Download New Deal Programs

New Deal Programs
Social Security Act(Aug. 14, 1935), original U.S. legislation establishing a permanent national old-age pension system through employer
and employee contributions; the system was later extended to include dependents, the disabled, and other groups.
Responding to the economic impact of the Great Depression, five million old people in the early 1930s joined
nationwide Townsend clubs, promoted by Francis E. Townsend to support his program demanding a $200 monthly
pension for everyone over the age of 60. In 1934 Pres. Franklin D. Roosevelt set up a committee on economic
security to consider the matter; after studying its recommendations, Congress in 1935 enacted the Social Security
Act, providing old-age benefits to be financed by a payroll tax on employers and employees. Railroad employees
were covered separately under the Railroad Retirement Act of 1934. The Social Security Act has been periodically
amended, expanding the types of coverage, bringing progressively more workers into the system, and adjusting both
taxes and benefits in an attempt to keep pace with inflation.
Securities and Exchange CommissionThe Securities and Exchange Commission was established in 1934 to regulate the commerce in stocks, bonds, and
other securities. After the October 29, 1929, stock market crash, reflections on its cause prompted calls for reform.
Controls on the issuing and trading of securities were virtually nonexistent, allowing for any number of frauds and
other schemes. Further, the unreported concentration of controlling stock interests in a very few hands led to the
abuses of power that the free exchange of stock supposedly eliminated.
To bring order out of chaos, Congress passed three major acts creating the Securities and Exchange
Commission, SEC, and defining its responsibilities. The Securities Act of 1933 required public corporations to register
their stock sales and distribution and make regular financial disclosures. The Securities Exchange Act of 1934
created the SEC to regulate exchanges, brokers, and over-the-counter markets, as well as to monitor the required
financial disclosures. The 1935 Public Utility Holding Company Act did away with holding companies more than twice
removed from the utilities whose stocks they held. This “death sentence” ended the practice of using holding
companies to obscure the intertwined ownership of public utility companies. Further, the act authorized the SEC to
break up any unnecessarily large utility combinations into smaller, geographically based companies and to set up
federal commissions to regulate utility rates and financial practices.
The business community, wary of New Deal reforms, was mollified by the efficient chairmanships of Joseph P.
Kennedy and William O. Douglas.
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation, or FDIC, is an independent U.S. government corporation created under
authority of the Banking Act of 1933 (also known as the Glass-Steagall Act), with the responsibility to insure bank
deposits in eligible banks against loss in the event of a bank failure and to regulate certain banking practices. It was
established after the collapse of many American banks during the initial years of the Great Depression. Although
earlier state-sponsored plans to insure depositors had not succeeded, the FDIC became a permanent government
agency through the Banking Act of 1935
The FDIC's income is derived from assessments on insured banks and from investments. Insured banks are
assessed on the basis of their average deposits; they are currently allowed pro-rata credits totaling two-thirds of the
annual assessments after deductions for losses and corporation expenses. The corporation is authorized to insure
bank deposits in eligible banks up to a specified maximum amount that has been adjusted through the years. Having
begun in 1934 with deposit insurance of $5,000 per account, in 1980 the FDIC had raised that amount to $100,000
for each deposit.
From 1933, all members of the Federal Reserve System were required to insure their deposits, while nonmember
banks—about half the United States total—were allowed to do so if they met FDIC standards. Almost all incorporated
commercial banks in the United States participate in the plan. The FDIC is managed by a board of five directors who
are appointed by the U.S. president; the five board positions are chairman, vice chairman, director, comptroller of the
currency, and director of the Office of Thrift Supervision.
National Recovery Administration
The cornerstone of President Franklin D. Roosevelt's New Deal program, the National Recovery
Administration (NRA) allowed companies to draw up trade "codes of fair competition." This resulted in
extensive, cross-industrial regulation that enraged the public even as it achieved its goal of strengthening
the depression-stricken national economy.
When the NRA was created in 1933, Roosevelt called the measure "the most important and far-reaching .
. . ever enacted by Congress." Under the NRA, businesses were allowed to regulate prices, plant
construction, wages, working conditions, and terms of credit as long as they had presidential approval.
Businesses that obeyed the codes were exempt from the government's strict antitrust (antimonopoly)
laws, which were designed to promote competition and free trade.
The NRA persuaded all the major industries to participate voluntarily, and soon the program began to
have its intended effect on the economy. However, consumers began to notice higher prices and less
availability of merchandise, and small-business owners complained that big companies had all the say in
developing government policy. Meanwhile, workers who had been guaranteed the right to organize
unions under the NRA provisions discovered that they had been betrayed.
The Supreme Court brought a sudden end to the NRA when it decided the case Schechter Poultry
Corporation v. United States in May 1935. The court unanimously ruled that the NRA was unconstitutional
because its code-drafting process violated the legal extent of the legislative branch's powers.