As the stock market began to fall in October 29 1929, Wall Street suffered the worst crash in history. The value of stocks sharply declined, and over the next several years, the banks began to close on a massive scale. It became difficult for people to withdraw their money and take out loans. As people lost their income, they were unable to purchase goods and the economy fell into crisis. Industry slowed, as there was little demand due to widespread decreases in wages and unemployment. The unemployment rate rapidly increased, and the economic situation of the Great Depression was worsened by extreme drought and dust storms that destroyed agriculture in the prairie states.
Hoover’s initial response towards the economic trouble was naturally laissez faire — Hoover’s Secretary of the Treasury, Andrew Mellon, described economic downturns like the depression as normal. They served the purpose of weeding out unproductive companies while encouraging moral virtue in the lower classes. Men of big business like Mellon strongly opposed federal aid to the unemployed. As opposed to policy of federal intervention in economic matters, Hoover was committed to the practice of “associational action.” He called together many conferences involving business and labor leaders to establish commissions and, encourage firms to cooperate in maintaining prices and wages without government intervention. Hoover attempted to restore public confidence, making frequent public statements that “the tide had turned.” But these comments made him seem out of touch with the reality on the streets, where men were selling apples for 5 cents. Hoover’s reflection on this phenomenon: “Many persons left their jobs for the more profitable one of selling apples.”