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Tony Badger: How FDR saved US

[Tony Badger is the author of FDR: The First Hundred Days.]

On the morning of Franklin D Roosevelt’s inauguration as US president on March 4, 1933, the governors of New York and Illinois closed their banks.

Roosevelt proclaimed a national bank holiday, which closed all the banks in the country until Congress could reconvene to pass banking legislation. The whole system appeared to have ground to a halt.

The following Sunday, he addressed the nation on the radio and explained how the banks were to be reopened on a phased basis. “Confidence and courage,” he told listeners, were the essentials of success in carrying out that plan. “It is better to keep your money in a reopened bank than it is to keep it under the mattress.”

Seldom has presidential rhetoric been put to the test so quickly. No one knew for sure which banks were sound. If FDR’s appeal failed and depositors withdrew their money, more banks would fail and there was no Plan B.

The next day, March 13, Americans put more money into the banks than they withdrew. In the next week most banks reopened. Even bankers were amazed.

Why did FDR succeed in his appeals, where today’s leaders have failed? He did not come into office with a plan to deal with the banking crisis. Officials dusted off old ideas and the key measure was to recapitalise the banks by government purchase of their stock. Similar measures are now in train in the 2008 crisis...

Read entire article at Times (UK)