Response to the Banking Crisis: Hoover, Congress, and the Economists
The Federal Reserve, as argued above, was not able to stem the downward spiral of the economy in the aftennath of the stock market crash. However, contrary to popular folklore, Hoover did not sit back and do nothing while the economy collapsed. Though he strongly believed in the free market economy and the preeminent role of businessmen, this did not preclude federal government action when necessitated by emergency conditions. As Herbert Stein has observed:
Hoover and Congress
Senator Carter Glass, a Democrat from Virginia who had fathered the Federal Reserve Act, introduced the Banking Act of 1930 on June 17, 1930. This legislation provided for restrictions on the security operations of national banks, the extension of branch banking, the regulation of security affiliates, the distribution of dividends on Federal Reserve stock, and the removal of the Secretary of the Treasury from the Federal Reserve Board (Bums 1974, 8-9). The bill was not passed and since 1930 was an election year, little else was done in Congress. The banking crisis continued throughout 1930 and 1931, and hearings were held amid increasing demands that the president and Congress take action.