweek and the elimination of child labor. With the acceptance of collective bargaining, the NRA also aided the growth of unions.
Resources
Frederick Lewis Allen is a writer. Only Yesterday and Since Yesterday: A Popular History of the 1920s and 1930s is a popular history of the 1920s and 1930s. Bonanza Books, New York, 1986.
The Reader’s Companion to American History, edited by Eric Foner and John A. Garraty. Houghton Mifflin, Boston, 1991.
George Brown Tindall, David E. Shi, George Brown Tindall, George Brown Tindall, George Brown Tindall, George Brown Tind A Narrative History of the United States of America. W.W. Norton and Company, New York, 1992.