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FIRESIDE CHAT ON BANKING
Franklin D. Roosevelt (1933)
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In his inaugural address, Roosevelt had famously said: “The only thing we
have to fear is fear itself.” Eight days after taking the oath of office, he moved to
address the fear of the failures of the nation's banks. One of the cruelest results of
the Great Depression was the failure of banks to which people had trusted their
life savings. With no deposit insurance (a yet to come New Deal innovation), the
savings simply no longer existed. The banking crisis had been building in the
months before Roosevelt took office. Hoover had all but begged Roosevelt to help
him address the problem and much of the animosity that separated Hoover from
Roosevelt at the inauguration was rooted in Roosevelt's failure to do so. Instead,
Roosevelt favored the dramatic stroke that a bank holiday would accomplish. As
the inauguration approached, the banking crisis climaxed.
Roosevelt was obviously making a second dramatic move: the use of radio to
directly address the American people. Political speeches had been broadcast
before, but the device of a “Fireside Chat" projected a persona of the president
sitting in your living room and chatting about the nation's problems. Roosevelt
had invented and branded a rhetorical forum through which he could directly
deal with the national anxieties.
Roosevelt asked for radio time on March 12, 1933, to address the nation. This
text of his message is from The Public Papers and Addresses of Franklin D. Roosevelt
(New York: Random House, 1938), vol. 2, pp. 61-65.
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Fireside Chat on Banking
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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.
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Franklin D. Roosevelt
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Roosevelt (1933
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I recognize that the many proclamations from State capitols and from
in banking and legal terms, should be explained for the benefit of the
e citizen. I owe this in particular because of the fortitude and good temper
banking holiday. I know that when you understand what we in Washington have
with which everybody has accepted the inconvenience and hardships of the
sympathy and help during the
been about I shall continue to have your cooperation as fully as I have had your
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-bonds, commercial paper, mortgages and 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 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
MENTARY
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the nation's banks. One of the celesi test:
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1. The banking crisis had been bulding it
ce. Hoover had all but begged Rosette
ich of the animosity that separated Home
stooted in Roosevelt's failure to do so. Insel
troke that a bank holiday would accomplish:
banking crisis climaxed
ing a
a second dramatic move: the use of robot
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 3d 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. This law also gave authority to develop a
meople
. Political speeches had been brutis
ide Chat" projected a persona of the price
hatting about the nation's problems. Rowe
torical forum through which he could died
March 12, 1931, to address the nation. Th
Phypen and Allidreces of Franklin D. Room
d. 2 pp. 61-65.
Chat on Banking
program of rehabilitation of our banking facilities. I want to tell our citizens in
every part of the Nation that the national Congress-Republicans and Democrats
emergency and the necessity for speed that it is difficult to match in our history.
alike-showed by this action a devotion to public welfare and a realization of the
continue their functions to take care of the distribution of food and household
The third stage has been the series of regulations permitting the banks to
This bank holiday, while resulting in many cases in great inconvenience, is
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. Neither is any bank which may turn out not to be in a position for
additional currency on good assets and thus the banks which reopen will be able
immediate opening. The new law allows the twelve Federal Reserve Banks to issue
necessities and the payment of payrolls
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on XIII
754
Engraving and Printing in large volume to every part of the country. It is sound
currency because it is backed by actual, good assets.
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A question you will ask is this: why are all the banks not to be reopened at the
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history of the past few years shall be repeated. We do not want and will not have
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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. This will be followed on
by the resumption of all their functions by banks already found to be sound in
cities where there are recognized clearing houses. That means about 250 cities of
the United States.
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
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.
I know that many people are worrying about State banks not members of the
Federal Reserve System. These banks can and will receive assistance from member
banks and from the Reconstruction Finance Corporation. 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. 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 policy.
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
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
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
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be laid. People will again be glad to have their money where it will be safely taken
that it
the
cooperation of the public-on its intelligent support and use of a reliable system.
Remember that the essential accomplishment of the new legislation is that it
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
Franklin D. Roosevelt
755
for issuing currency on the security of these good assets. This currency is not fiat
may
be required.
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 new capital which
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. I can even promise you salvation for some at least of the sorely pressed
banks. 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.
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