At 1:00 a.m. on Monday, March 6, 1933, the United States awoke to a financial reality unlike any it had faced before. President Franklin D. Roosevelt, barely a day into his presidency, issued Proclamation 2039, declaring a nationwide Bank Holiday Holiday. This unprecedented action, suspending all banking transactions across the nation, was not a festive break, but a desperate measure to halt the spiraling collapse of the American banking system. For a full week, the arteries of the nation’s economy – its banks – would be completely shut down, leaving Americans without access to their savings, loans, or any standard banking services.
The proclamation was stark and comprehensive. It forbade banks from paying out, exporting, or transferring gold, silver, or currency. Deposits were frozen, loans and discounts were halted, foreign exchange dealings ceased, and all other banking business ground to a halt. This drastic intervention was the culmination of a deepening crisis that had been years in the making, but had reached a critical point in early 1933. The roots of this “bank holiday holiday” lay in the economic turmoil of the preceding years, as thousands of banks succumbed to the pressures of the Great Depression. However, a fresh wave of bank runs in early 1933 threatened to bring down even the seemingly robust financial institutions of New York, which held reserves for banks across the country.
The gravity of the situation was acutely felt by key figures within the Federal Reserve system. George L. Harrison, the head of the Federal Reserve Bank of New York, and Federal Reserve Board Governor Eugene Meyer recognized the imminent danger. On March 1, 1933, Harrison sent an urgent warning to Meyer and Secretary of the Treasury Ogden Mills. The New York Reserve Bank, a cornerstone of the nation’s financial structure, had seen its gold reserves plummet below the legally mandated minimum.
Reserve Banks were legally obligated to maintain gold reserves equivalent to 40 percent of the paper currency they issued. However, a growing distrust in paper money, both domestically and internationally, was driving holders of US currency to redeem their dollars for gold at an alarming pace. Harrison’s message to Washington was unequivocal: he could no longer be responsible for the New York Reserve Bank’s operations with such critically low reserves.
The Federal Reserve Board’s initial response – a reluctant consideration of a temporary, thirty-day suspension of the gold reserve requirement – was deemed insufficient by Harrison. He argued that merely suspending the requirement would not stop the hemorrhaging of gold reserves. In his assessment, the only viable solution was a national bank holiday holiday. This pause, he believed, would provide a crucial “cooling-off” period for the nation, allowing time to enact the necessary legislation to address the underlying issues and restore confidence in the financial system. He envisioned a period where panic could subside and rational solutions could be implemented.
However, the power to declare such a bank holiday holiday rested solely with the President, then Herbert Hoover. In a climate of political paralysis, President Hoover remained unwilling to meet with Treasury Secretary Mills and Governor Meyer to discuss the unfolding crisis.
Frustrated by the White House’s inaction, Mills and Meyer returned to Harrison with an alternative suggestion: persuade Herbert Lehman, the newly elected governor of New York (who had succeeded Franklin D. Roosevelt), to declare a state-level bank holiday holiday in New York. Harrison swiftly rejected this proposal. He understood that even a New York state bank holiday holiday wouldn’t prevent the New York Federal Reserve Bank from having to pay out gold to foreign entities. Furthermore, shutting down banking operations in New York, the undisputed financial center of the United States, would effectively cripple the entire national banking system.
Adding to the complexity, prominent New York bankers voiced their opposition to a statewide bank holiday holiday, primarily out of concern for their institutions’ reputations. In a meeting with Governor Lehman, they reportedly declared their preference to “stay open and take their beating,” rather than succumb to a bank holiday holiday.
By March 3, the relentless wave of bank closures and failures had become undeniable. The mounting crisis forced even the most resistant bankers and regulators to confront the urgent need for decisive action. The directors of the Federal Reserve Bank of New York, finally acknowledging the severity of the situation, passed a resolution formally requesting the Federal Reserve Board to urge President Hoover to proclaim a nationwide bank holiday holiday.
In a significant shift, Harrison, who had previously opposed a statewide bank holiday holiday, reversed his position. Representatives of the Clearing House Banks of New York followed suit, offering a qualified endorsement of the proposal – qualified in the sense that they wanted it officially noted that they had neither initiated nor directly requested the action. The following day, Saturday, March 4, all twelve Federal Reserve Banks remained closed. Banks in thirty-seven states either shut down completely or operated under state-imposed restrictions, limiting withdrawals and further highlighting the fragmented and desperate nature of the crisis response prior to federal action.
The nation held its breath, awaiting a decisive move from the executive branch. However, neither the outgoing President Hoover nor the incoming President-elect Roosevelt seemed prepared to take the crucial step of declaring a national bank holiday holiday. Roosevelt’s advisors, lacking a clear and unified strategy to address the banking crisis, appeared content to remain ambiguous until Roosevelt officially assumed office and the full weight of presidential authority.
Expectations were sky-high on March 4, 1933, as Franklin D. Roosevelt stood before the nation to deliver his inaugural address. While his speech was deliberately short on specific details regarding the banking crisis, Roosevelt clearly identified two immediate national objectives: re-employment and “strict supervision of all banking and credits and investments.” The nation yearned for leadership and decisive action, and Roosevelt’s words, though general, signaled a shift in approach.
The day after his inauguration, Roosevelt’s cabinet, along with Treasury and Federal Reserve officials, convened to lay the groundwork for a national bank holiday holiday. Working with drafts that had been previously prepared for President Hoover by Treasury and Federal Reserve Board officials, they rapidly formulated a plan. By 1:00 a.m. on Monday, March 6, President Roosevelt acted decisively, issuing the proclamation that declared a nationwide bank holiday holiday, effective immediately. The initial plan was for the bank holiday holiday to last through Thursday, March 9. Congress was summoned to convene in an extraordinary session to consider emergency legislation designed to rebuild public trust in the shattered financial system. In the meantime, the American public grappled with the unprecedented reality of a complete banking shutdown, unsure when, or even if, they would regain access to their funds. Yet, remarkably, widespread panic did not materialize.
An article in the Boston Post observed the surprising public reaction:
“Everybody seemed to take the bank closings with good nature. Police officers on duty at the banks with instructions to inform any prospective depositors just why they could not leave their money reported that there was little or no excitement because the doors of the bank were not open. There seemed to be few who appeared for the purpose of withdrawing cash, the officers said, and many thought it was a great joke that they were unable to get into the banks for the purpose of making deposits.”
An Associated Press report further detailed how people adapted:
“The average citizen’s chief trouble appeared to lie in difficulty of cashing paychecks. Stores generally extended credit more liberally for household necessities. … Money orders were generally limited to $100. One company paid 25 percent for incoming money orders and gave checks for the balances. Railroad companies took emergency action, announcing broadened credit and stating that travelers would not be left stranded anywhere because of banking difficulties.”
Across the United States, communities demonstrated resilience and resourcefulness in the face of the bank holiday holiday. Milwaukee ministers collectively agreed to suspend the passing of collection plates during church services until the crisis subsided. The First Baptist Church in El Paso, Texas, innovatively arranged to accept I.O.U.’s as contributions. Pushcart vendors in Boston, facing a cash-strapped clientele, refused to accept large bills for small purchases of fruits and vegetables. In Bronx Traffic Court, some lawbreakers chose to serve one-day jail sentences rather than pay fines ranging from $2 to $5 in cash. Even advertisers adapted to the climate of uncertainty. A Pebeco Tooth Paste advertisement declared, “To back our faith in the current emergency program, we stand ready to keep millions of American families supplied with toothpaste. … Get three tubes. Take three months to pay.” In a somewhat darkly humorous note, the governor of California granted a reprieve to a convicted murderer, Peter Farrington, citing the “doubtful legality of hanging on a holiday holiday” – though this was likely a sardonic reference to the general disruption rather than a literal legal interpretation of the bank holiday holiday as a traditional holiday. However, the IRS remained unmoved by the financial turmoil, fully expecting and accepting tax payments via checks, highlighting the uneven impact of the crisis.
Back in Washington, government officials and congressional leaders worked tirelessly to develop a plan for reopening the banks in a way that would prevent a recurrence of the crisis. A central challenge was to prevent reopened banks from immediately failing again. Their solution was to categorize banks and reopen them in stages. Banks were classified into three categories: Class A banks, considered solvent and safe; Class B banks, weakened or endangered institutions deemed capable of reopening after reorganization; and Class C banks, insolvent banks that would not be permitted to reopen. Allan Meltzer, in his historical analysis, notes, “The Federal Reserve Banks sent the Treasury lists of banks recommended for reopening, and the Treasury licensed those it approved.” This categorization and phased reopening plan formed the backbone of the Emergency Banking Act, which Congress swiftly passed.
Crucial to the reopening strategy was the decision to temporarily decouple the dollar from the gold standard, allowing for a more flexible currency supply. At one point, Treasury officials even contemplated issuing government scrip as an emergency currency substitute. Ten million dollars’ worth of scrip was printed, but Treasury Secretary William Woodin ultimately abandoned the plan, fearing public distrust of scrip. He reasoned that issuing currency backed by the “sound assets of the banks,” rather than solely by gold, would be more palatable and effective. “The Federal Reserve Act lets us print all we’ll need. And it won’t frighten the people. It won’t look like stage money. It’ll be money that looks like real money,” Woodin argued.
This shift gave the Federal Reserve greater latitude to support reopening banks by lending more freely against their assets. George Harrison believed this would effectively make the Federal Reserve Banks “guarantors of the deposits of reopened banks,” providing a crucial layer of security and confidence.
The tide began to turn on March 9 with the passage of the Emergency Banking Act. On March 13, just four days after the emergency legislation took effect, member banks in Federal Reserve cities were authorized to reopen their doors. By March 15, banks controlling 90 percent of the nation’s banking resources had resumed operations. Encouragingly, initial deposits significantly outstripped withdrawals, signaling a restoration of public confidence. While approximately 4,000 banks remained permanently closed and full economic recovery remained a long-term prospect, the immediate banking crisis, triggered by the events that led to the bank holiday holiday, had demonstrably subsided. The bank holiday holiday, though a period of immense uncertainty, ultimately served as a critical circuit breaker, allowing the nation to step back from the brink of financial collapse and begin the arduous process of recovery.
