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One of the causes of the Great Depression was the failure of our banking system. When banks closed, many people lost all of their savings. Franklin Roosevelt responded to this crisis immediately upon taking office.
The first piece of legislation signed was the Emergency Banking Relief Act. This Act declared a four-day bank holiday. Every bank in the country closed. Federal regulators went into the banks and inspected their financial records. Only the strongest banks were allowed to reopen. President Roosevelt kept the public informed with his Fireside Chats. These radio broadcasts assured the public that the banks that would reopen would be strong. He implored people to trust what the government was doing. The people listened and more money was deposited into the banks than withdrawn when the banks reopened.
Another law was passed that also affected the banking system. This was the Glass-Steagall Act. This law created the Federal Deposit Insurance Corporation. The FDIC insures bank accounts in case a bank fails or closes. This law also prohibited commercial banks from investing in the stock market.
President Roosevelt understood how important it was to keep the banking system strong. This lead to the passage of laws that would help strengthen both the banking system and people’s confidence in it.
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