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The Emergency Banking Relief Act of 1933: Definition & Purpose

The Emergency Banking Relief Act of 1933: Definition & Purpose
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  • 0:02 The Banking Crisis
  • 1:33 The Emergency Banking…
  • 3:02 Effects of the EBRA
  • 3:41 Lesson Summary
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Lesson Transcript
Instructor: Jason McCollom
In the wake of a nationwide bank panic and subsequent banking system collapse, the Emergency Banking Relief Act of 1933 adopted bold measures to address the crisis. Learn about the act and its outcomes.

The Banking Crisis

Imagine your typical trip to your local bank. You have a check from work in your hand, and, as you've done many times before, you head to the bank to deposit it in your account. Immediately you notice something is not right. There is a line of nervous people snaking out the front door of the bank, and it stretches 100 yards around the building. As you get in line, you overhear someone say, 'They've lost our money!' Now you're anxious, too. When you arrive to talk to the bank teller, she says your money is gone. Your life savings has disappeared.

This situation occurred all over the United States during the banking crisis of 1930-33. By 1933, over 4,000 banks had shut their doors. That was almost 28% of all the banks in America! The Stock Market Crash of 1929 destroyed the banks' investments. People rushed to their local banks to withdraw their money, only to find it was gone, obliterated through the banks' risky investments in the stock market.

The Emergency Banking Relief Act (EBRA) aimed to address this crisis. The act authorized the federal government to regulate and control aspects of the banking system, and it also rescued failing banks with loans. When Franklin D. Roosevelt became president on March 4, 1933, his administration's first measure was to deal with the collapsed banking system. In FDR's inaugural speech he confidently proclaimed, 'First of all let me assert my firm belief that the only thing we have to fear is fear itself.'

The Emergency Banking Relief Act

The passage of the EBRA allowed Roosevelt to call a 4-day bank holiday in which all banks were ordered to cease doing business for four days to allow the panic to subside. FDR addressed Americans in a radio broadcast 'fireside chat' in which he said it was safer to 'keep your money in a reopened bank than under the mattress.'

The EBRA also required healthy banks to apply for a license from the Treasury Department. The act gave the federal government regulatory control and oversight privileges of the banking sector. It also provided federal financial support for struggling banks. All this was designed to prop up ailing banks and restore the confidence of depositors so that they would trust banks and put their money back in them.

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