Paul C. Lovelace
Paul C. Lovelace's boyhood memory of the Great Depression miss-represents the history of the â€œBank Holiday of 1933.â€ The banks may have been closed in his rural community for three months, however for much of the country the banks resumed operations within a matter of days and public confidence in the banking system began to return.
It is disappointing, but hardly surprising that no one among your staff has the read enough U. S. history to catch this discrepancy and comment on the significance of the â€œBank Holiday.â€ Shallow and insipid are the descriptive words that come to mind when I hear the Marketplace theme music.
A detailed and easy to read and understand history of the â€œBank Holidayâ€ can be found at the Boston Federal Reserve Bank web site. http://www.bos.frb.org/about/pubs/closed.pdf
The situation and necessity for action is well documented (with extensive primary sources) there.
Here is a brief timeline of the Bank Holiday of 1933 extracted from this source:
On Monday, March 6, 1933, President Franklin D. Roosevelt issued a proclamation to suspend all banking transactions. (This proclamation was based on drafts originally prepared by the U. S. Treasury and Federal Reserve Board officials for President Hoover.) The nationwide bank holiday was slated to extend through Thursday, March 9, at which time Congress would convene in extraordinary session to consider emergency legislation aimed at restoring public confidence in the financial system.
On March 9, the emergency banking bill went to Congress, accompanied by a message from the President. â€œOur first task is to reopen all sound banks.â€
Legislative leaders shepherded the emergency measure through Congress and delivered it to the President in less than 24 hours.
The Emergency Banking Act was never intended as a comprehensive reform bill. Its two main purposes were to stop the erosion of public confidence in the banking system and to establish a mechanism for reopening the closed banks.
As government officials and Congressional leaders worked round the clock to resuscitate the U.S. banking system, everyone else tried to deal with the reality that all banks were to remain closed until further notice. People had no way of knowing when, or even if, they would ever see their money again.
The Emergency Banking Act created a mechanism for the orderly reopening of American banks. Federal authorities divided banks into three categories. Class A banks were solvent institutions m little or no danger of failing. They would be the first allowed to reopen. Class B banks were endangered, weakened, or, insolvent institutions that were thought to be capable of reopening after an indefinite period of reorganization. Class C banks were insolvent institutions that would not be allowed to reopen.
On Marcia 13, only four days after the emergency banking legislation went into effect,member banks in Federal Reserve cities received permission to reopen. By Marcia 15, banks controlling 90 percent of the countryâ€™s banking resources had resumed operations, and deposits far exceeded withdrawals.
The immediate crisis bad begun to subside, but government officials, Congressional leaders, and most bankers recognized the need for a major overhaul of the U.S. banking system.
Favorable reaction to the Emergency Banking Act had created momentum for comprehensive reform, and just three months later, on June 16, President Roosevelt signed the Banking Act of
1933, more popularly known as the Glass-Steagall Act.
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