Bank Holiday of 1933

Overview

President Franklin D. Roosevelt declared a national bank holiday on March 6, 1933, after the banking system neared collapse in late February 1933. Thousands of bank failures during the 1920s and early 1930s weakened depositors’ confidence, triggered runs, and forced banks to sell assets, deepening the crisis. Congress confirmed the shutdown through the Emergency Banking Act on March 9, 1933. Federal and state officials examined banks and allowed only healthy institutions to reopen, while weaker banks received support, and the weakest closed. Roosevelt’s March 14, 1933, “Fireside Chat” helped calm the public, and the panic eased after banks reopened on March 15, 1933.

Essential Facts

• Date: March 6, 1933.
• President: Franklin D. Roosevelt.
• Key People: Hundred Days Congress.
• Part of: New Deal Programs.

Key Details

• Weak farm loans and a lack of bank capital contributed to instability during the 1920s.
• Thousands of bank failures undermined depositors’ confidence and triggered bank runs.
• Bank runs forced banks to sell assets for cash, which lowered asset values and deepened the crisis.
• The banking system collapsed in the last weeks of February 1933 as withdrawals spread nationwide.
• The banking crisis required quick action to stabilize the financial system.
• Congress drafted and passed the Emergency Banking Act (1933) in eight hours.
• It gave the President authority to regulate banking transactions and foreign exchange.
• It also enabled the reopening of solvent banks, restoring public confidence in the banking system.
• Government officials reopened healthy banks, supported weaker banks with loans, and closed the weakest banks through bankruptcy or consolidation.
• Roosevelt addressed the nation in the first Fireside Chat on March 12, 1933, and officials reopened 12,756 banks on March 15, 1933.

History

Background of the Banking Crisis

President Franklin D. Roosevelt’s decision to declare a national Bank Holiday became one of the most dramatic economic and political events of the Great Depression.

• During the 1920s, weak farm loans and too little bank capital created serious problems in the banking system.
• Thousands of banks failed, weakening depositors’ confidence in the banking system.
• Bank failures triggered bank runs as depositors rushed to withdraw cash.
• Bankers sold assets to raise cash during runs.
• Asset sales lowered asset values and further reduced depositors’ confidence.
• The cycle of fear, withdrawals, and falling asset values reinforced itself and deepened the crisis.

Banking Crisis of February 1933

• In the last weeks of February 1933, the banking system collapsed as the Hoover Administration ended and Roosevelt prepared to take the oath of office.
• About 95% of the nation’s banks faced the threat of shutdown during a surge of withdrawals.
• President Herbert Hoover and his advisers considered a banking holiday, but received little cooperation from the incoming Roosevelt Administration.
• Hoover decided not to act on a banking holiday before leaving office.

The Hundred Days Congress

Roosevelt called a Special Session of Congress, dominated by Democrats, to address the national emergency. During the “Hundred Days Congress,” a flood of legislation was approved from March 9 to June 16, 1933.

AHC Notes

• Special Session of Congress — A Special Session of Congress is a meeting called by the President outside the regular legislative schedule to address urgent matters, such as national crises or pressing legislation. For example, President William Howard Taft convened a special session in 1909 to address tariff reform, which led to the passage of the Payne-Aldrich Tariff Act.
• Hundred Days Congress — The Hundred Days Congress refers to the special session of Congress held during the first 100 days of Franklin D. Roosevelt’s Presidency in 1933. During this period, lawmakers enacted key New Deal legislation, including financial reforms, public works programs, and agricultural assistance. These efforts aimed to combat the Great Depression and set a precedent for government intervention in economic recovery.

Roosevelt Declares the Bank Holiday

• On March 6, 1933, President Franklin D. Roosevelt signed a proclamation (see Appendix for text) that stopped all banking operations across the United States.
• Congress later confirmed the proclamation by passing the Emergency Banking Act on March 9, 1933.

AHC Notes

• Emergency Banking Act (1933) — A law Congress passed on March 9, 1933, after Franklin D. Roosevelt ordered a national “Bank Holiday” to stop bank failures and stabilize the financial system. It legalized the shutdown, allowed federal officials to reorganize troubled banks, permitted the Reconstruction Finance Corporation (RFC) to invest in bank capital, and expanded the Federal Reserve’s ability to issue currency, creating a legal framework for rebuilding the banking system during the 1930s.

Bank Examinations and Rules for Reopening

The Roosevelt Administration did not have a detailed plan for handling the crisis, but it aimed to reopen only stable banks after the holiday.

• The Administration recognized that even a few bank failures could trigger another panic and a new cash crisis.
• The Administration ordered officials to confirm that each reopening bank was safe and to tell the public that it was safe.

Bank examiners from the Reconstruction Finance Corporation (RFC), the Treasury Department, the Comptroller of the Currency, and the Federal Reserve System started an emergency program to test the financial strength of every national bank.

• Officials licensed healthy, solvent banks to reopen.
• Weaker banks received investment capital and loans from the RFC and then reopened.
• Officials prohibited the weakest banks from reopening and pushed them into bankruptcy or consolidation with stronger institutions.
• State banking officials used similar methods to examine state banks.

AHC Notes

• Reconstruction Finance Corporation — A federal lending agency created in January 1932 to stabilize the financial system during the Great Depression by providing loans to banks and other institutions, later expanded under the New Deal to recapitalize banks through stock purchases and to finance and supervise major recovery programs.
• Solvent Banks — Financial institutions with enough assets to cover their liabilities and meet obligations. During the Great Depression, solvent banks were those deemed financially stable enough to reopen after inspections conducted under the Emergency Banking Relief Act (1933). These inspections helped restore public trust by ensuring that only reliable banks resumed operations, stabilizing the U.S. banking system.
• Federal Reserve System — Created by the Federal Reserve Act of 1913, the Federal Reserve System became the United States’ central banking structure, designed to regulate the money supply and stabilize the financial system after repeated banking disputes and renewed pressure following the Panic of 1907. Under Woodrow Wilson’s leadership and with bipartisan support, the law established 12 regional Federal Reserve banks and a president-appointed Federal Reserve Board to set policy. By influencing interest rates and the terms under which banks accessed funds, the system could expand or restrict credit and support financial transactions through Federal Reserve notes. Critics argued that it favored large banks and blamed it for the 1929 collapse that caused the Great Depression.

Fireside Chat and the End of the Panic

On March 12, 1933, President Roosevelt spoke to the nation by radio in a Fireside Chat (see Appendix for transcript).

• Roosevelt told Americans they could trust the banks that reopened the next day.
• He said deposits placed in reopened banks would remain completely safe.

On March 15, 1933, federal and state officials allowed 12,756 banks to reopen.

• Before the holiday, 18,390 banks operated nationwide.
• The bank holiday restored confidence and ended the financial panic.

AHC Notes

• Fireside Chats — Between 1933 and 1944, President Franklin D. Roosevelt gave a series of informal radio addresses. These broadcasts explained government policies, such as New Deal programs, directly to the American people in simple and reassuring language. They fostered a sense of connection between Roosevelt and the public, building trust during challenging times like the Great Depression and World War II.

AP US History (APUSH)

Alignment

The Bank Holiday of 1933 is part of the following units, topics, and chapters in the AP US History curriculum:

• Great Depression and the New Deal (1933–1939)

Definition

Bank Holiday (1933) — Declared by Franklin D. Roosevelt in March 1933, the bank holiday temporarily closed all U.S. banks to prevent runs during the Great Depression. This pause allowed the government to inspect banks’ solvency and restore public confidence. Following the holiday, Roosevelt signed the Emergency Banking Relief Act, which stabilized the financial system and led to the reopening of sound banks.

• Roosevelt declared a nationwide Bank Holiday from March 6 to 10, 1933, to stabilize the financial system.
• He called a Special Session of Congress, dominated by Democrats, to address the national emergency.
• During the “Hundred Days Congress,” a flood of legislation was approved from March 9 to June 16, 1933.
• The laws were a mix of progressive ideas and new measures designed to combat the immediate crisis.

Appendix

Roosevelt’s Proclamation

By the President of the United States of America

A Proclamation

Whereas, on March 6, 1933, I, Franklin D. Roosevelt, President of the United States of America, by Proclamation declared the existence of a national emergency and proclaimed a bank holiday extending from Monday the 6th day of March to Thursday the 9th day of March, 1933, both dates inclusive, in order to prevent the export, hoarding or earmarking of gold or silver coin, or bullion or currency, or speculation in foreign exchange; and

Whereas, under the Act of March 9, 1933, all Proclamations heretofore or hereafter issued by the President pursuant to the authority conferred by section 5 (b) of the Act of October 6, 1917, as amended, are approved and confirmed; and

Whereas, said national emergency still continues, and it is necessary to take further measures extending beyond March 9, 1933, in order to accomplish such purposes:

Now, Therefore, I, Franklin D. Roosevelt, President of the United States of America, in view of such continuing national emergency and by virtue of the authority vested in me by Section 5 (b) of the Act of October 6, 1917 (40 Stat. L. 411), as amended by the Act of March 9, 1933, do hereby proclaim, order, direct and declare that all the terms and provisions of said Proclamation of March 6, 1933, and the regulations and orders issued thereunder are hereby continued in full force and effect until further proclamation by the President.

In Witness Whereof, I have hereunto set my hand and have caused the seal of the United States to be affixed.

Done in the District of Columbia, this 9th day of March, in the Year of our Lord One Thousand Nine Hundred and Thirty three, and of the Independence of the United States the One Hundredth and Fifty-seventh.

FRANKLIN D. ROOSEVELT

By the President:

CORDELL HULL

Secretary of State.

Roosevelt’s Fireside Chat on the Banking Crisis

I want to talk for a few minutes with the people of the United States about banking — with the comparatively few who understand the mechanics of banking, but more particularly with the overwhelming majority who use banks for the making of deposits and the drawing of checks. I want to tell you what has been done in the last few days, why it was done, and what the next steps are going to be. I recognize that the many proclamations from State Capitols and from Washington, the legislation, the Treasury regulations, etc., couched for the most part in banking and legal terms, should be explained for the benefit of the average citizen. I owe this in particular because of the fortitude and good temper with which everybody has accepted the inconvenience and hardships of the banking holiday. I know that when you understand what we in Washington have been about, I shall continue to have your cooperation as fully as I have had your sympathy and help during the past week.

First of all, let me state the simple fact that when you deposit money in a bank, the bank does not put the money into a safe deposit vault. It invests your money in many different forms of credit—bonds, commercial paper, mortgages, and many other kinds of loans. In other words, the bank puts your money to work to keep the wheels of industry and of agriculture turning around. A comparatively small part of the money you put into the bank is kept in currency — an amount which in normal times is wholly sufficient to cover the cash needs of the average citizen. In other words, the total amount of all the currency in the country is only a small fraction of the total deposits in all of the banks.

What, then, happened during the last few days of February and the first few days of March? Because of undermined confidence on the part of the public, there was a general rush by a large portion of our population to turn bank deposits into currency or gold — a rush so great that the soundest banks could not get enough currency to meet the demand. The reason for this was that on the spur of the moment, it was, of course, impossible to sell perfectly sound assets of a bank and convert them into cash except at panic prices far below their real value.

By the afternoon of March 3rd, scarcely a bank in the country was open to do business. Proclamations temporarily closing them in whole or in part had been issued by the Governors in almost all the States.

It was then that I issued the proclamation providing for the nationwide bank holiday, and this was the first step in the Government’s reconstruction of our financial and economic fabric.

The second step was the legislation promptly and patriotically passed by the Congress, confirming my proclamation and broadening my powers so that it became possible, in view of the requirement of time, to extend the holiday and lift the ban of that holiday gradually. This law also gave authority to develop a program of rehabilitation of our banking facilities. I want to tell our citizens in every part of the Nation that the national Congress — Republicans and Democrats alike — showed by this action a devotion to public welfare and a realization of the emergency and the necessity for speed that it is difficult to match in our history.

The third stage has been the series of regulations permitting the banks to continue their functions to take care of the distribution of food and household necessities and the payment of payrolls.

This bank holiday, while resulting in many cases in great inconvenience, is affording us the opportunity to supply the currency necessary to meet the situation. No sound bank is a dollar worse off than it was when it closed its doors last Monday. Neither is any bank, which may turn out not to be in a position for immediate opening. The new law allows the twelve Federal Reserve Banks to issue additional currency on good assets, and thus, the banks which reopen will be able to meet every legitimate call. The new currency is being sent out by the Bureau of Engraving and Printing in large volume to every part of the country. It is sound currency because it is backed by actual, good assets.

A question you will ask is this: why are all the banks not to be reopened at the same time? The answer is simple. Your Government does not intend that the history of the past few years shall be repeated. We do not want and will not have another epidemic of bank failures.

As a result, we start tomorrow, Monday, with the opening of banks in the twelve Federal Reserve Bank cities — those banks which on first examination by the Treasury have already been found to be all right. This will be followed on Tuesday by the resumption of all their functions by banks already found to be sound in cities where there are recognized clearing houses. That means about 250 cities of the United States.

On Wednesday and succeeding days, banks in smaller places all through the country will resume business, subject, of course, to the Government’s physical ability to complete its survey. It is necessary that the reopening of banks be extended over a period in order to permit the banks to make applications for necessary loans, to obtain currency needed to meet their requirements, and to enable the Government to make common sense checkups.

Let me make it clear to you that if your bank does not open the first day you are by no means justified in believing that it will not open. A bank that opens on one of the subsequent days is in exactly the same status as the bank that opens tomorrow.

I know that many people are worrying about State banks not members of the Federal Reserve System. These banks can and will receive assistance from member banks and from the Reconstruction Finance Corporation. These State banks are following the same course as the National banks except that they get their licenses to resume business from the State authorities, and these authorities have been asked by the Secretary of the Treasury to permit their good banks to open up on the same schedule as the national banks. I am confident that the State Banking Departments will be as careful as the national Government in the policy relating to the opening of banks and will follow the same broad policy.

It is possible that when the banks resume a very few people who have not recovered from their fear may again begin withdrawals. Let me make it clear that the banks will take care of all needs — and it is my belief that hoarding during the past week has become an exceedingly unfashionable pastime. It needs no prophet to tell you that when the people find that they can get their money— that they can get it when they want it for all legitimate purposes—the phantom of fear will soon be laid. People will again be glad to have their money where it will be safely taken care of and where they can use it conveniently at any time. I can assure you that it is safer to keep your money in a reopened bank than under the mattress.

The success of our whole great national program depends, of course, upon the cooperation of the public—on its intelligent support and use of a reliable system.

Remember that the essential accomplishment of the new legislation is that it makes it possible for banks more readily to convert their assets into cash than was the case before. More liberal provision has been made for banks to borrow on these assets at the Reserve Banks, and more liberal provision has also been made for issuing currency on the security of these good assets. This currency is not fiat currency. It is issued only on adequate security, and every good bank has an abundance of such security.

One more point before I close. There will be, of course, some banks unable to reopen without being reorganized. The new law allows the Government to assist in making these reorganizations quickly and effectively, and even allows the Government to subscribe to at least a part of new capital which may be required.

I hope you can see from this elemental recital of what your Government is doing that there is nothing complex, or radical, in the process.

We had a bad banking situation. Some of our bankers had shown themselves either incompetent or dishonest in their handling of the people’s funds. They had used the money entrusted to them in speculations and unwise loans. This was, of course, not true in 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 and to put them into a frame of mind where they did not differentiate, but seemed to assume that the acts of a comparative few had tainted them all. It was the Government’s job to straighten out this situation and do it as quickly as possible. And the job is being performed.

I do not promise you that every bank will be reopened or that individual losses will not be suffered, but there will be no losses that possibly could be avoided; and there would have been more and greater losses had we continued to drift. I can even promise you salvation for some at least of the sorely pressed banks. We shall be engaged not merely in reopening sound banks but in the creation of sound banks through reorganization.

It has been wonderful to me to catch the note of confidence from all over the country. I can never be sufficiently grateful to the people for the loyal support they have given me in their acceptance of the judgment that has dictated our course, even though all our processes may not have seemed clear to them.

After all, there is an element in the readjustment of our financial system more important than currency, more important than gold, and that is the confidence of the people. Confidence and courage are the essentials of success in carrying out our plan. You people must have faith; you must not be stampeded by rumors or guesses. Let us unite in banishing fear. We have provided the machinery to restore our financial system; it is up to you to support and make it work.

It is your problem no less than it is mine. Together we cannot fail.