182 ChaPter^4
northerners, who owned over half of southern land, got government aid, not
the actual farmers in the South and West.
When crops were reduced, the farmers took land from sharecroppers and
tenant farmers, not from their own holdings, so the biggest farmers received
government money to remove crops from production and kill livestock while
millions went hungry. Subsequently, hundreds of thousands of poor farmers
working in such fields, including 75 percent of Blacks, some of whom had
been on their land since Reconstruction, now had no source of income and
took off for the North or other areas, especially California. Adding to the
problem for the poorest farmers, the agricultural corporations often took AAA
money to buy new machines for their crops, thus raising production and need-
ing less labor, which created more unemployment. By 1939 wheat and cotton
production was half of what it had been when the AAA began, but farm pov-
erty was still huge. In any event, 1936 the Supreme Court killed the AAA [in
United States v. Butler] because the administration was raising money for the
subsidies it gave out by taxing processors and giving that money to farmers,
which the court ruled was not a real tax and therefore beyond the govern-
ment’s power.
To address the financial crisis, FDR again let the ruling class take control
of matters, in this case the banking system. On June 16th, 1933 the president
signed the Glass-Steagall Act into law to address the stock market and credit
crises that had helped cause the depression. As noted, Capitalists had huge
sums of surplus capital in the 1920s and speculated heavily in stocks at a time
when there was no separation between commercial and investment banks.
Commercial banks are the institutions with which Americans are familiar—you
can open a savings or banking account, get a loan for a car or house, or buy
a Certificate of Deposit or Treasury Bill. Investment banks are essentially bro-
kerage firms, where one buys stocks. As noted in the section on the causes
of the depression, banks were making unsound loans because of the lure of
surplus capital and investing heavily on Wall Street, often without adequate
reserves, and also advising clients to invest in the same stocks to raise their
prices and thus bank profits. By separating the two types of banking, Glass-
Steagall created a barrier so consumers could feel that their money was safe
and so bankers could not use “commercial paper”—those deposits and inter-
est from loans—to speculate wildly on stocks. The Act also created the FDIC,
or Federal Deposit Insurance Corporation, so depositors could be repaid by the