The Essence of the Emergency Banking Relief Act

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					The Essence of the Emergency Banking Relief Act
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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