The Act legalized the temporary closure of banks called the National Bank holiday which allowed bank examiners to determine which banks were solvent and those that were weak and should be closed. Provisions were made to reorganize the banks, provide long term investment funds and allowed the RFC to issue new banks notes.
Why was the Emergency Banking Relief Act passed? The law was passed as the first of FDR's series of New Deal Programs to stabilize and regulate the banking system
When was the Emergency Banking Relief Act passed? The date the Emergency Banking Relief Act (EBA) was passed on March 9, 1933, three days after FDR declared a nationwide bank holiday
What was the National Bank Holiday? FDR declared a National Bank Holiday and temporarily closed all the banks from March 6, 1933 until March 13, 1933 when the banks re-opened.
Emergency Banking Relief Act
The banking crisis had led to the closure of thousands of banks. Many people had lost their life savings and the banks were seen as so unsafe that people were hoarding their money at home
FDR became president on March 4, 1933 and knew that the first thing he had to do was restore the Nation's confidence in the banking system.
He appointed William H. Woodin as Secretary of State and took the dramatic decision to temporarily close all the banks. The action was referred to as the 'Nationwide Bank Holiday' - but it was imperative that the banks were opened as quickly as possible .
At 1:00 a.m. on Monday, March 6,1933 President Roosevelt issued a proclamation ordering the suspension of all banking transactions. No banks were permitted to pay out or permit the withdrawal or transfer of any form of currency, make loans or discounts or deal in foreign exchange.
During the period of temporary closure of the banks a way had to be found to prevent any reopened banks from failing. FDR had tasked Secretary of State Woodin to prepare an emergency banking bill in just five days that could be presented to the special session of Congress on March 9, 1933.
Provisions: The provisions of the Emergency Banking Relief Act were as follows:
The Federal Reserve Banks sent the Treasury lists of banks recommended for reopening, and the Treasury licensed those it approved. This was accomplished by a phased approach in which:
The special session of Congress convened on March 9, 1933. The House of Representatives passed the Act unanimously after only 38 minutes of debate. The Senate approved the bill and President Franklin Roosevelt signed the new law the same evening.
The provisions of the Act enabled FDR to encourage the Federal Reserve to create de facto 100% deposit insurance in the reopened banks that provided some assurance to the people that their money would be safe
FDR explained the provisions of the EBA to the American people in his first radio Fireside Chat on March 12, 1933 that helped to restore the nation's confidence in the banking system.
Over 60 million Americans tuned into the radio and listened to their president. He said "I assure you that it is safer to keep your money in a reopened bank than under the mattress"
Effects of the law: The effects of the law were immediate. The banks re-opened on March 13, 1933, the day after FDR's radio speech (Fireside Chat) and bank deposits far outweighed the bank withdrawals.
Effects of the law: The legislation of the 1933 Emergency Banking Relief Act and the actions of FDR resulted in the end of the Banking Crisis.
The 1933 Emergency Banking Relief Act was largely replaced later in 1933 by the Banking Act of 1933, aka the Glass-Steagal Act
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