Question

Go to www.fdic.gov and click on the tab "Industry Analysis" and then on the link "Research \& Analysis." Select "The First Fifty Years: A History of the FDIC 1933-1983." Open Chapter 3, "Establishment of the FDIC," and scroll down to the section entitled "The Banking Crisis of 1933 " and the section entitled "Federal Deposit Insurance Legislation." Read the section and then answer these questions. a. President Roosevelt was sworn in on March 4, 1933. What was one of his first official acts in response to the banking crisis? b. How many banks suspended operations during \(1933 ?\) c. Who was the chief proponent of federal deposit insurance in Congress? d. How much coverage did the temporary fund for federal deposit insurance provide?

Short answer

Who was the chief proponent of federal deposit insurance? Additionally, what was the temporary fund coverage provided by the Banking Act of 1933? Answer: President Roosevelt's first official act in response to the Banking Crisis of 1933 was to declare a nationwide bank holiday, temporarily closing all banks for assessment. During the crisis, 4,004 banks suspended their operations. Senator Carter Glass of Virginia was the chief proponent of federal deposit insurance. The temporary fund coverage provided by the Banking Act of 1933 was up to $2,500 per account.

Step-by-step solution

a. President Roosevelt's first official act

To find the answer to this question, the student should read the section "The Banking Crisis of 1933" on the FDIC page. The first official act of President Roosevelt was to declare a nationwide bank holiday, which temporarily closed all banks and allowed the government to assess their financial health. This measure helped to stabilize the banking sector and restore public confidence in financial institutions.

b. Number of banks suspended operations

To find the answer to this question, the student should read the same section, "The Banking Crisis of 1933," on the FDIC page. During the year 1933, a total of 4,004 banks suspended their operations. This information can be found in this section which describes the extent of the banking crisis during that time.

c. Chief proponent of federal deposit insurance

To find the answer to this question, the student should read the section "Federal Deposit Insurance Legislation" on the FDIC page. The chief proponent of federal deposit insurance in Congress was Senator Carter Glass of Virginia. He worked closely with other lawmakers on the Banking Act of 1933, which eventually led to the creation of the FDIC.

d. Temporary fund coverage

To find the answer to this question, the student should read the section "Federal Deposit Insurance Legislation" on the FDIC page. The temporary fund for federal deposit insurance provided coverage of up to $2,500 per account. This feature was part of the Banking Act of 1933, and it helped to ease the fears of account holders while the government worked to establish a more permanent solution for insuring bank deposits.

Key concepts

Banking Crisis 1933

In 1933, the United States faced a severe banking crisis. Thousands of banks were closing their doors, leaving ordinary people unable to access their savings. This crisis was the culmination of years of economic turmoil, triggered by the Great Depression.
The public's trust in financial institutions was at an all-time low. People were anxiously withdrawing their money, further destabilizing the banking system. By 1933, a staggering 4,004 banks had suspended operations, impacting countless individuals and families.
This alarming situation prompted the government to quickly devise strategies to restore confidence and stabilize the banking sector. They needed urgent intervention to prevent further deterioration of the nation's financial fabric.

President Roosevelt Bank Holiday

Just after assuming office in March 1933, President Franklin D. Roosevelt took decisive action to address the banking crisis. His first official act was the declaration of a nationwide bank holiday.
This extraordinary measure temporarily closed all banks across the United States. The purpose was to halt the spiraling panic and give the government time to assess the banks' health.

• This move was crucial in halting the widespread panic among the public.
• It allowed a pause to rebuild trust and prepare for subsequent measures to secure the banking system.

During the bank holiday, Congress worked swiftly with Roosevelt to pass the Emergency Banking Act. This legislation granted the federal government more oversight over banks, safeguarded deposits, and laid the groundwork for further reforms.

FDIC Legislation

The banking crisis of 1933 necessitated significant legislative changes, leading to the creation of the Federal Deposit Insurance Corporation (FDIC). The Banking Act of 1933, also known as the Glass-Steagall Act, introduced these pivotal changes.
The FDIC was established to insure bank deposits, providing people with the peace of mind that their savings were secure, even if their bank failed. Initially, the FDIC provided coverage of up to $2,500 per account.
This amount may sound modest today, but at the time, it was a substantial improvement that significantly reduced the risk faced by account holders. Through this framework, the FDIC ensured financial stability and helped restore faith in the American banking system.

Carter Glass

Senator Carter Glass from Virginia was a leading advocate for banking reform and the establishment of federal deposit insurance through the FDIC.
Glass was already well-known for his role in creating the Federal Reserve System in the early 20th century, showing his long-standing commitment to stabilizing and organizing the country's financial systems.
His tireless work alongside Representative Henry B. Steagall and others resulted in the historic legislation known as the Glass-Steagall Act.

• Senator Glass viewed federal deposit insurance as a way to protect small depositors.
• He believed this would also prevent the financial chaos brought on by repeated bank failures.

Carter Glass's vision and legislative push were key components in establishing a more resilient banking framework that still underpins the financial security of America today.