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 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 State capitols 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 benefit 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 hardships of the banking holiday. And 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 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 around.
A comparatively small part of the money that 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 comparatively small proportion of the total deposits in all
the banks of the country.
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 couldn't 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 third, 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 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 fabric.
The second step, last Thursday, 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 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 their
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 currency 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 currency on good assets and thus the banks
that reopen will be able to meet every legitimate call. The new currency is being sent out by
the Bureau of Engraving and Printing in large volume to every part of the country. It is sound currency because it is backed by actual, good assets. #p#副标题#e#
Another question 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 tomorrow, Monday, with the opening of banks in the twelve Federal
Reserve 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 recognized clearing
houses. That means about two hundred and fifty cities of the United States. In other 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
resume 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 currency needed to
meet their requirements, and to enable the Government to make common sense checkups.
Please 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.
I know that many people are worrying about State banks that are not members of the Federal
Reserve System. There is no occasion for that worry. These banks can and will receive
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 Banking Departments will be as careful as the national Government
in the policy relating to the opening of banks and will follow
the same broad 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 your 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 before. More liberal provision has been made for banks to borrow on these assets at
the Reserve Banks and more liberal provision has also been made for issuing currency on the security of these good assets. This currency is not fiat currency. It is issued only on adequate security, and every good bank
has an abundance of such security. #p#副标题#e#
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 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 have 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 of the United
States, 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. And so it became the Government’s job to straighten out
this situation and do it as quickly as possible. And that 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. I can even promise you salvation for
some, at least, of the sorely presses banks. We shall be engaged not merely in reopening
sound banks but in the creation of more sound banks through
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
that 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 themselves.
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, and it is up to
you to support and make it work.
It is your problem, my friends, your problem no less than it is mine.