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The new deal


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The New Deal

The depression had just begun and the country was desperate for change. »¿In 1930, Americans were beginning to witness a collapse of Democracy - and possibly even the free enterprise way of life. Americans felt that the free enterprise system had failed them, a view shared by Roosevelt's government. What the New Deal did was increase governmental regulation and intervention in the economic system, therefore temporarily altering the system of capitalism and turning towards the socialist way to find answers.

The New Deal was comprised of 21 new acts and policies. Some of these Acts ended during WWII and others are still intact today. The three which I feel are the most important are: FDIC, SEC and the SSA.

»¿ The Federal Deposit Insurance Corporation (FDIC), created by the Glass-Steagall Act, guaranteed accounts of up to $5,000 in case of bank failure. This provided protection to individual depositors and gave new confidence to the banking system. In 1933, the FDIC was created in response to the thousands of bank failures that had occurred in the 1920s and early 1930s. The deposit insurance also guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. »¿Currently, the FDIC insures deposits at 8,195 institutions. In addition to providing insurance, the FDIC; supervises and examines certain financial institutions for soundness and safety, manages banks in receiverships (failed banks), and performs certain consumer-protection functions. Institutions insured by the FDIC are required to place signs at their place of business stating that "deposits are backed by the full faith and credit of the United States Government." No depositors have lost a single cent of insured money as a result of bank failure since the start of the FDIC in 1934.

The SEC (Securities and Exchange Commission) regulates the stock market. Congress gave the Federal Reserve Board the power to regulate the purchase of stock on margin. Full financial disclosures were required by businesses to further regulate stock exchanges. This was to prevent some of the practices that led to the crash of 1929. A number of the most important reforms measures by the New Deal were administered by the SEC: The Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, and the Investment Advisers Act of 1940 were enacted to regulate securities transactions. »¿Additionally, The SEC would act as a participant in corporate reorganization in the federal courts under the National Bankruptcy Act. Various laws administered by the SEC were intended to give investors more safety when it came to entrusting their money with enterprises, which previously were non-existent. The emphasis of these laws was to switch the responsibility for the condition and quality of the goods from the buyers to the sellers. »¿However, these measures did not guarantee investors against losses. It was not necessarily any harder to lose money than before, but the business practices were more fair to the stock purchaser. These regulatory measures were at first severely opposed by the financial community, since they imposed limitations and liabilities on issuers of securities. The financial community also felt that it would impede the financing of industry deals. Those firms or individuals who were affected by the regulatory decisions of the SEC have a right of review by a U.S. Circuit Court of Appeals. In 1935, the original penalties of the Securities Act of 1933 were lightened. Supervision by the Government has won increasing acceptance by the interests concerned because of the stability it has provided to the marketplace as well as the confidence it has given to the investing public.

»¿ The Social Security Act of 1935 was formed To provide for unemployment insurance and old-age pensions. A fund from which retirees received monthly pensions after the age of 65 was created by a payroll tax placed on workers and their employers. The retirement payment size depended entirely on how much the employees and their employers contributed based upon a percentage of the employees earnings. The Social Security Act's unemployment compensation plan established a minimum weekly pay and a minimum number of weeks during which those who lost their jobs could collect benefits. At as little as $10 per month, the old-age pensions were quite small at first. No one could collect unemployment who had not first lost a job . Eventually, the crucial concept of federal responsibility for America's most vulnerable citizens was established by the law (and has been subsequently amended many times). »¿Even though the original Social Security Act did not cover domestic and farm workers, it helped millions of Americans feel secure in about their retirement. This act also provided for survivor's benefits for victims of industrial accidents, unemployment insurance, aid for defendant mothers and children, and for the blind and physically disabled.

The overall impact of the New Deal has been debated by historians for years. In any political situation there are pros and cons. How much did the New Deal help or hinder the people of America? The New Deal, endorsed by farmers, liberals, and labor groups, met with increasing criticism from other factions of the U.S. The speed of reform slackened after 1937, primarily due to the Republican and popular opposition to the huge public spending, high taxes, and centralization of power in the executive branch of government. Even within the Democratic party, there was strong disapproval from the more senior members of the Party. The prospect of was in Europe shifted the focus of government to foreign affairs. At the end of World War II, most of the New Deal legislation was still in place and it remains the foundation for American social policy. Many feel that the The New Deal's policies went a long way toward curing the worst suffering of the Depression. Criticism: Those who criticize the New Deal claim that it never actually got cured unemployment in America and that Roosevelt's New Deal only had short term impact, which deluded the unemployed into thinking that all their troubles were at an end.

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