AmericanRhetoric.com

Franklin Delano Roosevelt:
The Banking Crisis (First Fireside Chat)

Delivered
12
March 1933,
Washington D.C.

AUTHENTICITY CERTIFIED:
Text
version below
transcribed
directly
from
audio

My friends:

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.

Transcription by
Michael
E. Eidenmuller. Property
of AmericanRhetoric.com. . Copyright 2006. All rights reserved.
Page
1

AmericanRhetoric.com

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.

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.

Transcription by
Michael
E. Eidenmuller. Property
of AmericanRhetoric.com. . Copyright 2006. All rights reserved.
Page
2

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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.

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.

Transcription by
Michael
E. Eidenmuller. Property
of AmericanRhetoric.com. . Copyright 2006. All rights reserved.
Page
3

AmericanRhetoric.com

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
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
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.

Together we cannot fail.

Transcription by
Michael
E. Eidenmuller. Property
of AmericanRhetoric.com. . Copyright 2006. All rights reserved.
Page
4