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When FDR took the oath of office on March 4, 1933, the nation's banks were closed. He knew that the banking crisis was the most pressing matter facing the country. He would not move forward with any other item from his agenda until the banking crisis had been dealt with.
On his first day in office, Roosevelt issued two major proclamations. The first proclamation was to convene a special session of Congress on March 9th. The second proclamation was to declare a banking holiday that would last into the beginning of the special session. The plan was to keep the banks closed until they could get banking legislation passed.
The long closing of the banks had a calming effect upon the nation. It gave the impression that we had finally hit rock bottom and there was nowhere to go but up. Combined with the changing of the guard in Washington, the people began to hope again.
FDR and his team went to work immediately putting together legislation so Congress could act at soon as the special session began. The bill provided a test to determine if a bank was financially secure. Those banks that were so determined were allowed to reopen. Within three days, over 5,000 banks had passed the test and opened their doors. Public confidence in the banks slowly returned. The FDR team has bought themselves some breathing room.
Later in 1933, FDR and Congress would work together to pass the Glass-Steagall Act which would usher in an unheard of period of stability in the American banking system. The most notable accomplishment of the act was the creation of the Federal Deposit Insurance Corporation which would ensure depositors in the nation's banks. (The act would be weakened by the Republican Congress in 1999. This deregulation has played a large role in the problems we face today.)
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