Mary Tao
On March 6, 1933, President Roosevelt issued a proclamation of a
national bank holiday, which prohibited the withdrawal of gold for hoarding and
other purposes and resulted in the temporary closure of all banks in the United
States. The proclamation was followed by huge inflows of gold to the Federal Reserve.
Reasons typically given for the bank holiday include the possible collapse of a financial system unable to keep up with the demand for gold withdrawals and the publication in major newspapers of those banks receiving aid from the Reconstruction
Finance Corporation. The Federal Reserve observed in its 1933 annual report that the crisis “was occasioned not by a shortage of currency but by loss of confidence in the solvency of banks and by a depreciation in bank assets consequent upon the drop in prices of all classes of property caused by the depression.” Shortly after
his proclamation, Roosevelt explained
his actions to the American people during his first Fireside Chat radio speech.
Whatever the reasons for the proclamation, the penalties for
ignoring it were fines of up to $10,000, a prison term of up to ten years, or a
combination. The effects were felt within days.
“Modern Midases’, Frightened by Prison Threats Deluge Federal Reserve Banks With Hoarded Gold” declared an article in the March 11, 1933, Cornell Daily Sun. The article offers
this description: “While . . . member banks were the principal depositors of gold
coin, bullion and certificates, huge amounts were returned by individuals . . . gold
holdings came back in coat pockets, bags, suitcases, brief cases and trucks.”
In the same edition is an article
describing the possible resumption of bank activities.
The Fed calculated that “between March 4 and March 15,
$370,000,000 in gold coin and gold certificates were returned, an amount about
$50,000,000 more than had gone out between the first of the year and March 4.
About $260,000,000 was returned in the second half of March, about $175,000,000
more in the second quarter of the year, and about 60,000,000 more in the last 2 quarters.”
The Fed’s annual report noted that the proclamation didn’t
require already-hoarded gold to be returned (that came later, in an executive order
of April 5), but
suggested that “the possible publication of the names of gold hoarders” and the
public’s sense of civic duty or
conscience, a
theory seconded by the Associated Press,
contributed to the high rate of returned gold.
For more on related events occurring in 1933, see our post “The
Double Eagle Lands at the New York Fed.”
Disclaimer
The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.
Mary Tao is a research librarian in the Research and Statistics Group of the Federal Reserve Bank of New York.
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