US Coins

Monday Morning Brief for March 20, 2023: FDR steps up

Actions taken 90 years ago, in March 1933, to combat banking and other economic problems, stopped the production of gold coins and prohibited further release of those that were struck in 1933 before Franklin Delano Roosevelt was inaugurated as president. Shown is the only 1933 Saint-Gaudens double eagle authorized for private ownership.

Original coin image courtesy of Sotheby’s.

While this column was being written in mid-March, news accounts were filled with reports about the crash at three regional banks, as their questionable investments put their investors and depositors at risk. Federal regulators stepped up to take action to stop another 2008-level banking crisis and guaranteed that depositors be made whole.

Ninety years earlier almost to the day, the newly inaugurated president of the United States was facing a much bigger crisis involving the nation’s banks. Bold, quick action was required and the new president, Democrat Franklin Delano Roosevelt, was finally in position to do what he deemed was needed.

As the eponymous host of The Rachel Maddow Show reminded viewers in her March 13 broadcast, and as most collectors know, in 1933, the president elected in November 1932 was not able to be inaugurated until March (not in January as now). The outgoing president, Republican Herbert Hoover, had failed miserably in combating the economic woes that had started with the stock market crash of 1929 and the resultant Great Depression. Roosevelt, who campaigned on a promise to turn things around, had to wait four months before he could take action. Much of what he would do in his first weeks of office would affect numismatics and collecting for decades.

His first step after becoming president on March 4, 1933, was to declare a national banking holiday, designed to stop depositors from emptying bank vaults.

The Federal Deposit Insurance Corporation was created through the Banking Act of 1933, which became law on June 16 and established a fund to guarantee that depositors would not lose their savings through their bank’s failure, initially to a maximum of $2,500 and a year later, to an upper limit of $5,000.

Before that act became law, though, more cash was needed in circulation. To pump more cash into the commercial sector to meet the demand faced by banks, an emergency order for Federal Reserve Bank notes was placed with the Bureau of Engraving and Printing. While Federal Reserve Bank notes (not be confused with Federal Reserve notes) had been produced as large-size notes, none had been produced since the 1929 switch to small-size notes.

Federal Reserve Bank notes were authorized by Act of Congress March 9, 1933, to permit Federal Reserve Banks to issue currency equal to 100% of the face value of U.S. bonds, or 90% of the value of commercial paper used as collateral. The first notes were issued March 11, with the rapid response of the BEP to the new authorization only possible through the use of the slightly modified national bank note plates.

Since the plates for the national bank notes bore the titles of the issuing national banks, information not applicable to the Federal Reserve Bank notes, those titles were obscured with heavy lines, and the issuing Federal Reserve Bank governor’s information was added in place of the national bank’s president.

Roosevelt also stopped the production of gold coins in March. At that time, only $10 eagles and $20 double eagles were in production; the last $2.50 and $5 coins had been struck in 1929. Small numbers of 1933 Indian Head gold eagles were released legally, mostly to collectors, but no double eagles were officially released, at least according to Mint officials today. Small numbers of both 1933 denominations survive, with just one 1933 Saint-Gaudens authorized for private ownership. A year later, when Roosevelt signed the Gold Reserve Act of 1934 into law, Americans were prohibited from owning any gold coins struck after April 4, 1933, and prohibited against the ownership of gold certificates and gold bullion (bars, for example). Collectors hate those bans (lifted at the end of 1974) to this day.

Today’s banking problems do not seem to be anywhere close to the scope of those problems in 1933, and no one seriously expects a 1934-style ban on gold ownership to be resurrected (the government makes a ton of money striking and selling gold coins of many kinds). But it is interesting that 90 years apart, problems in the banking industry led the government to take emergency actions to protect citizens.
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