Chapter 32

Exhausted by World War I and Woodrow Wilson's idealistic crusade for the League of Nations, American voters in 1920 craved comfort over reform. Ohio senator Warren G. Harding promised exactly that, campaigning on a folksy pledge to return the nation to "normalcy." He crushed Democrat James M. Cox in a landslide, winning the first election in which women nationwide could vote.

Harding was affable and well-liked, but he privately admitted he was unfit for the presidency's complexities, and he leaned heavily on his cabinet and cronies to run the government. His election marked a decisive retreat from Wilsonian progressivism and international idealism — the Senate had already rejected the League of Nations, and the country turned inward toward business, tax cuts, and immigration restriction.

Harding filled some cabinet posts with genuine talent, including Secretary of State Charles Evans Hughes and Secretary of Commerce Herbert Hoover, but he also rewarded old Ohio political friends with sensitive positions, planting the seeds of the scandals to come.

The most notorious scandal of the Harding years took its name from Teapot Dome, a government oil reserve in Wyoming set aside for the navy. Secretary of the Interior Albert B. Fall secretly arranged to lease the Teapot Dome fields — and the Elk Hills reserve in California — to private oilmen Harry Sinclair and Edward Doheny, who in return quietly funneled Fall hundreds of thousands of dollars in "loans" and gifts.

Fall was later convicted and became the first former cabinet officer to serve time in prison, but the corruption reached further. Harding's circle of Ohio friends and appointees, dubbed the "Ohio Gang," looted the Veterans' Bureau under Charles Forbes and compromised the Justice Department under Attorney General Harry Daugherty.

The 1920s brought a genuine consumer-driven economic boom. Henry Ford's moving assembly line perfected mass production, and cheap, standardized automobiles — increasingly bought through installment buying rather than cash — became a middle-class fixture, reshaping American life, leisure, and geography.

New technologies like radio and nationwide advertising campaigns created a modern consumer culture, teaching Americans to want refrigerators, vacuum cleaners, and other household appliances they had never owned before. Stock ownership also broadened beyond the wealthy elite as ordinary citizens sought to share in the era's rising corporate profits.

By the late 1920s, the stock market itself had become a national obsession. Investors increasingly practiced buying on margin — putting down only a small fraction of a stock's price in cash and borrowing the rest — which multiplied both potential profits and potential losses. Regulation of the exchanges was minimal, allowing rampant manipulation and insider dealing to flourish unchecked.

Complex holding companies and utility "pyramids," such as those built by tycoon Samuel Insull, stacked layer upon layer of borrowed capital and inflated valuations, obscuring how fragile the underlying businesses actually were.

An early tremor came with the Florida land boom of the mid-1920s, in which speculators drove real estate prices to absurd heights before the bubble collapsed in 1926 — a preview, largely ignored, of the reckoning to come. Overconfidence reigned instead: prominent voices, including Coolidge himself and many respected economists, insisted stock prices reflected a permanent new plateau of prosperity rather than a bubble waiting to burst.

Choosing not to seek reelection, Coolidge cleared the way for his Commerce Secretary, Herbert Hoover, who won the Republican nomination in 1928. A mining engineer by training, Hoover had earned an international reputation organizing Belgian relief during World War I and had modernized the Commerce Department through voluntary industry standardization.

Hoover crushed Democrat Al Smith, the first Catholic nominee of a major party, in a landslide that mixed genuine confidence in Republican prosperity with religious and rural-urban prejudice against Smith's Irish-Catholic, "wet," big-city background.

The speculative bubble finally burst in late October 1929. On "Black Thursday" (October 24), panicked selling swept Wall Street, and despite bankers' efforts to calm the market, the collapse resumed in full force on "Black Tuesday" (October 29, 1929), when stock values disintegrated and paper fortunes vanished almost overnight.

The crash itself was less a single cause of the coming Depression than the spark that exposed deeper structural weaknesses: chronic overproduction of both factory goods and farm crops that outran consumer demand; a severe maldistribution of income that left too much wealth concentrated among too few Americans; reckless margin buying and easy credit that had inflated stock values far beyond reality; and a fragile, undercapitalized banking system of thousands of small, poorly regulated banks especially vulnerable to a panic. Layered atop an agricultural depression that had never really ended since the war, these weaknesses turned a stock market crash into the opening act of the Great Depression.

Amid the deepening Depression, thousands of impoverished World War I veterans demanded that Congress immediately pay a service bonus that law had promised them only for 1945. In the summer of 1932, some fifteen to twenty thousand veterans and their families — calling themselves the Bonus Expeditionary Force, or "Bonus Army" — marched on Washington, D.C., and camped in ramshackle huts along the Anacostia Flats.

When the Senate rejected the bonus bill, most marchers drifted home, but several thousand remained encamped. Hoover ordered the army to clear federal buildings the remaining veterans occupied; the operation, led by General Douglas MacArthur with junior officers Dwight Eisenhower and George Patton assisting, escalated far beyond its orders — troops with bayonets, tanks, and tear gas routed the veterans and burned their encampment to the ground.

Newsreel images of soldiers attacking former comrades-in-arms and their families shocked the nation and devastated Hoover's already battered public standing. The episode became a lasting symbol of the administration's perceived indifference to suffering Americans and helped seal Hoover's landslide defeat by Franklin D. Roosevelt in the election of 1932.