President Franklin Roosevelt signed the Emergency Banking Relief Act (EBRA) in 1933 during the Great Depression. This act dictated the closing down of some banks and reopening of others that have the strong backing to survive the crisis and which have been inspected to be financially secure.
The same bill gave the Secretary of the Treasury the power to confiscate the gold owned by individuals in exchange for some amount in the form of paper currencies, which can devaluate as the gold devaluates.
The act was very controversial since not so many members of the Congress had the chance to review or study the act first before it got passed as a law. Most of the congress representatives also only heard of the act when the clerk read it.
Three hundred days after the passing and signing of the bills, 5000 banks got inspected and passed and were opened again. Under the Emergency Banking Relief Act, people regained their faith in the banking system as more than sixty five percent of all US banks reopened.
President Roosevelt and the Congress representatives that allow the act provided a solution that temporarily solved one major economic problem that time. The 1933 Banking Act that followed suit became the more permanent solution to backup the EBRA leading to the birth of the Federal Deposit Insurance Corporation or FDIC.
The Great Depression of the 1930s
The Great Depression is considered as a reminder and warning of how modern economy can crash and fall really hard. This huge world economic phenomenon occurred in most places in the year 1929 and concluded at different periods in the 1930s in different countries of the world.
This economic crisis rooted from the United States and is also earmarked as the beginning of the stock market crash in 1929, which was, coined Black Tuesday. The Great Depression completely ended in 1939 during the economy war of Word War II.
Effects of the Great Depression
* Sharp decline in international trade
* Devastating effects on exportations of raw materials
* Decline of income
* Grave effects in tax revenues, prices, and profits
* Cities that depended on heavy industries got hit very hard in terms of business viability
* Construction in many countries stopped
* Prices of crop dropped to sixty percent making farming and rural areas suffer
* Wall Street crashed
* Very few alternate sources of income for the people especially in farming, mining, and logging
Different countries saw the depression end at different times. Almost all countries have devised their own relief programs as many of these countries experienced political instability.
This crisis caused a great damage in the banking system in America. When the Wall Street Crash happened, private banks, which had investments in the form of stocks and shares, saw a significant lost of funds. The Bank of United States was forced to close down in 1930 and many small banks found it extremely hard to cope. In just a few years time, one fifth of all banks in the United States closed down bringing with them the life savings of so many people.
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