FDR: THE
GREAT CONFISCATOR
Advancing Tyranny under a cover
of "patriotism" and "sacrifice".
Using the theme of a "caring government" when it's
really "Them" vs. "Us".
Listen to Audio: Audio mp3 of Address
Followed by the Coup de grâce one month later - the outright theft of the people's gold
President Franklin D. Roosevelt: My friends, I want to talk for a few minutes with
the people of the United States about banking—to talk with the comparatively
few who understand the mechanics of banking, but more particularly with the
overwhelming majority of you who use banks for the making of deposits and the
drawing of checks. I want to tell you what has been done in the last few days,
and why it was done, and what the next steps are going to be. I recognize that
the many proclamations from the state capitals and from
First of all, let me state the simple fact
that when you deposit money in a bank the bank does not put the money into a
safe deposit vault. It invests your money in many different forms of credit—in
bonds, in commercial paper, in mortgages, and in many other kinds of loans. In
other words, the bank puts your money to work to keep the wheels of industry
and of agriculture turning round. A comparatively small part of the money that
you put into the bank is kept in currency—an amount which in normal times is
wholly sufficient to cover the cash needs of the average citizen. In other
words, the total amount of all the currency in the country is only a
comparatively small proportion of the total deposits in all the banks of the
country.
What, then, happened during the last few
days of February and the first few days of March? Because of undermined
confidence on the part of the public, there was a general rush by a large
portion of our population to turn bank deposits into currency or gold—a rush so
great that the soundest banks couldn’t get enough currency to meet the demand.
The reason for this was that on the spur of the moment it was, of course,
impossible to sell perfectly sound assets of a bank and convert them into cash
except at panic prices far below their real value.
By the afternoon of March
It was then that I issued the proclamation
providing for the national bank holiday, and this was the first step in the
government’s reconstruction of our financial and economic fabric.
The second step, last Thursday, was the
legislation promptly and patriotically passed by the Congress confirming my
proclamation and broadening my powers so that it became possible in view of the
requirement of time to extend the holiday and lift the ban of that holiday
gradually in the days to come. This law also gave authority to develop a program
of rehabilitation of our banking facilities, and I want to tell our citizens in
every part of the nation that the national Congress—Republicans and Democrats
alike—showed by this action a devotion to public welfare and a realization of
the emergency and the necessity for speed that it is difficult to match in all
our history.
The third stage has been the series of
regulations permitting the banks to continue their functions to take care of
the distribution of food and household necessities and the payment of payrolls.
This bank holiday, while resulting in many
cases in great inconvenience, is affording us the opportunity to supply the
currency necessary to meet the situation. Remember that no sound bank is a
dollar worse off than it was when it closed its doors last week. Neither is any
bank which may turn out not to be in a position for immediate opening. The new
law allows the twelve federal reserve banks to issue
additional currency on good assets and thus banks that reopen will be able to
meet every legitimate call. The new currency is being sent out by the Bureau of
Engraving and Printing in large volume to every part of the country. It is
sound currency because it is backed by actual, good assets.
Another question that you will ask is
this: why are all the banks not to be reopened at the same time? The answer is
simple, and I know you will understand it. Your government does not intend that
the history of the past few years shall be repeated. We do not want and will
not have another epidemic of bank failures.
As a result, we start tomorrow, Monday,
with the opening of banks in the twelve federal reserve bank
cities—those banks which on first examination by the Treasury have already been
found to be all right. That will be followed on Tuesday by the resumption of
all other functions by banks already found to be sound in cities where there
are recognized clearing houses. That means about 250 cities of the
On Wednesday and succeeding days banks in
smaller places all through the country will resume business, subject, of
course, to the government’s physical ability to complete its survey. It is
necessary that the reopening of banks be extended over a period in order to
permit the banks to make applications for the necessary loans, to obtain
currency needed to meet their requirements, and to
enable the government to make commonsense checkups.
Please let me make it clear to you that if
your bank does not open the first day, you are by no means justified in
believing that it will not open. A bank that opens on one of the subsequent
days is in exactly the same status as the bank that opens tomorrow.
I know that many people are worrying about
state banks that are not members of the Federal Reserve System. There is no
occasion for that worry. These banks can and will receive assistance from
member banks and from the Reconstruction Finance Corporation and of course they
are under the immediate control of the state banking authorities. These state
banks are following the same course as the national banks except that they get
their licenses to resume business from the state authorities, and these
authorities have been asked by the secretary of the treasury to permit their
good banks to open up on the same schedule as the national banks. And so I am
confident that the state banking departments will be as careful as the national
government in the policy relating to the opening of banks and will follow the
same broad theory.
It is possible that when the banks resume
a very few people who have not recovered from their fear may again begin
withdrawals. Let me make it clear to you that the banks will take care of all
needs except of course the hysterical demands of hoarders—and it is my belief
that hoarding during the past week has become an exceedingly unfashionable
pastime in every part of our nation. It needs no prophet to tell you that when
the people find that they can get their money—that they can get it when they
want it for all legitimate purposes—the phantom of fear will soon be laid.
People will again be glad to have their money where it will be safely taken
care of and where they can use it conveniently at any time. I can assure you,
my friends, that it is safer to keep your money in a reopened bank than it is
to keep it under the mattress.
The success of our whole national program
depends, of course, on the cooperation of the public—on its intelligent support
and its use of a reliable system.
Remember that the essential accomplishment
of the new legislation is that it makes it possible for banks more readily to
convert their assets into cash than was the case before. More liberal provision
has been made for banks to borrow on these assets at the reserve banks and more
liberal provision has also been made for issuing currency on the security of
these good assets. This currency is not fiat currency. It is issued only on
adequate security, and every good bank has an abundance of such security.
One more point before I close. There will
be, of course, some banks unable to reopen without being reorganized. The new
law allows the government to assist in making these reorganizations quickly and
effectively and even allows the government to subscribe to at least a part of
any new capital that may be required.
I hope you can see, my friends, from this
essential recital of what your government is doing that there is nothing
complex, nothing radical, in the process.
We had a bad banking situation. Some of
our bankers had shown themselves either incompetent or dishonest in their
handling of the people’s funds. They had used the money entrusted to them in
speculations and unwise loans. This was, of course, not true in the vast
majority of our banks, but it was true in enough of them to shock the people of
the United States for a time into a sense of insecurity and to put them into a
frame of mind where they did not differentiate, but seemed to assume that the
acts of a comparative few had tainted them all. And so it became the government’s
job to straighten out this situation and to do it as quickly as possible. And
that job is being performed.
I do not promise you that every bank will
be reopened or that individual losses will not be suffered, but there will be
no losses that possibly could be avoided; and there would have been more and
greater losses had we continued to drift. I can even promise you salvation for
some at least of the sorely pressed banks. We shall be engaged not merely in
reopening sound banks but in the creation of more sound banks through
reorganization.
It has been wonderful to me to catch the
note of confidence from all over the country. I can never be sufficiently
grateful to the people for the loyal support that they have given me in their
acceptance of the judgment that has dictated our course, even though all our
processes may not have seemed clear to them.
After all, there is an element in the
readjustment of our financial system more important than currency, more
important than gold, and that is the confidence of the people themselves.
Confidence and courage are the essentials of success in carrying out our plan.
You people must have faith; you must not be stampeded by rumors or guesses. Let
us unite in banishing fear. We have provided the machinery to restore our
financial system; and it is up to you to support and make it work.
It is your problem, my friends, your
problem no less than it is mine. Together we cannot fail.
Prison
for Gold Hoarders Edition of NY Times, March, 1933
Source:American Rhetoric
Courtesy of the Franklin D. Roosevelt Library,
