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Impressively researched, elegantly presented, and brimming with astute analysis, Phantom of Fear is the best examination of early New Deal banking practices yet to appear. Challenging many of the uncritical assumptions that plague New Deal scholarship, Robert Lynn Fuller argues that FDR's famous Bank Holiday was not only unnecessary but largely counterproductive. Historians, economists, and general readers will all enjoy and profit from this provocative work, especially at a time when federal banking policies are again at the center of political debate.

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"Phantom of Fear": The Banking Panic of 1933

View or edit your browsing history. Back to top. Get to Know Us. English Choose a language for shopping. Audible Download Audio Books. Fuller presents a unique perspective on the relations between France and the United States during the Second World War.

Until the summer of , the German Army made real efforts to fare well with the French to make their occupation duties easier. The Americans also tried to get along with the French; however, American GIs were subjected to looser discipline than German soldiers. Most GIs behaved appropriately, but the small number who did not created an unfavorable impression among the French -- which created tension, mutual feelings of suspicion and dislike, and occasional displays of outright hostility.

Yet, because the war against the Axis powers was also France's war, most French, especially officials, wanted to work cooperatively with the Americans to play their part in winning it. I owe this in particular because of the fortitude and good temper with which everybody has accepted the inconvenience and hardships of the banking holiday. 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 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…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 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 3 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 [the legislation made it legal for Roosevelt to call the bank holiday and allowed him to extend it, then lift it gradually].

This law also gave authority to develop a program of rehabilitation of our banking facilities.


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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. No sound bank is a dollar worse off than it was when it closed its doors last Monday. A question you will ask is this: why are all the banks not to be reopened at the same time? The answer is simple.

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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. This will be followed on Tuesday by the resumption of all their functions by banks already found to be sound in cities … about cities of the United States.

"Phantom of Fear": The Banking Panic of 1933

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 [of soundness]. 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.

Joseph Wayne Jr. | cessprofaleth.ga

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 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.

Fear of “Reversal Rates” Sets in: Fed

I can assure you that it 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 the cooperation of the public—on its intelligent support and use of a reliable system. 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. 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.

Each depositor insured to at least $250,000 per insured bank

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.


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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.