The
Bank of the United States was established in Philadelphia in 1791.
By the 20th century the bank was one of the most important in the
country. In 1930 rumours began to circulate that the bank was in trouble.
On the 7th December long queues began forming outside the bank's branches.
Over the next four days depositors took out $20 million from the bank.
On the 11th December, all its branches closed, as the bank no longer
had any money to give back to its customers. It was the most disastrous
failure in the banking history of the United States. Investigators
discovered that the bank's owners had been guilty of incompetence
and three of them, B. K. Marcus, Saul Singer and Herbert Singer, were
sentenced to terms in Sing Sing Prison.
The governor of New York, Franklin D.
Roosevelt, was one of those deeply shocked by the failure of the
Bank of the United States. When he became president in 1933 he persuaded
Congress to pass the 1933 Banking Act.
The Federal Reserve Board was given tighter control of the investment
practices of banks and the Federal Deposit Insurance Corporation was
set up to insure all deposits in banks up to $5,000.
B. K. Marcus, Saul Singer and Herbert Singer
(1) David Kennedy, banker,
interviewed by Studs Terkel in Hard
Times (1970)
All through the Twenties, they were having about six hundred banks
a year close. In 1929 and 1930 they got into thousands. Closing every
day. There was one bank in New York, the Bank of the United States
- in the wake of that closing, two hundred smaller banks closed because
of the deposits in that bank from the others.
(2) James D. Horan, The
Desperate Hours (1962)
It was one of the most disastrous failures in the banking history
of the country. The collapse carried with it four affiliate corporations,
involving an additional 200 million dollars. Men wept as they tried
to rush past the police guards and pound on the closed doors; women
screamed as they held up their bank books. Crowds refused to disperse
and stayed outside the doors for days, hoping that their savings were
not lost.
(3)
Franklin D. Roosevelt, radio broadcast,
Fireside Chat (12th March, 1933)
Some
of our bankers have shown themselves either incompetent or dishonest
in their handling of the people's funds. They had used money entrusted
to them in speculations and unwise loans. This was, of course, not
true of the vast majority of our banks, but it was true in enough
of them to shock the people for a time into a sense of insecurity.
It was the government's job to straighten out this situation and do
it as quickly as possible. And the job is being performed. Confidence
and courage are the essentials in our plan. We must have faith; you
must not be stampeded by rumours. We have provided the machinery to
restore our financial system; it is up to you to support and make
it work. Together we cannot fail.
Last
updated: 1st August, 2002
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