The Emergency Banking Act of 1933 was passed to restore and strengthen public confidence in the US banking system. This legislation was a response to the fact that American citizens were massively withdrawing their money from banking accounts.
Consequently, the Emergency Banking Relief Act provided the president with the power to close some banks and allowed the Federal Reserve Board to issue new currency to back the personal savings of the population.
The description of the Emergency Banking Act will be incomplete without mentioning a historical context. Thus, the given piece of legislation took place against the background of the Great Depression. At that time, the US citizens did not trust national banks and wanted to keep their money at homes.
Shortly after his inauguration, President Roosevelt decided that it was necessary to address the issue to prevent the banking sector from collapsing. That is why he initiated the four-day Bank Holiday across the United States. From March 6 till March 9, all the banks were closed, and individuals were not allowed to withdraw any funds from their accounts. Roosevelt made that step to both stop bank runs and provide the Congress with sufficient time to find the solution to the given issue.
One should note that the holiday was productive since the legislation was passed on March 9, 1933. According to this law, a bank could only reopen if appropriate examiners identified and proved its financial security. Banks were provided with the new currency that was sufficient for the financial institutions to meet every customer’s call after their reopening.
In addition to that, President Roosevelt promised to ensure the funds of the 12 Federal Reserve banks. Thus, if one of those banks lost its funds, its clients would be compensated by the government. Finally, the given legislation expanded presidential powers in case of a crisis to regulate all banking functions. It also provided the Federal Reserve with the relative freedom of issuing emergency currency backed by any assets.
Considering the information above, once can ask the following: Was the Emergency Banking Act successful? Credible evidence presents an affirmative answer to the question above.
Firstly, the law managed to restore the people’s confidence in the banking system, which was proved by numerous customers who were returning their cash to banking accounts. Since the president promised to insure their money, individuals were ready to invest their funds in banks.
Secondly, Wall Street demonstrated the beneficial consequences of the given act, which referred to a significant one-day percentage price increase. Then, the Emergency Banking Act impact also touched the Federal Reserve. The law allowed this establishment not to back the currency with gold, which created a new monetary policy.
Finally, the legislation was successful since even modern Americans utilize its benefits. It relates to the fact that banking accounts are now insured as a result of the law under consideration.
The Emergency Banking Act was an essential phenomenon in American history. It demonstrated that adequate management could be sufficient to overcome various challenges. Roosevelt managed to start his term in office with a favorable decision.
Since the initial purpose of the Emergency Banking Act was to stabilize the confidence of the US citizens in their banking sector, the legislation coped with the task. That case that the law has generated some benefits for the modern world emphasizes its significance.