Herbert Hoover on lessons from the 1920-1921 crisis

Some of you will recollect that following the great boom and slump of 8 years ago, as Secretary of Commerce, I initiated a series of conferences and investigations by representative men into the experiences of that occasion and to make therefrom recommendations for the future. It is worth a moment to examine our conclusions at that time as tested in this present crisis.

The first of the conclusions at that time was that our credit machinery should be strengthened to stand the shock of crash; that the adjustment of interest rates through the Federal Reserve System should retard destructive speculation and support enterprise during the depression.

Our credit machinery has proved itself able to stand shock in the commercial field through the Federal Reserve System, in the industrial field through the bond market and the investment houses, in the farm mortgage field to some extent through the Farm Loan System; and in the installment-buying field through the organization of powerful finance corporations.

But if we examine the strains during the past 6 months we shall find one area of credit which is most inadequately organized and which almost ceased to function under the present stress. This is the provision of a steady flow of capital to the home builder.

From a social point of view this is one of the most vital segments of credit and should be placed in such a definitely mobilized and organized form as would assure its continuous and stable flow. The ownership of homes, the improvement of residential conditions to our people, is the first anchor in social stability and social progress. Here is the greatest field for expanded organization of capital and at the same time stimulation to increased standards of living and social service that lies open to our great loan institutions.

The result of the inability to freely secure capital has been a great diminution in home construction and a large segment of unemployment which could have been avoided had there been a more systematic capital supply organized with the adequacy and efficiency of the other segments of finance. We need right now an especial effort of our loan institutions in all parts of the country to increase the capital available for this purpose as a part of the remedy of the present situation.

~ President Herbert Hoover, speech to the Chamber of Commerce, May 1, 1930