The Pendergast Era
At the outset state government was too alarmed. Each regarded the crisis as a temporary business recession. Business and industry were urged to hold the line on wages and prices, while employees were encouraged not to press demands for salary increases or improved working conditions. Many leaders believed that if the most critical industries and institutions in the economic sector were provided limited financial assistance, the nation would soon recover its health. President Hoover believed that relief for the poverty stricken was a matter for private agencies and local government and that massive federal aid would destroy individual initiative and the free enterprise system. As a result, the President and Congress developed no bold plan to relieve the crisis. After 1930 Democrats controlled the House of Representatives while the Republican margin in the Senate was razor-thin. Hence political arguments frequently made action difficult. Soon the road to recovery became the road to economic shambles as the depression worsened.
At Hoover's request, Congress set up the Reconstruction Finance Corporation (RFC) in 1932 to lend money to banks and other firms to keep them from going bankrupt. It also established the Federal Home Loan Bank designed to help lending institutions discount mortgages in lieu of foreclosing on homeowners. Both agencies proved inadequate to the enormous task that confronted them. That summer Congress passed the Emergency Relief Act, which authorized the RFC to lend the states up to $300 million for relief purposes, and Missouri borrowed over $1 million to aid approximately 200,000 needy persons. In the meantime, Missouri's Republican Governor Henry S. Caulfield had encouraged the highway depart-