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Document Type

Case Study

Case Series

Bank Holidays & Other Suspensions

Abstract

By mid-February 1933, the United States was in the depths of the Great Depression and the banking system faced sustained depositor runs and currency hoarding. On February 14, the governor of Michigan declared a holiday for all banks and trusts in the state. There followed a wave of declared bank holidays and bank runs across the country. The public withdrew $1.8 billion in gold and currency from banks in February and early March, with nearly two-thirds of those withdrawals occurring in the week ended Friday, March 3. By that date, 25 of 48 states had implemented bank holidays or restricted withdrawals. The Federal Reserve Board, concerned about the dwindling cash and gold reserves at the Federal Reserve Banks, voted to implement a nationwide bank holiday early in the morning on Saturday, March 4, the day of President Franklin D. Roosevelt’s inauguration. Fed and US Treasury officials persuaded the governors of remaining states to close their banks before business opened that day. Roosevelt declared a national bank holiday on March 6, his third day in office, to place a uniform set of restrictions on banks and buy some time to plan for their reopening. On March 9, Congress passed the Emergency Banking Act. The next day, President Roosevelt issued an executive order dictating the reopening procedure. Banks applied for licenses to reopen from the Treasury and state authorities. On March 13, 1933, the 12 Reserve Banks and viable banks in those cities reopened, followed by viable banks in cities with clearinghouse branches on March 14, and a general reopening of remaining viable banks on March 15. By the end of March, $1.2 billion, or two-thirds of the decline in deposits since the beginning of February, had returned to the banking system.

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