Financial History 144 Winter 2023 | Page 20


By Michael A . Martorelli
The average American will probably not pause to note the significance of the date March 6 , 2023 . Media outlets will probably not highlight the fact that it is the anniversary of a unique event in the country ’ s history . And the customers of Bank of America , Citibank , Wells Fargo and other banks will engage in multiple transactions with those institutions without a second thought . Nevertheless , it is worth noting that on that date 90 years ago , newly inaugurated President Franklin
President Franking D . Roosevelt broadcasts his first fireside chat regarding the banking crisis on March 12 , 1933 .
D . Roosevelt ordered the nation ’ s 21,000 banks to take a four day “ holiday ” in order to halt the stampede of withdrawals that threatened to bankrupt the entire banking system . Despite all the problems our country has experienced since 1933 , no government official has ever needed to take a similar action . Almost a century after it occurred , the story of that unprecedented and all-but-forgotten episode still makes compelling reading .
President Herbert Hoover was not totally off base in October 1931 when he asserted that the nation ’ s most serious financial problem was the banking system ’ s inability to provide credit . In 1920 , there had been about 31,000 banks in the United States . Throughout the mid-1920s , many suffered the lingering effects of depressed livestock and produce prices in farming communities . At the end of that decade , others became victims of the deteriorating business conditions experienced in parts of industrial America . The great majority of banks operated out of only one office and served customers in only one community . So they were particularly vulnerable to any disruption in the economic health of one particular geographic area . Throughout the early 1930s , most were experiencing increases in loan losses , decreases in the value of investment securities and shrinking deposit bases . There were 3,643 bank failures in the first two years of that new decade — more than in the last five years of the 1920s combined .
In the initial stages of the Great Depression , bank executives regarded the lack of demand for credit as more problematic than their inability or unwillingness to
18 FINANCIAL HISTORY | Winter 2023 | www . MoAF . org