The
economic depression in the early 1930s had a disastrous impact on
the banking system in America. Private banks which had invested in
stocks and shares found that the Wall Street
Crash had severely reduced their funds. In December, 1930, the
Bank of the United States was forced to
close. Many banks found it difficult to continue and within a few
years a fifth of all banks in America were forced to close. As a consequence,
around 15% of people's life-savings had been lost.
By the beginning of 1933 the American people were starting to lose
faith in their banking system and a significant proportion were withdrawing
their money and keeping it at home. When Franklin
D. Roosevelt was elected as president, he made it clear that his
first concern would be to solve this banking crisis. The day after
his inauguration he called Congress into a special session and declared
a 4-day bank holiday.
On 9th March, 1933, Congress passed the Emergency Banking Relief Act
which provided for the reopening of the banks as soon as examiners
had found them to be financially secure. Within three days, 5,000
banks had been given permission to be re-opened.
Later that year Congress passed 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.
Cliff Berryman, Washington Evening
Star (1938)
(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) Ruth McKenney, diary entries
(26th February - 4th March, 1933)
26th February: Horrible rumours spread through West Hill. Bank officials
didn't show up at church services and weren't home at one o'clock
to eat the usual big Sunday dinner with their families.
27th February: The Akron banks went on a "restricted withdrawal
basis". The lobby of the First-Central Trust Company was a madhouse.
Bewildered grocery store owners and frantic housewives stood in line
with their passbooks shrilly demanding their money. Soft-voiced clerks
explained, over and over, that "everything was all right".
Ist March: The local newspapers spread great cheer over the local
banking situation. Pay rolls were said to be passing through the bank,
taxes were being paid, business places were finding their operations
unhampered.
3rd March: In the nearby empty streetcars, men told scare stories.
Hysterical women wept on neighbours' shoulders, "Everything we
had is gone. Now we go on relief."
4th March: At nine, the First-Central Trust Company owned for business.
The lobby was jammed. Clerks paid out the one per cent allowed. "I
didn't get paid this week," men in work clothes shouted. "You've
got to give me some of my money." "No!" said the clerks,
signalling for the bank guards. At noon the bank guards hustled the
crowd out. "Closing time," they shouted.
(3) Newsweek Magazine
(11th March, 1933)
Less than 34 hours after he became President of the United States,
Franklin D. Roosevelt took action unprecedented in American history.
By proclamation, under a war-time measure's terms, he closed the doors
of every bank in the United States and its possessions.
(4)
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.
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