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“More Important Than Gold”: FDR’s First Fireside
Chat
When President Franklin D. Roosevelt took office in 1933, one in four Americans was
out of work nationally, but in some cities and some industries unemployment was well
over 50 percent. Equally troubling were the bank panics. Between 1929 and 1931, 4,000
anks closed for good; by 1933 the number rose to more than 9,000, with $2.5 billion in
lost deposits. Banks never have as much in their vaults as people have deposited, and if
all depositors claim their money at once, the bank is ruined. Millions of Americans lost
their money because they a
ived at the bank too late to withdraw their savings. The
panics raised troubling questions about credit, value, and the nature of capitalism itself.
And they made clear the unpredictable relationship between public perception and
general financial health—the extent to which the economy seemed to work as long as
everyone believed that it would. To stop the run on banks, many states simply closed
their banks the day before Roosevelt’s inauguration. Roosevelt himself declared a four-
day “bank holiday” almost immediately upon taking office and made a national radio
address on Sunday, March 12, 1933, to explain the banking problem. This excerpt from
Roosevelt’s first “fireside chat” demonstrated the new president’s remarkable capacity to
project his personal warmth and charm into the nation’s living rooms.
Audio is an excerpt of the full address.
Listen to Audio:
President Franklin D. Roosevelt: My friends, I want to talk for a few minutes with the
people of the United States about banking—to talk with the comparatively few who
understand the mechanics of banking, but more particularly with the overwhelming
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majority of you who use banks for the making of deposits and the drawing of checks. I
want to tell you what has been done in the last few days, and why it was done, and what
the next steps are going to be. I recognize that the many proclamations from the state
capitals and from Washington, the legislation, the Treasury regulations and so forth,
couched for the most part in banking and legal terms, ought to be explained for the
enefit of the average citizen. I owe this in particular because of the fortitude and the
good temper with which everybody has accepted the inconvenience and the hardships of
the banking holiday. And I know that when you understand what we in Washington have
een about I shall continue to have your cooperation as fully as I have had you
sympathy and your help during the past week.
First of all, let me state the simple fact that when you deposit money in a bank the bank
does not put the money into a safe deposit vault. It invests your money in many different
forms of credit—in bonds, in commercial paper, in mortgages, and in many other kinds
of loans. In other words, the bank puts your money to work to keep the wheels of
industry and of agriculture turning round. A comparatively small part of the money that
you put into the bank is kept in cu
ency—an amount which in normal times is wholly
sufficient to cover the cash needs of the average citizen. In other words, the total amount
of all the cu
ency in the country is only a comparatively small proportion of the total
deposits in all the banks of the country.
What, then, happened during the last few days of Fe
uary and the first few days of
March? Because of undermined confidence on the part of the public, there was a general
ush by a large portion of our population to turn bank deposits into cu
ency or gold—a
ush so great that the soundest banks couldn’t get enough cu
ency to meet the demand.
The reason for this was that on the spur of the moment it was, of course, impossible to
sell perfectly sound assets of a bank and convert them into cash except at panic prices
far below their real value.
By the afternoon of March 3, a week ago last Friday, scarcely a bank in the country was
open to do business. Proclamations closing them in whole or in part had been issued by
the governors in almost all of the states.
It was then that I issued the proclamation providing for the national bank holiday, and
this was the first step in the government’s reconstruction of our financial and economic
fa
ic.
The second step, last Thursday, was the legislation promptly and patriotically passed by
the Congress confirming my proclamation and
oadening my powers so that it became
possible in view of the requirement of time to extend the holiday and lift the ban of that
holiday gradually in the days to come. This law also gave authority to develop a
program of rehabilitation of our banking facilities, and I want to tell our citizens in every
part of the nation that the national Congress—Republicans and Democrats alike—
showed by this action a devotion to public welfare and a realization of the emergency
and the necessity for speed that it is difficult to match in all our history.
The third stage has been the series of regulations permitting the banks to continue thei
functions to take care of the distribution of food and household necessities and the
payment of payrolls.
This bank holiday, while resulting in many cases in great inconvenience, is affording us
the opportunity to supply the cu
ency necessary to meet the situation. Remember that
no sound bank is a dollar worse off than it was when it closed its doors last week.
Neither is any bank which may turn out not to be in a position for immediate opening.
The new law allows the twelve federal reserve banks to issue additional cu
ency on
good assets and thus banks that reopen will be able to meet every legitimate call. The
new cu
ency is being sent out by the Bureau of Engraving and Printing in large volume
to every part of the country. It is sound cu
ency because it is backed by actual, good
assets.
Another question that you will ask is this: why are all the banks not to be reopened at the
same time? The answer is simple, and I know you will understand it. Your government
does not intend that the history of the past few years shall be repeated. We do not want
and will not have another epidemic of bank failures.
As a result, we start tomo
ow, Monday, with the opening of banks in the twelve federal
eserve bank cities—those banks which on first examination by the Treasury have
already been found to be all right. That will be followed on Tuesday by the resumption
of all other functions by banks already found to be sound in cities where there are
ecognized clearing houses. That means about 250 cities of the United States. In othe
words, we are moving as fast as the mechanics of the situation will allow us.
On Wednesday and succeeding days banks in smaller places all through the country will
esume business, subject, of course, to the government’s physical ability to complete its
survey. It is necessary that the reopening of banks be extended over a period in order to
permit the banks to make applications for the necessary loans, to obtain cu
ency needed
to meet their requirements, and to enable the government to make commonsense
checkups.
Please let me make it clear to you that if your bank does not open the first day, you are
y no means justified in believing that it will not open. A bank that opens on one of the
subsequent days is in exactly the same status as the bank that opens tomo
ow.
I know that many people are wo
ying about state banks that are not members of the
Federal Reserve System. There is no occasion for that wo
y. These banks can and will
eceive assistance from member banks and from the Reconstruction Finance
Corporation and of course they are under the immediate control of the state banking
authorities. These state banks are following the same course as the national banks except
that they get their licenses to resume business from the state authorities, and these
authorities have been asked by the secretary of the treasury to permit their good banks to
open up on the same schedule as the national banks. And so I am confident that the state
anking departments will be as careful as the national government in the policy relating
to the opening of banks and will follow the same
oad theory.
It is possible that when the banks resume a very few people who have not recovered
from their fear may again begin withdrawals. Let me make it clear to you that the banks
will take care of all needs except of course the hysterical demands of hoarders—and it is
my belief that hoarding during the past week has become an exceedingly unfashionable
pastime in every part of our nation. It needs no prophet to tell you that when the people
find that they can get their money—that they can get it when they want it for all
legitimate purposes—the phantom of fear will soon be laid. People will again be glad to
have their money where it will be safely taken care of and where they can use it
conveniently at any time. I can assure you, my friends, that it is safer to keep you
money in a reopened bank than it is to keep it under the mattress.
The success of our whole national program depends, of course, on the cooperation of the
public—on its intelligent support and its use of a reliable system.
Remember that the essential accomplishment of the new legislation is that it makes it
possible for banks more readily to convert their assets into cash than was the case
efore. More liberal provision has been made for banks to bo
ow on these assets at the
eserve banks and more liberal provision has also been made for issuing cu
ency on the
security of these good assets. This cu
ency is not fiat cu
ency. It is issued only on
adequate security, and every good bank has an abundance of such security.
One more point before I close. There will be, of course, some banks unable to reopen
without being reorganized. The new law allows the government to assist in making these
eorganizations quickly and effectively and even allows the government to subscribe to
at least a part of any new capital that may be required.
I hope you can see, my friends, from this essential recital of what your government is
doing that there is nothing complex, nothing radical, in the process.
We