"Teddy" was an abbreviation of Theodore, and the nickname had nothing to do with Theodore Roosevelt's bear hunting incident. However, the teddy bear's name is derived from the incident.
Theodore Roosevelt refused to shoot a bear that had been captured for him to shoot when his hunting trip was not going well. The incident was captured in a Clifford Berryman political cartoon, "Drawing the Line in Mississippi," featuring a frightened little bear tied down by a man and an indignant Roosevelt refusing to even look at it. The little bear became a feature in the background of Berryman Cartoons of Roosevelt forever after.
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