01 The Hour
01:00
Monday 6 March 1933, Washington
The proclamation was issued at one in the morning, thirty-six hours after the oath of office. It ran from Monday 6 March to Thursday 9 March, both dates inclusive.
Its terms were itemised rather than general. No banking institution was to pay out deposits, make loans or discounts, deal in foreign exchange, transfer credits abroad, or transact any other banking business whatsoever. All twelve Reserve Banks had already kept their doors locked through the Saturday, and banks in thirty-seven states were closed or operating under state restrictions on withdrawals.
02 The Sequence
1 Mar Wednesday. The head of the New York Reserve Bank sends an urgent message to Washington: the bank's gold reserve has fallen below the legal limit. Reserve Banks were required to hold gold equal to 40 per cent of the paper currency they issued.
3 Mar Friday. The directors of the New York Reserve Bank resolve to ask the Board to urge a nationwide holiday. Representatives of the New York Clearing House banks follow with a qualified endorsement, on the record that they neither sought nor directly requested it.
4 Mar Saturday. All twelve Reserve Banks keep their doors locked. Banks in thirty-seven states close completely or operate under state-imposed restrictions on withdrawals.
6 Mar Monday, 1:00 a.m. Proclamation 2039 suspends all banking transactions, effective immediately, through Thursday 9 March.
6 Mar Through the week. A wire report puts the average citizen's chief trouble as the difficulty of cashing paychecks. Stores extend credit more liberally for household necessities. Money orders are generally limited to 100 dollars, and one company pays 25 per cent on incoming money orders and gives checks for the balance. Railroads announce broadened credit.
6 Mar In Washington. Treasury officials consider issuing government scrip as a substitute for cash and print 10 million dollars of it. The Secretary of the Treasury backs away, on the concern that the public would not accept scrip at face value, and the decision instead is to issue currency against the sound assets of banks.
9 Mar Thursday. Congress passes the Emergency Banking Act. Proclamation 2040 continues the terms and provisions of 6 March, and the regulations and orders issued under it, until further proclamation.
10 Mar Friday. Executive Order 6073 authorises the Secretary of the Treasury to permit member banks and other institutions organised under the laws of the United States to perform their usual functions, and the state supervisor in each state to do the same for banks outside the Federal Reserve System.
13 Mar Monday. Member banks in Federal Reserve cities receive permission to reopen, four days after the legislation took effect.
15 Mar Wednesday. Banks controlling 90 per cent of the country's banking resources have resumed operations, and deposits exceed withdrawals. Some 4,000 banks would remain closed for good.
03 The Hidden Dependency
The wage did not arrive as notes. It arrived as a check, and a check becomes money at a counter.
A wire report through the week put the average citizen's chief trouble as the difficulty of cashing paychecks. What filled the gap was other people's credit. Stores extended credit more liberally for household necessities, railroad companies announced broadened credit and said travellers would not be left stranded because of banking difficulties, ministers in Milwaukee agreed not to pass collection plates, and a church in El Paso arranged to accept IOUs.
Money orders were generally limited to 100 dollars, and one company paid 25 per cent on incoming money orders and gave checks for the balance.
The closed door held the balance, and it also held the step that turns an instrument into something spendable.
04 What Still Worked
Money Orders
They continued to be written, generally to a ceiling of 100 dollars, and at least one company took them in at 25 per cent and issued a check for the remainder.
Merchant and Carrier Credit
Stores extended credit more liberally for household necessities. Railroad companies took emergency action, broadening credit and stating that travellers would not be left stranded anywhere because of banking difficulties.
Checks Payable to the Government
There was no reprieve for those who owed federal income tax during the holiday. The revenue service was perfectly willing to accept checks.
05 The Plumbing
The Plumbing March 1933
Reopening ran through a licence. The Federal Reserve Banks sent the Treasury lists of banks recommended for reopening, and the Treasury licensed those it approved. Behind the lists sat a three-way sort: solvent institutions in little or no danger of failing, weakened or insolvent institutions thought capable of reopening after an indefinite period of reorganisation, and insolvent institutions that would not be allowed to reopen at all. The Federal Reserve Board's annual report for 1933 sets out the reopening at page 14.
06 The Pattern Library
1
When one retail withdrawal channel closes or fails, demand concentrates on whichever channel is left open, and the capacity of that channel sets what a depositor can obtain.
Observed: Northern Rock 2007, Cyprus 2013, India 2016, Greece 2015, United States 1933.
2
A currency replacement can require physical modification of each cash dispensing machine before the new notes can be issued, so the machine estate returns to service site by site rather than at once.
Observed: India 2016.
3
Withdrawal limits imposed on a domestic banking system can be written to exempt cards issued outside it, so one machine dispenses under two rules according to where the card was issued.
Observed: Greece 2015.
4
Domestic payment and deposit channels can continue operating while cross-border payment routes fail, with the central bank standing in as the intermediary for payments to and from the country.
Observed: Iceland 2008.
5
When the institutions that convert payment instruments into cash are closed, wages and checks already received cannot be spent, and merchants and carriers extend their own credit in place of the missing conversion.
Observed: United States 1933.
Changed today: Entry 1 gained United States 1933, where every banking transaction was suspended and the channels left standing carried their own ceilings, money orders being generally limited to 100 dollars. Entry 5 added, on wages held as instruments that could not be converted while the institutions were shut.