Excerpt from "The First 'Fireside Chat': An Intimate Talk with the People of the United States on Banking, March 12, 1933"
Reprinted from The Public Papers and Addresses of Franklin D. Roosevelt: Volume Two, 1933
Published in 1938
"I owe this [radio talk with the people] in particular because of the fortitude [bravery] and good temper with which everybody has accepted the inconvenience and hardships of the banking holiday."
Franklin D. Roosevelt
In 1933 Americans did not have televisions in their homes. Radio was the most powerful means to transmit ideas and information, so President Franklin Roosevelt instituted his "fireside chats" via radio broadcast, the first one airing on Sunday evening, March 12, 1933. In his comforting, reassuring voice, he clearly explained the bank crisis and the actions he had taken to relieve the crisis.
Roosevelt explained that when a person deposits money in a bank, all that money does not stay at that local bank. Instead it is used to make loans and other investments, which provide the bank with regular income. The bank keeps on hand only enough cash to take care of customers' needs on any normal day. Since the crash of the stock market in late 1929, banks had been forced to close when people could not make their regular loan payments—not enough cash was available to operate the banks. As a result, customers of the failed banks lost their savings—and their confidence in the banking system. On the mere rumor that a bank was in trouble, depositors lined up to take out all their money. This was known as a "bank run." Those at the end of the line did not get all their money. Bank runs caused perfectly sound banks to collapse.
Believing that the banking system could not endure another day, Roosevelt had suspended all banking operations on March 6, 1933. In his "fireside chat" Roosevelt explained that banks across the country had undergone examinations by federal officials to ensure that only sound banks would reopen on March 13. Roosevelt then urged Americans to quit hoarding money in mattresses and redeposit it into banks, which he assured them were safe. Roosevelt was fully aware that the country's survival depended on the actions of its citizens on Monday, March 13, 1933.
Things to remember while reading the excerpt from "The First 'Fireside Chat': An Intimate Talk with the People of the United States on Banking, March 12, 1933":
- From the late 1920s to 1933 almost 40 percent of U.S. banks had failed or had to merge to stay in business. Most failed banks were local banks, often located in economically struggling rural areas. These banks had to stretch their resources to carry out an array of services because nationwide branch banking was prohibited.
- One city bank failure involved the Bank of the United States in New York City. The bank's failure on December 11, 1930, closed fifty-seven branches in the city, freezing $210 million in 440,000 accounts. Although it was a private bank, its name spawned fears that the whole U.S. banking system was failing.
- As the Depression wore on, businesses failed, workers lost their jobs, and as a result, bank loans were not repaid. This, in turn, caused more and more bank failures.
- With few retirement plans in existence, those who lost savings in bank failures often lost the only money they had set aside for their old-age living expenses.
- By March 5, 1933, the bankers themselves had come to no agreement on how to solve the bank crisis.
Excerpt from "The First 'Fireside Chat': An Intimate Talk with the People of the United States on Banking, March 12, 1933"
I want to talk for a few minutes with the people of the United States about banking—with the comparatively few who understand the mechanics of banking but more particularly with the overwhelming majority 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, why it was done, and what the next steps are going to be. I recognize that the many proclamations from State capitols and from Washington, the legislation, the Treasury regulations, etc., couched for the most part in banking and legal terms, should be explained for the benefit of the average citizen. I owe this in particular because of the fortitude and good temper with which everybody has accepted the inconvenience and hardships of the banking holiday. I know that when you understand what we in Washington have been about I shall continue to have your cooperation as fully as I have had your sympathy and 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…kinds of loans. In other words, the bank puts your money to work to keep the wheels of industry and of agriculture turning around. A comparatively small part of the money you put into the bank is kept in currency—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 currency in the country is only a small fraction of the total deposits in all of the banks.
What, then, happened during the last few days of February and the first few days of March? Because of undermined confidence on the part of the public, there was a general rush by a large portion of our population to turn bank deposits into currency or gold—a rush so great that the soundest banks could not get enough currency 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 scarcely a bank in the country was open to do business. Proclamations temporarily closing them in whole or in part had been issued by the Governors in almost all the States.
It was then that I issued the proclamation providing for the nationwide bank holiday, and this was the first step in the Government's reconstruction of our financial and economic fabric.
The second step was the legislation promptly and patriotically passed by the Congress confirming my proclamation and broadening 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 [the legislation made it legal for Roosevelt to call the bank holiday and allowed him to extend it, then lift it gradually]. This law also gave authority to develop a program of rehabilitation of our banking facilities.…
This bank holiday, while resulting in many cases in great inconvenience, is affording us the opportunity to supply the currency necessary to meet the situation. No sound bank is a dollar worse off than it was when it closed its doors last Monday.…
A question you will ask is this: why are all the banks not to be reopened at the same time? The answer is simple. 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 tomorrow, Monday, with the opening of banks in the twelve Federal Reserve Bank cities
On Wednesday and succeeding days banks in smaller places all through the country will resume business, subject, of course, to the Government's physical ability to complete its survey [of soundness]. It is necessary that the reopening of banks be extended over a period in order to permit the banks to make applications for necessary loans, to obtain currency needed to meet their requirements and to enable the Government to make common sense checkups.
Let me make it clear to you that if your bank does not open the first day you are by 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 tomorrow.…
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 that the banks will take care of all needs—and it is my belief that hoarding during the past week has become an exceedingly unfashionable pastime. 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 that it is safer to keep your money in a reopened bank than under the mattress.
The success of our whole great national program depends, of course, upon the cooperation of the public—on its intelligent support and use of a reliable system.…
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 reorganizations quickly and effectively.…
I hope you can see from this elemental recital of what your Government is doing that there is nothing complex, or radical, in the process.
We had a bad banking situation. Some of our bankers had shown themselves either incompetent or dishonest in their handling of the people's funds. They had used the money entrusted to them in speculations and unwise loans. This was, of course, not true in the vast majority of our banks, but it was true in enough of them to shock the people for a time into a sense of insecurity and to put them into a frame of mind where they did not differentiate, but seemed to assume that the acts of a comparative few had tainted them all. It was the Government's job to straighten out this situation and do it as quickly as possible. And the job is being performed.
I do not promise you that every bank will be reopened or that individual losses will not be suffered, but there will be no losses that possibly could be avoided; and there would have been more and greater losses had we continued to drift.… We shall be engaged not merely in reopening sound banks but in the creation of sound banks through reorganization.
It has been wonderful to me to catch the note of confidence from all over the country. I can never be sufficiently grateful to the people for the loyal support they have given me in their acceptance of the judgment that has dictated our course, even though all our processes may not have seemed clear to them.
After all, there is an element in the readjustment of our financial system more important than currency, more important than gold, and that is the confidence of the people. Confidence and courage are the essentials of success in carrying out our plan. You people must have faith; you must not be stampeded by rumors or guesses. Let us unite in banishing fear. We have provided the machinery to restore our financial system; it is up to you to support and make it work.
It is your problem no less than it is mine. Together we cannot fail. [Roosevelt, pp. 61–62, 63, 64–65]
What happened next…
Lecturer and humorist Will Rogers (1879–1935) reviewed Roosevelt's first fireside chat the next day, March 13, 1933. His comments, reprinted here, appear in Susan Winslow's 1976 book titled Brother, Can You Spare a Dime?.
"Mr. Roosevelt stepped to the microphone last night and knocked another home run. His message was not only a great comfort to the people, but it pointed a lesson to all radio announcers and public speakers what to do with a big vocabulary—leave it at home in the dictionary.
"Some people spend a lifetime juggling with words, with not an idea in a carload.
"Our President took such a dry subject as banking (and when I say 'dry,' I mean dry, for if it had been liquid, he wouldn't have to speak on it at all) and made everybody understand it, even the bankers."
On Monday morning, March 13, as sound banks began reopening, Americans again lined up, but they deposited rather than withdrew money. The bank runs were over. Deposits exceeded withdrawals by $10 million in New York City alone. People had regained confidence in their political leadership and in the nation's banking system. Approximately 90 percent of the country's banking system had reopened for business by March 15.
Building on the actions of those first days of the Roosevelt administration, Congress passed the Banking Act of 1933 in June 1933 and the Banking Act of 1935 on August 23, 1935. Although the Emergency Banking Relief Act passed on March 9, 1933, had addressed the immediate crisis, the two subsequent banking acts laid the foundation for far-reaching changes in the U.S. banking system. The most enduring and influential agency to emerge from the banking acts was the Federal Deposit Insurance Corporation (FDIC), which insures depositor money against loss. The FDIC created such confidence that bank runs and failures were all but eliminated.
Did you know…
- On March 9, 1933, the entire process of enacting the Emergency Banking Act—the unanimous favorable vote in the House of Representatives, the Senate's favorable vote, and Roosevelt's signing—took less than eight hours.
- When all the banks closed on March 6, 1933, Americans responded to their common predicament with relief, not panic. They were thankful that, at least for the moment, the bank runs had stopped. For the most part people laughed, joked, and wrote lots of IOUs.
- The Banking Act of 1933 was commonly known as the Glass-Steagall Act. Under the guidance of Senator Carter Glass (1858–1946) of Virginia, this act separated commercial banks (banks that carry out regular operations of savings and checking accounts) from banks that carry out investment activities (such as investing in the stock market). Through the leadership of Representative Henry Steagall of Alabama, this act also created the Federal Deposit Insurance Corporation (FDIC) to insure depositors' money.
Consider the following…
- What do you think would have happened to the banking system if Roosevelt had not called the bank holiday? What might have happened to the United States?
- Imagine what would happen if all the banks today closed for one week. How would you live and get to and from school or work? What alternative forms of payment might be created?
- Compared to banks with a single office location, why would it be easier for banks with regional, statewide, or nationwide branches to survive an economic crisis?
For More Information
Burns, Helen M. The American Banking Community and New Deal Banking Reforms, 1933–1935. Westport, CT: Greenwood Press, 1974.
Kennedy, Susan E. The Banking Crisis of 1933. Lexington, KY: University Press of Kentucky, 1975.
Roosevelt, Franklin D. The Public Papers and Addresses of Franklin D. Roosevelt: Volume Two, 1933. New York, NY: Random House, 1938.
Winslow, Susan. Brother, Can You Spare a Dime? America from the Wall Street Crash to Pearl Harbor: An Illustrated Documentary. New York, NY: Paddington Press, 1976.