Many corporations continued to pay the usual dividend rates after their earnings dropped to zero; and, at the same time, they were making wage cuts, laying off men, and reducing others to part time. Wages dropped 60 percent in three years. President Hoover made repeated appeals to prevent wage-cutting and the discharge of employees by industry, but to no avail. He held a series of conferences at Washington where he insisted that the shock of the depression ought to fall upon profits instead of wages, and that there ought to be no wage cuts if they could possibly be avoided. Industry, however, refused to act upon the principle that recovery depended upon restoration of the purchasing power of the masses.

The Administration, also, probably in the belief that the depression would be of short duration, approached the problem of the unemployed from the viewpoint of relief rather than restoration of purchasing power,. It, therefore, refused to countenance the use of federal funds for relief purposes. Only at the end of his administration did President Hoover agree to loans of federal funds to states whose resources had been exhausted by the burden of caring for the unemployed. His approach was the indirect one of revitalizing industry so people could go back to work, instead of increasing purchasing power so industry could resume production. More than $2,000,000,000 was appropriated for public works, including the Boulder Dam project on the Colorado River; but the two chief measures of the administration program were the creation of the Reconstruction Finance Corporation and the Home Owners Loan Banks.

The Reconstruction Finance Corporation Act passed Congress in January, 1932. It created a corporation under a board of seven directors, including the Secretary of the Treasury, the Governor of the Federal Reserve Board, and the Farm Loan Commissioner. It was capitalized at $500,000,000 and was authorized to sell a maximum of $1,500,000,000  worth of five-year notes or bonds to the public or to the Treasury of the United States. Regional offices were established for the purpose of making loans. These loans could be made directly to banks and railroads, to agriculture through the Department of Agriculture, and to industry by acceptance of bills of exchange. Loans were limited to five years and to a maximum of $100,000,000. Not even Congress was to be allowed information as to what loans were made, except the aggregate amount in each class and state. In July, 1932, the capital funds of the corporation were increased to $3,800,000,000; $500,000,000 for initial capital, $1,500,000,000 for loans to corporations, the same amount for construction loans on self-liquidating projects, and $300,000,000 for relief loans to states.

The Home Loan Bank Act of July, 1932, established a system of Home Loan Banks to discount home mortgages held by building and loan associations, savings banks, and insurance companies. The primary purpose of the Act was to rescue the banks. The Reconstruction Finance Corporation, during the first year of its existence, loaned $1,000,000,000 to banks. Nothing, however, seemed able to stop the trend toward a bank panic. Withdrawals continued, bankers refused to borrow and lend, and confidence was not restored. It became increasingly evident that the banks must close and in financial circles, that the gold standard would have to be abandoned. The banking crisis came at the close of Hoover's administration. Nearly 7000 had closed in the previous eight years, more than 2000 of them in 1931, and the entire structure was shaky. Banks were temporarily closed by governors' proclamations in Nevada in January, and in Louisiana in February, 1933. Governor Comstock of Michigan closed the banks of that state on February 14. By March 1, the holiday had been extended to more than half the states and three days later was decided upon in New York City. Almost the entire country was without banking facilities and without currency. On March 5, President Roosevelt by proclamation closed every bank in the country and ordered all movements of gold and silver stopped. That date marked the bottom of the depression.

 
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