Finance Wanted.

By Julian Davidson

Franklin D. Roosevelt, the former President of the United States of America was the driving force of the enactment of the Emergency Banking Act or also known as the Emergency Banking Relief Act during the era of Great Depression. Emergency banking Relief Act was passed on March 9th of 1933. This act has created a plan that would terminate the services of those banking institutions that cannot satisfy their clients' needs any longer as far as banking is concerned while giving chance for those banks that has enough funds to resume and to undergo new changes in their organization. On the 5th day of March, 1933, just one day after President Roosevelt took the seat of presidency, he ordered a special meeting of Congress wherein a 4-day bank suspension is to be implemented to provide enough time for the federal inspectors to declare those banks that has the capacity to operate again. The federal inspectors are the only official governments who are allowed to declare if a particular financial institution is financially stable or not.

The Emergency Banking Relief Act has granted the Treasury Secretary the power to seize the gold of the private civilians in the return for a corresponding amount of paper money which will be subjected to later reduction of its value in connection to the gold. Though this bill has an immense significance, it was rather passed too quickly that most of the congressmen did not have the time to read it. Most of them only had the chance to know about the bill when it was read to them by the clerk of the congress. Some congressmen were against to the fast passage of this bill; however, it was still passed. After 10 months of the bill's enactment, 5,000 banking institutions have passed the federal inspection and were ordered to resume their services and operation. Majority of banks promptly reopened and the trust of the people on the banking institution was re-established.

However, this bill was only a transient solution to a more problematic situation. In the following year, the 1933 Banking Act was later passed which provides more stable and long-lasting resolution to the banking problems; this includes the creation of FDIC or the Federal Deposit Insurance Company. FDIC is a government organization that helps secure the money of the depositors. In order for the depositors to be eligible for this, their deposit should not be less than 100,000 and their bank should be a member of FDIC. President Roosevelt was first against to the idea of establishing FDIC; he argues that this kind of insurance will only give protection to the irresponsible banking institutions but soon conceded when he saw that the support of the Congressmen was overwhelming. Roosevelt's fear came to a realization when he appointed Leo Crowley- a banker from Wisconsin, in 1934 to head FDIC. He learned that Crowley was using FDIC to hide his money fraud activities. Crowley's embezzlement was only made public in 1996.

The enactment of Emergency Banking Relief Act in 1933 has helped many private banks to re-establish their businesses in the middle of disastrous years of Depression Era which made the clients to lose hope in the banking industry.

Julian Davidson is a banking specialist and has written many bank related articles to help people save money and avoid the traps.

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