Emergency Banking Relief Act Flashcards, test questions and answers

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What is Emergency Banking Relief Act?

The Emergency Banking Relief Act was a law passed by the United States Congress in 1933 during the Great Depression to help stabilize the banking system. The act was signed into law by President Franklin D Roosevelt, who declared a bank holiday and closed all banks until they were examined and certified as safe. The act provided for federal loans to those banks deemed solvent enough to be reopened, allowed for Treasury Department audits of all banks, and provided federal deposit insurance up to $2,500 per account (though this amount was later increased). Additionally, it made illegal transactions in gold bullion or coins except under certain circumstances. The Emergency Banking Relief Act restored public confidence in the banking system which had been devastated by bank failures throughout the country. Before its passage, many people lost their savings when banks failed due to bad investments or mismanagement. The act established trust between customers and their financial institutions while also providing much-needed liquidity back into the economy. The act also marked an important shift from laissez-faire economic policies of previous administrations towards more active government intervention in managing economic volatility through financial regulation and support for struggling institutions. This shift towards more proactive policies would become known as New Deal economics and would be reinforced with subsequent legislation like the Glass-Steagall Act of 1933 which separated commercial from investment banking activities in order to protect depositors from risky activities by investment bankers. In sum, the Emergency Banking Relief Act was instrumental in stabilizing a weakened American banking system during one of its darkest periods and set an important precedent for future government interventions to manage an unstable economy.