The Emergency Banking Relief Act was a Public Law that was presented by the Congress of the United States in 1933. Its purpose was stabilizing the banking system of America.
Explanation:
The Emergency Banking Relief Act was signed by President Roosevelt on March 9, 1933. This law was significant, as it was one of the first ones the new administration introduced.
At the beginning of his career as a president of the United States, Roosevelt attacked the bank crisis first. He decided to close all banks for four days and pushed the Emergency Banking Relief Act through Congress within only eight hours.
The situation Roosevelt faced was that the country’s economy was highly affected by the Great Depression. Many loans of the 1920th were not repaired, which was an acute issue for America’s banking system. This point can be illustrated by the fact that between 1929 and 1933, 10,000 banks were closed in the United States. Moreover, the population lost its savings because of the Stock Market Crash of 1929. As a result, individuals could not trust banks any longer because they lost their money every time a bank failed. This period was known for so-called “bank runs”, as the population rushed to the banks to withdraw their money in order to avoid risks.
The situation the country’s population faced can be illustrated in the following way. A person is walking to their local bank to deposit a check in their account, which is an action they had done several times before. However, the situation is now different. The bank is surrounded with people, and it is possible to see that they are anxious. Someone from the crowd tells the person that their money are lost. Then, the person approaches the bank’s employee, who confirmed that their life savings are now gone. Such an event is illustrated in the image below.
The situation presented above was a reality to many people living at the time. Events like this happened all over the country, as all of its parts were affected by the Great Depression. Evidently, it was necessary to manage the problem as soon as it was possible. To manage the problem, the president declared a bank holiday on March 5, 1933, and closed all banks in the United States for several days. During that short period, Roosevelt enacted the Emergency Banking Relief Act, allowing some individual banks to reopen. Thus, the law permitted solvent banks to open again but only under the government’s supervision.
The Emergency Banking Relief Act was useful for the American population in several ways. For instance, it restored individuals’ confidence associated with Wall Street. As many banks were reopened several days after the law was presented, people started to return their cash they had withdrawn earlier. Moreover, as people started trusting Wall Street, the first day of stock trading presented the largest price increase that had ever been registered.
It is evident that the Emergency Banking Relief Act helped the country to overcome the significant financial crisis associated with the Great Depression. It was crucial for the President to stabilize the credit and monetary systems of the United States to help the population recover from the crisis. The law also helped people pay off the loads of debts that they ran up from the easy credit and buying stock, which happened after the Stock Market crash of 1929.
After the Emergency Banking Act, several follow-up measures were introduced, including the acts related to stock market, savings, loans, gold, and mortgage. Therefore, the law helped Americans to gain financial stability after the Great Depression.