The early hours of March 6, 1933, saw President Franklin D. Roosevelt take decisive action to confront a spiraling financial crisis. Just a day after his inauguration, Roosevelt issued Proclamation 2039, a bold move that declared a nationwide Bank Holiday Bank Holiday, effectively halting all banking operations across the United States. This drastic measure, implemented at 1:00 a.m. on that Monday, was intended to stop the run on banks and restore faith in the nation’s collapsing financial system.
For an entire week, the American economy operated without banks. People were unable to access their savings, businesses couldn’t deposit earnings, and the financial gears of the nation ground to a halt. This unprecedented bank holiday bank holiday meant no withdrawals, no deposits, no loans – a complete freeze on banking activity. The severity of the situation underscored the depth of the crisis gripping the country.
Alt text: President Franklin D. Roosevelt delivering a radio address to the American people during the 1933 bank holiday, explaining the necessity of the banking closures and outlining his plan for financial recovery.
The seeds of this crisis had been sown over the preceding years. The Great Depression had already crippled the economy, and thousands of banks had succumbed to failure in the three years leading up to 1933. By early 1933, the situation intensified, with New York banks facing immense pressure. These financial institutions held substantial reserves for banks across the country, making them a critical linchpin in the national banking network.
George L. Harrison, the Governor of the Federal Reserve Bank of New York, and Eugene Meyer, the Federal Reserve Board Governor, found themselves at the heart of this escalating crisis. On March 1, 1933, Harrison sent an urgent warning to Meyer and Treasury Secretary Ogden Mills. The New York Reserve Bank’s gold reserves had dangerously dipped below the legally mandated minimum. Reserve Banks were required to maintain gold reserves equivalent to 40% of their issued paper currency. However, a growing wave of fear and mistrust in paper money led both foreign and domestic holders to redeem dollars for gold at an alarming pace. Harrison’s stark message to Washington conveyed his inability to continue managing the New York Reserve Bank with such critically low reserves.
Alt text: A long line of people gathered outside the closed doors of a bank during the 1933 bank holiday, illustrating public uncertainty and the widespread impact of the banking suspension on everyday citizens.
The Federal Reserve Board’s initial response was to consider a temporary, 30-day suspension of the gold reserve requirement. Harrison, however, astutely pointed out that simply suspending the requirement wouldn’t solve the fundamental problem – the relentless outflow of gold. He argued forcefully that the only effective solution was a nationwide bank holiday bank holiday. This pause, he believed, would provide a crucial “cooling off” period for the nation and create the necessary space for enacting crucial legislative reforms to address the root causes of the crisis.
However, the power to declare a bank holiday bank holiday rested solely with President Hoover, who at that point, was unwilling to collaborate with Treasury Secretary Mills and Governor Meyer. Frustrated by the White House’s inaction, Mills and Meyer approached Harrison with a desperate proposal: persuade Herbert Lehman, the newly elected Governor of New York (Roosevelt’s successor in that role), to declare a state-level bank holiday bank holiday in New York. Harrison rejected this suggestion outright. He understood that a state-level action wouldn’t stop the gold drain, as the New York Federal Reserve Bank would still be obligated to pay out gold to foreign entities. Furthermore, shutting down banking in New York, the nation’s financial nerve center, would cripple the entire US banking system.
Adding to the complexity, prominent New York bankers resisted even a statewide bank holiday bank holiday, primarily out of concern for their institutions’ reputations. In a meeting with Governor Lehman, they infamously declared their preference to “stay open and take their beating” rather than admit defeat by closing.
By March 3rd, the relentless cascade of bank closures and failures had become undeniable. The mounting crisis finally forced bankers and regulators to acknowledge the urgent need for decisive intervention. The directors of the Federal Reserve Bank of New York adopted a resolution, formally requesting the Federal Reserve Board to urge President Hoover to proclaim a national bank holiday bank holiday. Even Harrison, who had initially opposed a state-level holiday, reversed his stance in favor of a nationwide solution. Representatives of the Clearing House Banks of New York followed suit, offering a qualified endorsement of the proposal. On Saturday, March 4th, a day before Roosevelt’s inauguration, all twelve Federal Reserve Banks remained closed, and banks in thirty-seven states were either fully closed or operating under state-imposed restrictions on withdrawals.
Alt text: A historic newspaper headline boldly announcing President Roosevelt’s declaration of a bank holiday in 1933, signaling the dramatic government intervention in the national financial crisis.
Despite the widespread banking paralysis, neither President Hoover nor President-elect Roosevelt seemed prepared to take the final step and declare a nationwide bank holiday bank holiday. Roosevelt’s advisors, lacking a clear strategy of their own, appeared content to remain ambiguous until Roosevelt officially took office. The nation held its breath as March 4, 1933, arrived, the day of Franklin D. Roosevelt’s inauguration. In his inaugural address, Roosevelt, while light on specific details, identified two immediate priorities: restoring employment and implementing “strict supervision of all banking and credits and investments.”
The very next day, Roosevelt’s cabinet, along with Treasury and Federal Reserve officials, convened to lay the groundwork for a national bank holiday bank holiday. Working with drafts previously prepared for President Hoover, they finalized the plan. And so, at 1:00 a.m. on Monday, March 6th, President Roosevelt issued the proclamation, plunging the nation into a nationwide bank holiday bank holiday. Initially intended to last through Thursday, March 9th, the bank holiday bank holiday was designed to give Congress time to convene in a special session and pass emergency legislation aimed at rebuilding public trust in the financial system.
The immediate aftermath of the bank holiday bank holiday was a period of uncertainty. People faced the daunting reality of banks being completely inaccessible. The question on everyone’s mind was whether they would ever see their money again. Yet, remarkably, panic was largely absent. A Boston Post article observed a widespread sense of calm and even humor. Police officers stationed at closed banks reported little agitation, noting that many people seemed to view the situation as a “great joke.” The primary concern for most citizens was managing daily transactions, particularly cashing paychecks. Local stores generally extended credit for essential household goods, and money orders, though limited to $100, became a crucial workaround. Railroad companies broadened credit policies to ensure travelers wouldn’t be stranded.
Across the nation, communities adapted to the bank holiday bank holiday in creative ways. Milwaukee ministers suspended church collections, while a church in El Paso, Texas, accepted I.O.U.s. Pushcart vendors in Boston refused large bills, and in a Bronx traffic court, minor offenders opted for jail time rather than paying fines in cash. Even advertisers found ways to connect with the crisis, with a toothpaste ad suggesting stocking up and paying later. The governor of California even granted a reprieve to a condemned murderer due to the “doubtful legality of hanging on a holiday.” However, the IRS remained steadfast, accepting tax payments via checks.
Back in Washington, the focus shifted to reopening the banks in a way that would prevent further failures. The solution involved categorizing banks into three classes: Class A (solvent and safe), Class B (weakened but potentially recoverable), and Class C (insolvent and to be liquidated). Federal Reserve Banks compiled lists of banks recommended for reopening, and the Treasury Department issued licenses to those approved. This framework was later formalized in the Emergency Banking Act.
A crucial debate emerged regarding the gold standard. Treasury officials briefly considered issuing government scrip as temporary currency, even printing $10 million worth. However, Secretary Woodin ultimately rejected this plan, fearing public distrust of scrip. Instead, the decision was made to issue currency backed by the “sound assets of the banks” rather than solely by gold. This approach, facilitated by the Federal Reserve Act, allowed for the printing of sufficient currency without alarming the public with unfamiliar “stage money.” The Federal Reserve was empowered to provide greater support to reopened banks by lending more freely against their sound assets, effectively acting as a guarantor of deposits.
The bank holiday bank holiday crisis began to recede on March 9th with the passage of the Emergency Banking Act. By March 13th, banks in Federal Reserve cities were authorized to reopen, and by March 15th, banks controlling 90% of the nation’s banking resources had resumed operations. Remarkably, deposits significantly outpaced withdrawals, indicating a swift restoration of public confidence. While thousands of banks remained permanently closed and full economic recovery was still distant, the immediate banking crisis was demonstrably over. The bank holiday bank holiday of 1933 stands as a testament to decisive government action in the face of economic catastrophe, ultimately serving as a turning point in American financial history.
