what was the emergency banking act of 1933 
the emergency banking act of 1933 was a bill passed in the midst of the great depression that took steps to stabilize and restore confidence in the u s banking system it came in the wake of a series of bank runs following the stock market crash of 1929 among its major measures the act created the federal deposit insurance corporation fdic which began insuring bank accounts at no cost for up to 2 500 1 additionally the president was given executive power to operate independently of the federal reserve during times of financial crisis understanding the emergency banking actthe act was conceived after other measures failed to fully remedy how the depression strained the u s monetary system by early 1933 the depression had been ravaging the american economy and its banks for nearly four years mistrust in financial institutions grew prompting a rising flood of americans to withdraw their money from the system rather than risk leaving it in banks despite attempts in many states to limit the amount of money any individual could take out of a bank withdrawals surged as continuing bank failures heightened anxiety and in a vicious cycle spurred still more withdrawals and failures while the act originated during the administration of herbert hoover it passed on march 9 1933 shortly after franklin d roosevelt was inaugurated it was the subject of the first of roosevelt s legendary fireside chats in which the new president addressed the nation directly about the state of the country 1roosevelt used the chat to explain the provisions of the act and why they were necessary that included outlining the need for an unprecedented four day shutdown of all u s banks in order to fully implement the act during that time roosevelt explained banks would be inspected for their financial stability before being allowed to resume operations the inspections together with the act s other provisions aimed to reassure americans that the federal government was closely monitoring the financial system to ensure it met high standards of stability and trustworthiness on march 13 the first banks to reopen were the 12 regional federal reserve banks these were followed on the next day by banks in cities with federal clearinghouses the remaining banks deemed fit to operate were given permission to reopen on march 15 1 remember that no sound bank is a dollar worse off than it was when it closed its doors last week 1important effects of the emergency banking actuncertainty even anxiety about whether people would believe president roosevelt s assurances that their money was safe all but evaporated as banks reopened to long depositor lines the stock market also weighed in enthusiastically with the dow jones industrial average rising by 8 26 points a gain of more than 15 on march 15 when all eligible banks had reopened 1the effects of the emergency banking act continued with some still seen today the fdic continues to operate and virtually every reputable bank in the u s is a member of it certain provisions such as the extension of the president s executive power in times of financial crisis remain in effect the act also completely changed the face of the american currency system by taking the united states off the gold standard the loss of personal savings from bank failures and bank runs had gravely damaged trust in the financial system perhaps most importantly the act reminded the country that a lack of confidence in the banking system can become a self fulfilling prophecy and that mass panic can do the financial system and the people of the nation great harm other laws similar to the emergency banking actthe emergency banking act was preceded and followed by other pieces of legislation designed to stabilize and restore trust in the u s financial system approved during herbert hoover s administration the reconstruction finance corporation act sought to provide aid for financial institutions and companies that were in danger of shutting down due to the ongoing economic effects of the depression the federal home loan bank act of 1932 similarly sought to strengthen the banking industry and the federal reserve 1a few related pieces of legislation were passed shortly after the emergency banking act the glass steagall act also passed in 1933 this act separated investment banking from commercial banking to combat the corruption of commercial banks that engaged in speculative investing such speculation was recognized as a key cause of the stock market crash 2glass steagall was repealed in 1999 however and some believe its demise helped contribute to the 2008 global credit crisis a similar act the emergency economic stabilization act of 2008 was passed at the beginning of the great recession 3 in contrast to the emergency banking act the focus of this legislation was the mortgage crisis with legislators intent on enabling millions of americans to keep their homes was the emergency banking act a success or failure overall a success in immediate terms confidence was restored and customers brought the money they d withdrawn back to deposit at their banks decades later the fdic continues to support bank customers confidence by insuring their deposits to this day 