Why was there a need for the role of the federal government to change during the 1930s?

Answer 1

The role had to change because the earlier government policy of letting the economy run itself with minimal regulation had failed, resulting in the Great Depression. Because of massive unemployment, the government stepped in to provide jobs for some people. But the more important and permanent change was that the government increased active regulation of the economy.

For instance, before the Depression, bank failures were a frequent occurrence, and people who had kept their savings in a bank that went bankrupt lost their money. Because banks were unreliable, many people kept their savings at home, taking the money out of circulation entirely. Because so many people had lost money in banks that failed, the rumor that a bank was about to go under produced a stampede of depositors trying to get their money back all at once, which could undermine even a solidly run bank. Roosevelt instituted the Federal Deposit Insurance Corporation, in which the government insured money that was put into banks. Since the government was now the guarantor of last resort that bank customers wouldn't lose their money, it instituted active regulation and oversight of banks, so that it wouldn't get stuck too often paying for their blunders.

The more active role of government regulation is the permanent legacy of the Depression and the New Deal. The Great Depression is long over, and most of the employment programs like the Civilian Conservation Corps long gone, but all US banks remain under the oversight of the FDIC, and no failure since the Depression has caused an insured bank account to be lost.

Answer 2

To bolster the employment rolls-the Great Depression left countless businesses bankrupt. Many Americans were greatly impoverished, and there were no jobs. The Fed's role was first feed the populace and second, it provided work for thousands. So in a sense, the Fed was stuck in a rut. It's new role of 'provider' would forever include a great clump of humanity with a hand out, begging sustainance.