1010thth American History American HistoryUnit IV- U.S. Economic History to 1945Unit IV- U.S. Economic History to 1945

Laws to Regulate Business and the Laws to Regulate Business and the Economy under President WilsonEconomy under President Wilson

Reading QuizReading Quiz

1. What was the Underwood-Simmons Bill?1. What was the Underwood-Simmons Bill?

2. What was a bank run?2. What was a bank run?

3. What did the Federal Reserve Act do?3. What did the Federal Reserve Act do?

4. What is a Federal Reserve Note? 4. What is a Federal Reserve Note?

Reading QuizReading Quiz

5. What was the Sherman Anti-Trust Act?5. What was the Sherman Anti-Trust Act?

6. What was Clayton Anti-Trust Act?6. What was Clayton Anti-Trust Act?

7. What did the FTC do? 7. What did the FTC do?

8. What did the Federal Farm Loan Act do?8. What did the Federal Farm Loan Act do?

Underwood-Simmons Bill- 1913Underwood-Simmons Bill- 1913 Reforming the tariff . President Woodrow Wilson- Reforming the tariff . President Woodrow Wilson-

first reduction of import duties since the Civil War. first reduction of import duties since the Civil War. The bill reduced rates by an average of 15%. The bill reduced rates by an average of 15%.

Items which could be produced more cheaply in the Items which could be produced more cheaply in the United States than abroad, such as food, wool, iron United States than abroad, such as food, wool, iron and steel, shoes, and agricultural machinery, were and steel, shoes, and agricultural machinery, were placed on the free list, and rates on other products placed on the free list, and rates on other products were substantially cutwere substantially cut

To offset the expected loss of revenue, a graduated To offset the expected loss of revenue, a graduated tax on personal incomes (1% on incomes between tax on personal incomes (1% on incomes between $3000- $20,000) was included in the act. 1% of $3000- $20,000) was included in the act. 1% of population.population.

By 1917, revenue from the income tax replaces By 1917, revenue from the income tax replaces tariff revenues as the #1 source of government tariff revenues as the #1 source of government fundingfunding

Currency and Banking ReformCurrency and Banking Reform US needed a currency that would US needed a currency that would

expand and contract with the expand and contract with the economy. Money supply had to economy. Money supply had to keep pace with rising output- keep pace with rising output- goods and services.goods and services.

No national banking system to No national banking system to help banks stop “help banks stop “runsruns”.”. Banks had small cash reserveBanks had small cash reserve Banks had reserves on deposit in Banks had reserves on deposit in

larger banks.larger banks. Larger banks lent the money to Wall Larger banks lent the money to Wall

street speculators. “On Call”street speculators. “On Call”

Federal Reserve Act (December 1913)Federal Reserve Act (December 1913)

The act created a network of 12 regional Fed. Reserve banks under mixed private and public control

Each bank could issue currency called Federal Reserve notes and this money would be given as loans to companies and corporations and individuals

The heads of the 12 banks would control the system The greatest power bestowed on the new

Federal Reserve System was establishment of the discount ratediscount rate — the rate of interest charged by the Banks when lending to member institutions. The ability to raise the discount rate was to have the tendency to slow down the economy, while dropping rates would tend to stimulate economic activity.

At 1st the decision making authority of the “fed” was bad, but by the 1930s it became a powerful institution- to control money supply thus controlling inflation. Tight money and Cheap Money.Tight money and Cheap Money.

Federal Reserve Act (December 1913)Federal Reserve Act (December 1913)

Federal Reserve Act (December 1913)Federal Reserve Act (December 1913)

A flexible new national currency These could be issued according to the

needs of the business community. The Federal Reserve NoteFederal Reserve Note—as a means to

solve the problem of inelasticity. The notes were to be backed by

commercial credit and reserves of gold of at least 40 percent of the amount of the notes issued.

Sherman Anti-Trust Act - 1890Sherman Anti-Trust Act - 1890 The act, based on the constitutional power of Congress

to regulate interstate commerce, declared illegal every contract, combination (in the form of trust or otherwise), or conspiracy in restraint of interstate and foreign trade.

A fine of $5,000 and imprisonment for one year were set as the maximum penalties for violating the act.

The Sherman Act authorized the federal government to institute proceedings against trusts in order to dissolve them, but Supreme Court rulings prevented federal authorities from using the act for some years.

As a result of President Theodore Roosevelt's “trust-busting” campaigns, the Sherman Act began to be invoked with some success, and in 1904 the Supreme Court upheld the government in its suit for dissolution of the Northern Securities Company.

The act was further employed by President Taft in 1911 against the Standard Oil trust and the American Tobacco Company.

Clayton Anti-Trust Act of 1914Clayton Anti-Trust Act of 1914 The act prohibitedThe act prohibited:

Exclusive sales contracts local price cutting to freeze out

competitors rebates interlocking directorates in corporations

capitalized at $1 million or more in the same field of business,

inter-corporate stock holdings. made corporate officers personally

responsible for violations Labor unions and agricultural

cooperatives were excluded from the forbidden combinations in the restraint of trade.

The act restricted the use of the injunction against labor, and it legalized peaceful strikes, picketing, and boycotts.

Federal Trade Commission - 1914Federal Trade Commission - 1914 Federal Trade Commission (FTC) with power to

investigate violations of federal regulations statues “Cease and Desist Order” and the power to punish. FTC could conduct investigations, gather

information, and publish reports. The Commission reported on export trade, resale

price maintenance, and other general issues, as well as meatpacking and other specific industries.

It could challenge “unfair methods of competition”. It could enforce the Clayton Act’s prohibitions

against certain price discriminations, vertical arrangements, interlocking directorships, and stock acquisitions.

FTC soon ventured beyond antitrust- misrepresentations, deception. commercial bribery, etc.

Other Economic LegislationsOther Economic Legislations Labor LegislationLabor Legislation

Wilson supported the American Federation of labor, defended workers’ rights

He liked the Clayton clause of exemption of strikes or any kind from antitrust laws prohibition of actions in “restrain of trade”

Keating-Owen ActKeating-Owen Act- Barred from interstate products made by child labor.

Adamson ActAdamson Act - Established an 8-hour workday

Workmen’s Compensation ActWorkmen’s Compensation Act-- This act provided accident and injury protection to federal workers.

Federal Farm Loan Act - made it possible for farmers to get long-term, low interest loans.