On March 6, 1933, the newly elected US President Franklin Delano Roosevelt announces the closure of all American banks for four days, until a special session of Congress is convened. Rather than causing panic, his act creates a general feeling of relief. First, because many of the banks are already closed. Second, because he uses the term “bank holidays”. And, third, because with his action Roosevelt demonstrates the determination of the federal government to stop the collapse of the banking industry.
As a result of the panicked withdrawal of savings, the largest financial centers - New York and Chicago - are already paralyzed. The lack of working capital puts the entire economy in danger of a complete shutdown of production.
Three days Roosevelt later sent his first bill to Congress - to put all banks under control in order to check their solvency. Confused and even frightened, Congress approved the bill in less than four hours and it immediately went into effect. Banks found to be involved in fraud were closed, but in return, those that turned out to be "healthy" - and this happened to 75% of them - received full state support.
Government guarantees were also announced for all savings up to $5,000, which led to the restoration of confidence in banks. And indeed, in just one month, deposits worth over $1 billion were returned to them.
The next step was a law on savings, by which the budgets of state institutions (police, army, administration), as well as the pensions of war veterans, were cut by 15%, and the funds were used to finance programs on “the new course”. Revenues from excise duties and taxes on the production and sale of alcohol are also directed for the same purposes, after the so-called “Beer act” repealed “Prohibition”.
The law on the regulation of agriculture also played an important role in overcoming the crisis. It introduced compensatory payments to farmers if they agreed to voluntarily reduce the production of seven basic products such as corn, dairy products, pork, cotton, tobacco, rice and wheat.