Historical Context
". . . many banks had invested depositors' money in the stock market. After the Stock Market Crash of 1929, word spread that banks' assets contained huge uncollectable loans and almost worthless stock certificates, and depositors rushed to withdraw their savings . . . banks began failing by the hundreds in 1932 and 1933."
-Drew Powers, University of Washington professor "This banking crisis sparked fear in depositors all across the nation and public confidence in the markets plummeted, causing many people to hoard their cash, even withdrawing funds from financially sound banks. . . . By March 3rd [1933], 5,504 banks with deposits of $3,432,000,000 had closed their doors throughout the nation . . ."
-Drew Powers, University of Washington professor |
Closing and Reopening Banks
"By the afternoon of March 3 scarcely a bank in the country was open to do business . . . It was then [on March 6, 1933] that I issued the proclamation providing for the nation-wide bank holiday, and this was the first step in the Government's reconstruction of our financial and economic fabric." |
"About 50% of the nation's banks, holding nearly 90% of the country's total resources, were judged to be safe and allowed to reopen by March 15 [1933] . . . Forty-five percent of the nation's banks were placed under conservators, or regulations . . . while the remaining unstable banks, approximately 5% of the nation’s total, were closed permanently without any plans for reorganization."
-Drew Powers, University of Washington professor
-Drew Powers, University of Washington professor
"Shoring up the banks was one of the most important achievements of the New Deal. Without it, an already crippled economy could have spiraled even further downward."
-Alan Brinkley, The Gilder Lehrman Institute of American History
Restoring Americans' Faith in Banks and the Government
"Perhaps as important as what Roosevelt did in declaring the bank holiday was what he said and how he said it . . . he managed to calm Americans over the radio with conviction."
-Melissa Block, NPR
Roosevelt was empathetic to Americans' fears, but he recognized that actions borne from fear could further derail the economy. In his Fireside Chat, he spoke confidently and firmly, assuring Americans that redepositing their money was necessary for the economy to survive. Roosevelt's courage in radically shoring up the banks and his confidence in the face of the crisis made a powerful impression on Americans, who expressed their faith in Roosevelt's leadership by redepositing their money.
"Confidence is essential for success. Your people must have faith. You must not be stampeded be rumors or guesses. Let us unite in banishing fear."
-Franklin D. Roosevelt, March 12, 1933, "On the Banking Crisis" Fireside Chat
"I can assure you, my friends, that it is safer to keep your money in a reopened bank than it is to keep it under the mattress." "Contemporary observers consider the Bank Holiday and the Fireside Chat afterward a one-two punch that broke the back of the Great Depression." |
"I have regained faith in the banks due to your earnest beliefs." |
Reform: Federal Deposit Insurance Corporation (FDIC)
"The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails."
-FDIC "The FDIC is a recognized leader in promoting sound public policies . . ."
-FDIC Vision |