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By Francis Gloyd Awalt, 1895-1966
U.S. TREASURY DEPARTMENT, 1 9 3 2 - 1 9 3 3

Recollections of the Banking Crisis in 1933
According to a key participant, members of both the outgoing and
incoming administrations worked side-by-side during the banking crisis
of 1933. Their concern was not politics, but rather the search for a solution to the nations financial problems — even though relations between
President Herbert Hoover and President-elect Franklin D. Roosevelt
were not so amicable. Thus, the resultant banking holiday and Emergency Banking Act were not sole products of either the Republican
or the Democratic administrations but the results of pragmatic, cooperative attempts to meet and solve the crisis.

The following portion of the reminiscences of Francis Gloyd Awalt
was brought to our attention by Raymond Moley, head of Franklin D.
Roosevelt's famous "brains trust," who worked closely with Acting Comptroller Awalt during the Banking Crisis of 1933.1
Awalt was born in Laurel, Maryland, in 1895, and graduated from
Baltimore Polytechnic Institute in 1914. After receiving a law degree
from the University of Maryland in 1917, he began practice with the
firm of Marbury & Finch in Baltimore. He served in the Field Artillery's
Reserve Corps during 1918 and in 1919, became assistant general counsel and then general counsel of the Baltimore Ordnance Claims Board.
In 1920, he was chief of the award section of the Board of Contract
Awalt joined the United States Treasury Department in 1920, serving
as special assistant to the Secretary of the Treasury until 1927. In 1922,
he began his long association with the office of the comptroller of the
currency in the position of second deputy comptroller and general counsel. Awalt moved into the office on a full-time basis in 1927 when he
was appointed first deputy comptroller and general counsel.3
In September 1932, Comptroller John W. Pole resigned, and President
Herbert Hoover asked Awalt to take the position. However, he declined
to accept the patronage job during the waning months of the Republican
administration, but agreed to serve as acting comptroller in the interim.
Business History Review, Vol. XLIII, No. 3 (Autumn 1969). Copyright © The President
and1 Fellows of Harvard College.
The editors wish to express their appreciation to Milton Friedman and Henry Ford II
for 2reading and commenting upon this article.
New York Times, December 13, 1966, an obituary of Francis G. Awalt.
Ibid. Unpublished reminiscences of Francis G. Awalt in the possession of Francis G.
Awalt, Jr., 2. The editors thank Mr. Awalt for his permission to publish this portion of his
father's reminiscences.

Awalt stayed in the post until President Franklin D. Roosevelt appointed
J. F. T. O'Conner comptroller in 1933, when he returned to his previous
Awalt resigned from government service in 1936, and returned to the
practice of law. Drawing on his experience in the comptroller's office,
he specialized in banking cases with the firm of Awalt, Clark & Sparks.
He was a member of the American Bar Association and served as chairman of the committee of the District of Columbia Bar Association to set
up a code of conduct for Congressional investigations.
Awalt served as acting comptroller for only about six months, but these
were six of the most dramatic and demanding months the office was to
see. Although President Hoover spoke confidently in public of "the
strength of our banking system," Awalt called it a "fairweather" system
in his annual report to Congress in 1932. He wrote that mismanagement,
excessively low capitalization, and lax state regulation, along with changing economic and social conditions, caused American banks, which had
functioned well enough in good times, to be unable to meet the conditions
of economic depression resulting in the loss of billions of dollars to the
American people.4
Awalt was among the bolder spirits in the Hoover administration who
were urging the President to take action, and in the recollections which
follow, written on the twenty-fifth anniversary of the crisis in 1958, he
describes the hectic days during the banking crisis of March 1933. Awalt
begins with a detailed account of an important aspect of the beginning
of the crisis, the unsuccessful attempt to prevent the imminent collapse
of the two major Michigan banking groups through cooperation with a
recalcitrant Henry Ford. Awalt then goes on to describe the activities,
in which he played a significant role, that led up to the banking holiday,
including a view of the stiff dealings between Hoover and Roosevelt.
Perhaps most significant, Awalt covers in some detail aspects of the
drafting, passage, and implementation of the Emergency Banking Act of
1933. He describes in particular the origins of two important sections
of the bill, Titles II and III, showing that not only were they not drawn
up by New Deal Democrats, but also that they predated by some time
Roosevelt's accession to office.
Awalt also outlines the problems encountered in implementing the
bill, deciding which banks should be reopened and which liquidated, a
problem which fell almost entirely on his shoulders and which was
handled well enough to earn Roosevelt's "most sincere gratitude" for the
"remarkably wise and competent manner in which you carried on the
duties of Acting Comptroller in the heart of the banking crisis."5 But
perhaps the highest compliment comes from New Dealer Raymond
Moley who worked with Awalt all through those eventful days: "In the
most distinguished sense of the term, Francis Gloyd Awalt was a professional career man." 6 The following narrative by this professional
public servant adds enough to our knowledge of these important months
in American history to make it a significant historical document.
Arthur M. Schlesinger, Jr., The Crisis of the Old Order, 1919-1933 (Boston, 1957),
474;5 New York Times, December 31, 1966.
Awalt reminiscences, 2.
Raymond Moley, The First New Deal (New York, 1966), 217.




On numerous occasions I have been requested by my friends,
and particularly by my son, to write my story of the banking holiday.
Ihadintended to do this in a book of some length, but time passes
quickly that I thought it best to write this short version so that
some record might be made of the picture as I saw it. . . .
The high point of bank failures was reached in 1931 when
the total failures for that year reached 2,290. Of this number, 1,772
were non-member banks of the Federal Reserve System, with
deposits of $983,316,000. In the fall of 1932, there had been a leveling off in failures. This led Comptroller of the Currency John W.
Pole to advise President Hoover that, since conditions were better,
he felt it was no longer necessary to withhold his resignation and
return to private life. Actually, this was but a lull in the storm, as
history shows.
I became Acting Comptroller in September 1932, and after the
election in November, it was quite evident that the situation was
worsening. It seemed to me that the incoming President should be
apprised of the critical banking conditions with a view to formulating some plans and, particularly, to the appointment of a
strong Secretary of the Treasury. With this in mind, I had a long
conference with Senator Pat [Bryan Patton] Harrison of Mississippi,
in whom I had confidence, and urged him to lay the situation
before Mr. Roosevelt. He afterward informed me that he had done
this, but I got no comfort from his report.

What proved to be the straw that broke the camel's back occurred
in Detroit, Michigan. Sometime in 1930 a drain approaching the
proportions of a run began on the large banks in Detroit. In a
period of about two and one-half years prior to February 11, 1933,
about $250,000,000 was withdrawn from the First National Bank
of Detroit, and large sums were also withdrawn from the Union
Guardian Trust Company and the Guardian National Bank of
Because of the personal involvement of Henry and Edsel Ford in this event, Henry
Ford II, chairman of the Board of the Ford Motor Company, was asked and agreed to
examine Awalt's account of the Detroit episode. In a letter to James P. Baughman on
March 14, 1969, Chairman Ford stated: "The reminiscences appear to be a significant
addition to the historical record of these events. However, I should like to call to your
attention that Mr. Awalt's memoir differs in some respects from the account published in
Allan Nevins and Frank Ernest Hill, Ford: Decline and Rebirth 1933-1962 (New York,
Charles Scribner's Sons, 1963), pp. 11-15. I believe the Nevins-Hill account is correct as
far as it goes." Mr. Ford's comments on specific points will be found in the footnotes that
follow which are identified with letters.



Commerce. In order to meet these withdrawals, the First National
Bank was compelled to liquidate practically all of its liquid and
unpledged assets, and the Union Guardian Trust Company was
compelled to borrow from the Reconstruction Finance Corporation
and from the Ford interests. Mr. Edsel Ford was Chairman of the
Board of the Union Guardian Group.b
In January 1933, the run was continuing without abatement, and
the Detroit banks were losing from $2,500,000 to $3,000,000 each
week. The banks could not continue to pay out money at this rate
without further borrowing.
Two banking groups were dominant in Detroit: the Detroit Bankers Company Group, and the Union Guardian Group or Ford
Group. The Detroit Bankers, formed in 1930, owned all of the stock
of the First National Bank of Detroit, the Peoples Wayne County
Bank (later merged), all of the stock of the Detroit Trust Company, eight suburban banks in Michigan, and all of the stock of an
investment affiliate known as the First Detroit Company. The
Guardian Detroit Union Group, or holding company, held the stock
of the National Bank of Commerce, the Guardian Union Trust
Company, and a number of other banks, one in Flint, Grand Rapids,
Battle Creek, and Jackson.
The Guardian Trust Company attempted to borrow further funds
from the Reconstruction Finance Corporation. In order to accomplish this, Henry Ford was asked to subordinate some of the
amount owed to the Ford interests to a new loan. He refused to do
this,c and it seemed obvious that, if the Guardian Trust Company
could not meet withdrawals, a chain reaction would occur in the
group and spread. It was thought wise to send someone high in the
administration to Detroit to confer with Ford. Those chosen were
Arthur A. Ballantine, Under Secretary of the Treasury, and Roy D.
Chapin, Secretary of Commerce. A meeting was arranged with Mr.
Ford by President Herbert Hoover.
The Ford interests had on deposit $7,500,000 at the Guardian
Trust Company, about $17,500,000 at the Guardian National Bank
of Commerce, and about $25,000,000 at the First National Bank of
Detroit.d Secretary Chapin and Mr. Ballantine met with Mr. Henry
Edsel Ford was a director of the Union Guardian group. Ernest C. Kanzler was
chairman of the board. Henry Ford II to James P. Baughman, March 14, 1969; Nevins
and c Hill, Ford: Decline and Rebirth, 12n.
The Ford family and company had already advanced a total of $12,000,000 to the
Guardian group, and Edsel Ford had initially agreed to subordinate the $7,500,000 on
deposit with the Union Guardian Trust. Ford to Baughman, March 14, 1969; Nevins and
Hill,d Ford: Decline and Rebirth, 12, 12n.
Mr. Awalt's statement of the amounts of Ford money on deposit with the two major
bank groups appears to be incorrect. Ford to Baughman, March 14, 1969. Nevins and Hill



Ford, Mr. Edsel Ford, and Mr. E. G. Leibold in Mr. Ford's office
at Dearborn at 10:00 A.M. February 13, 1933. This was a legal and
a banking holiday since Lincoln's birthday fell on Sunday, February 12.
According to the signed report of Secretary Chapin and Mr. Ballantine, Mr. Ballantine stated they were there to discuss the acute
situation existing with reference to the Union Guardian Trust
Company of Detroit and a plan which had been worked out to
enable the trust company to remain open. Mr. Henry Ford stated
at once that he knew about the plan and that he would not agree
to do what he understood had been proposed he do, but that he
would be glad to discuss the situation.
Mr. Ballantine then stated that the difficulty was: that the Union
Guardian Trust Company had deposit liabilities of some $20,500,000;
that it already had a loan with the Reconstruction Finance Corporation to the amount of some $15,000,000, secured by the pledge
of assets; and that the remaining free assets of the bank subject to
pledge were of the face value of some $6,300,000, with a loan value
of not exceeding $5,000,000. A plan had been worked out under
which the Guardian Group would pay into the trust company, or
some company to be formed, assets of a loan value of some $3,600,000, so that a loan of $8,600,000 could be made by the R.F.C. for
the purpose of furnishing funds to the trust company.
This loan was to be a part of the larger loan aggregating about
$23,000,000, the purpose of which was to provide further liquidation for the Guardian National Bank of Commerce and certain units
of the Guardian Group. This larger loan had been agreed upon
with representatives of the Guardian Group as sufficient for the
purpose of the needs of the other units. However, Mr. Ballantine
called attention to the fact that this loan would leave a gap of some
$11,000,000 to $13,000,000 in the assets of the trust company, and
to make this up, it was proposed to subordinate the deposit liabilities
of the trust company to the amount of at least $9,000,000, thus
leaving a balance of some $4,000,000 to be supplied by new cash.
It was also necessary to have $2,000,000 in cash to furnish the
capital for the mortgage company it was proposed to organize,
which would be the actual applicant for the R.F.C. loan and a
vehicle for the proposed financing transaction.
As part of the transaction the deposit liabilities of the trust company would be assumed by the Guardian National Bank of Corn________
show $32,500,000 on deposit with the Guardian banks and $18,000,000 with the Detroit
Bankers. Ford; Decline and Rebirth, 12n.



merce, which would receive from the trust company cash assets to
make good the liabilities so assumed. Ballantine pointed out that
this plan had been formulated on the basis that the deposit liabilities
of the trust company to the Ford Company, in the amount of
$7,500,000, would be subordinated and that, in addition, part of the
new cash required would have to be supplied by the Ford interests.
He said that those having given consideration to the plan felt that
so worked out, it would enable the trust company to continue as a
trust company and the Guardian Group to continue its banking
Mr. Ford stated at once that he would not subordinate the
$7,500,000 deposit liabilities held by the Ford Motor Company. He
stated that he had said some two or three weeks earlier that this
might be done, but he had not fully understood the plan. In any
case, his determination was that he had changed his mind and that
he would not do this.
Mr. Ballantine stated to Mr. Ford that his decision would make
any plan for saving the trust company impossible. He further stated
that, if the trust company could not be saved, it was the opinion
of those who had considered the situation that the Guardian banks
would be forced to close. The consequences of this would be to
throw great pressure upon the First National Group and upon all
the other banks in Michigan, and that pressure would probably
very soon extend outside of the state.
Mr. Ford reiterated that he would not agree to make the subordination of the Ford deposits in the trust company. He further
stated that if the trust company was not kept open, he would
immediately, on Tuesday morning, withdraw from the First National Bank the Ford deposits of $25,000,000. Mr. Ballantine asked
whether he had understood Mr. Ford correctly. Mr. Ford said that
he had, and that Mr. Ballantine was free to immediately report his
position to the R.F.C. and those working in Washington in connection with this situation.
Mr. Ballantine then stated that it seemed clear that the Guardian
Group could not survive, that the withdrawal of the Ford account
from the First National Bank of Detroit would make it very much
more difficult to preserve that bank, and that if that bank could not
survive, it was difficult to see how any Michigan banks could be
kept open. This, he stated, would cause vast distress in the State
of Michigan as there were nearly 1,000,000 bank depositors representing the source of support of as many as 3,000,000 people. All
these people would be subject to loss and suffering, and the business


of the state would be vastly hampered, if not paralyzed. The situation so resulting could not be confined to Michigan and would
probably communicate itself to neighboring states, and some reflection would be felt among banks elsewhere. He said that if similar
results developed throughout the nation, the consequences would
have an effect not only on business, but on the lives of the people
and on social developments which it was very difficult to foresee.
Mr. Ford then went on to say that he did not think Mr. Chapin
or Mr. Ballantine understood the situation at all. He said that this
trouble and this effort to talk him into the plan came from sources
which they did not know about. When questioned, he stated it was
part of the operation of the same source which had brought about
the strike at the Briggs plant for the purpose of harming or destroying his business. He stated he felt it was due to some of his competitors, or some of the people back of them.
Mr. Chapin then told Mr. Ford that he desired to talk to him as
a fellow manufacturer (Hudson Motors), with whom he had had
good relations for many years. He felt that he and Mr. Ford were
in the same position as they each had independent companies. Mr.
Ford said that that was so, except for the fact that Mr. Chapin's
stock was listed on the stock exchange. Mr. Chapin said that as a
manufacturer he felt that the consequences to the industry, of the
tying up of the banks in Michigan, would be to add immensely to the
already serious difficulties of the business. He pointed out that
while some years ago it had been thought that automobiles were
in the class of consumers' goods, during the period of the depression
it had become clear that old cars could be retained longer than had
been anticipated, and that under present conditions the purchase
of new automobiles was regarded almost as a capital expenditure.
He said that such purchases, even for low priced cars, required the
expenditure of relatively large amounts, and that if the people of
the country were made still further short of funds, they certainly
would drastically curtail purchases. He said that it was very hard
for him, as a manufacturer, to contemplate such a development
and that he could not see how Mr. Ford could possibly want to
face such a situation.
Mr. Ford said that great adverse financial development might
have a very bad effect upon the industry but that, even if the effect
were so bad that his company would be destroyed, he would
proceed to start a new one and believed that he could again build
up a business, as he still felt young. Mr. Chapin then spoke to Mr.
Ford about the immediate effect upon the local situation, saying



that he believed that Mr. Ford must feel a deep interest in the
future of Detroit and its people. It would seem a very strange thing
for Mr. Ford, in effect, to turn his back on the course which he had
pursued and fail to help stave off the threatened adversity.
Mr. Ford said that the people here, and all people, might have
to go through the experience of a crash. The general effect would
be that everybody would have to get to work a little sooner, and
that might be a very good thing. In any event, it had to come.
There were further pleas made to Mr. Ford, but he said that he
would not subordinate, or in any way contribute, a single dime, as
he felt that the principle was wrong. He stated that he felt he had
already done everything he should to help the trust company.
Mr. Ford at times approached the point of irritation and suggested that Mr. Ballantine and Mr. Chapin might be making threats.
They told him they were not trying to and were certainly not
threatening, but that they felt it was their absolute duty to point
out to him with the utmost clearness what was believed to be
involved in this situation and his decision.
Mr. Ford stuck to the point that the crash had to come and stated
that the only terms on which he would subordinate his deposits to
the trust company would be to receive from them endorsed notes
which would be absolutely good. Mr. Chapin remarked that Mr.
Ford always claimed the right to change his mind, and he hoped he
would think over most carefully all they had said and let them
know if there was any change that day. Mr. Ford remarked that
the trust company was dead anyhow. Mr. Chapin said that Mr.
Ford should reflect on the point that the corpse might communicate
disease over a very extensive area.
Mr. Ballantine and Mr. Chapin reported their conversation to
those working on the plan in Detroit. It was suggested by Mr.
Melvin A. Traylor, President of First National Bank of Chicago,
that the result might be that banks over wide areas, if not generally,
might have to go on a clearing house certificate basis, and wanted
to know whether Mr. Ford fully realized this point. It was thought
that it had been covered, but Mr. Ballantine called Mr. Liebold in
regard thereto. He also asked Mr. Liebold if he was absolutely
right in his understanding of Mr. Ford's withdrawing his entire
deposit from the First National Bank, and Mr. Leibold stated that
that was certainly what Mr. Ford had said. At about 4:30 that
afternoon, Mr. Leibold called and said that there had been no
change in Mr. Ford's position in any respect. That message ap354


peared to entirely end any hope of saving the trust company through
Mr. Ford.
A meeting was called in the office of Mr. Eugene Meyer, Chairman of the Federal Reserve Board, with respect to the Detroit
situation early on February 13. There were present members of
the Board, members of the staff of the Board, myself, and, at times,
members of my staff. As information came in from Detroit, telephone conferences were held with various officials, including Mr.
Jesse Jones of the R.F.C. It was apparent that the situation was
so serious that a joint meeting should be held. Such a meeting was
held in the board room of the R.F.C. at which were present, in
addition to R.F.C. Board members and staff, Governor George L.
Harrison of the Federal Reserve Bank of New York, members of
the Federal Reserve Board, Mr. Floyd Harrison, Administrative
Assistant to Mr. Meyer, Mr. Chester Morrill, Secretary to the Federal Reserve Board, Mr. W. P. Folger, Chief National Bank Examiner, and myself. After some discussion Senator James Couzens
and Senator Arthur H. Vanderberg were invited to join the conference, since not only was the State of Michigan involved, but also
because Senator Couzens, through his long association with Mr.
Ford, might prove to be of some help with Mr. Ford in working
out the situation.
The question of a banking holiday in Michigan was discussed as
well as what could be done in lieu of such a holiday, such as the
issuance of clearing house certificates as was done in the panic of
1907. I was at that time against a banking holiday in Michigan.
I felt sure it could not be localized and that it would spread to other
states. I knew we had a situation entirely different from the panic
of 1907, which was a money panic, when the certificates were used
generally for clearance between the banks themselves. In the
situation we were facing, the question of soundness of assets was
present, and clearing house certificates could not be issued in the
same way as in 1907. Moreover, many places where it would have
been necessary to issue the certificates had no clearing house.
I advocated, under the circumstances, that clearing house certificates, if they were issued, be issued on a partial basis, depending
upon the value of assets of the various banks. That is, one bank up
to 80 per cent of assets, another 60 per cent, etc., or that we go on
the scrip plan called the "Broderick" or "New York Plan," I was
generally opposed on this except by Governor Harrison, who, much
to my surprise, supported me. However, as further word came in
from Detroit, it became evident that the issuance of certificates was


not possible in any limited time. The key to the situation was Mr.
Ford, and there need be no issuing of clearing house certificates or
declaring of a bank holiday, if he could be persuaded to go along
with the plan which had been discussed with him that day.
Thereupon, Senator Couzens was requested to talk to Mr. Ford
by telephone. He did, and urged Mr. Ford to go along with the
plan submitted to him. Mr. Jones and I listened in. I was particularly interested in finding out whether or not Mr. Ford would
state that he would withdraw his deposits from the two national
banks if the trust company did not open the following day. Mr.
Ford again so stated. He also made it very plain that he would
not go along on the plan proposed. At the resumption of the
conference, I told the conferees that I had no choice under such
circumstances but to refuse to let the two large Detroit banks open
the next day because I could not let Mr. Ford have preference to
the detriment of the other depositors in those institutions.
Constant contact was being kept with Mr. Ballantine in Detroit,
as well as with Mr. John McKee, then Chief Examiner for the
R.F.C., and Mr. A. A. Layburn, Chief National Bank Examiner of
that Federal Reserve District. Mr. McKee had been sent to Detroit
about February 9, to head the team of examiners going over the
assets of the two groups of banks, and he had worked out the plan
for the Guardian Union Group which was presented to Mr. Ford.
In substance, the Guardian Group's free assets, at face value, were
$67,947,481.09. The loan required for the group was $49,438,679.89.
The trust company had a loan of $14,760,953, so that the new loan
would be $34,677,726.89.
Total loan
Ford's Subordinated
Loan Value Approved
Capital Required
Cash Needed
The Detroit Clearing House had been advised of the situation
and was meeting. The Governor of the State had been called into
the Clearing House meeting, and, after Senator Couzens talked
with Mr. Henry Ford,e the meeting was advised of the discussion

This is the subordination to which Mr. Ford would not agree.
Nevins and Hill conclude that Senator Couzens played a significant part in the blocking
of reorganization plans. Ford to Baughman, March 14, 1969. "Either Ford or Couzens
could have met the crisis, or the two jointly could have done so. The clash of personalities



through Mr. Ballantine and urged to prevail upon the Governor to
declare a banking holiday in the State. Governor William A.
Comstock declared a banking holiday for Michigan about 1:00
A.M., February 14, after the request for such a holiday was placed
in writing. The holiday declared was for a period of only eight
days, but it was later continued up to the date of the beginning of
the national holiday — March 6. Needless to say, Mr. Ford was
unable to withdraw the funds in the various banks prior to the
banking holiday.f

At approximately 10:00 P.M., March 2, 1933, I was requested to
attend a meeting of the Federal Reserve Board in the office of the
Chairman, Eugene Meyer. I was not a member of the Board. The
Board, various members of its staff, and Secretary of the Treasury
Ogden Mills were present. There was under discussion a letter
from President Hoover calling attention to the Trading with the
Enemy Act of 1917, and to the fact that under its provisions he had
authority to declare a banking holiday. He requested the Board's
judgment in the matter and asked for a form of proclamation. The
subject of the guarantee of bank deposits in the emergency was
also mentioned.
Mr. Mills and Mr. Meyer were of the opinion that a banking
holiday must be declared, pointing out that many of the banks
throughout the country were, for all practical purposes, closed.
The drain on the remaining open institutions would probably be
disastrous, and the fact that the New York savings banks were, the
following morning, to put into effect a sixty-day withdrawal provision, would further weaken the situation.
Mr. Adolph C. Miller and Mr. Charles S. Hamlin, both members
of the Federal Reserve Board, felt that the Trading with the Enemy
Act could be invoked to prevent further withdrawals for hoarding
and that the situation would clear up, making a holiday unnecessary. I saw no way out but a holiday.
blocked action." Couzens had a large fortune based on the sale of Ford stock which he had
received as a director of the company until 1915 when he resigned after a clash with Henry
Ford. Nevins and Hill, Ford: Decline and Rebirth, 13, 13n, 14.
After the bank closings, Henry and Edsel Ford worked to reestablish normal banking
services in the Detroit area. Ford to Baughman, March 14, 1969. On February 24, 1933,
Henry and Edsel Ford offered to provide the entire capital needed to create two new banks
but they reserved the right to select the officers and directors of the banks. Both the First
National and the Guardian group rejected the plan. However, a new bank, the Manufacturers National Bank of Detroit, was organized and began operation in August in which the
Fords held a controlling interest. Nevins and Hill, Ford: Decline and Rebirth, 14-15.



In the course of the discussion, Secretary Mills stated that President Hoover was prepared to declare a banking holiday for three
days, March 3, 4, and 5. But first, he wanted assurances that the
incoming administration would agree to call Congress in to extra
session on Monday, March 5, to pass the necessary emergency
legislation, some of which had been prepared with the balance to
be drafted in the interim. Secretary Mills then proceeded to state
that unless such an agreement could be reached, it would not be
possible for President Hoover to declare a holiday, since to declare
a holiday and not be assured that Congress would be called to pass
the necessary legislation might be fatal.
A number of phone conversations were held between the two
administrations. Unfortunately, Mr. William H. Woodin, Secretary
of the Treasury-designate, was in New York, and Mr. Roosevelt was
at the Mayflower Hotel in Washington. Thus, Mills would talk to
Woodin in New York, Woodin would call Roosevelt in Washington,
and then to Mills, and Mills would confer with President Hoover.
Under the circumstances, it was not possible to get together. Mr.
Roosevelt suggested that President Hoover declare a holiday until
Saturday noon and said that he would take the further responsibility. Mills was unwilling to see this done. The then-Attorney
General, William DeWitt Mitchell, had advised President Hoover
that the authority under the Trading with the Enemy Act was weak,
a mere shoe string, and the President should only act in the emergency provided all consented and provision was made for emergency
legislation.2 Two drafts of a form of proclamation were prepared
by the Attorney General in consultation with the General Counsel
of the Federal Reserve Board, Walter Wyatt. At 2:00 A.M. Mr.
Mills attempted to reach President Hoover by phone, but was told
he had gone to bed, so the meeting ended.
March 3, 1933, might well be called the day of the big gold rush.
The Federal Reserve Bank of New York at the end of the day had
lost over $200,000,000 in gold through wire transfers, gold earmarking, and exports, and $150,000,000 in currency. It was short about
$250,000,000 in reserves. The situation at the Federal Reserve Bank
of Chicago was critical, and orders from its larger Chicago member
banks for about $100,000,000 in gold aggravated the situation.
The Chicago bankers knew that the Federal Reserve Bank or
New York would have to rediscount with Chicago, which meant
All actions taken and rules, licenses, orders, and proclamations issued by President
Roosevelt or Secretary Woodin after March 4, 1933, pursuant to the Trading with the
Enemy Act, were approved and confirmed by Section 1 of Title 1 of the Emergency Banking
Act of March 9, 1933.



that the gold would leave Chicago, go to New York, and then
possibly out of the country. They sought to prevent this situation
by ordering the gold for the Chicago banks. Some harsh words
and ruffled feelings developed during this incident. It was, of
course, quite obvious that the Federal Reserve Banks could not
stand the pace and that something drastic had to be done.
Mr. Woodin had arrived in Washington and I met him later in
Mr.Mills' office. Professor Raymond Moley joined Mr. Woodin
there. The question of whether President Hoover would issue a
proclamation for a holiday was still unsettled. Conferences were
held continuously. During the day there had been prepared for
consideration by the Federal Reserve Board a proclamation for a
holiday, under Section 5 of the Trading with the Enemy Act, with
regulation of cash and exchange dealing. There was also prepared,
as an alternative, a joint resolution of Congress, on the possibility
that Congress might act on such a resolution that night. The full
Board and its staff met about 10:00 P.M. and, although some of its
members left about 2:00 A.M. on March 4, Governor Meyer and
most of the staff did not leave before 4:00 A.M. I spent my time
between Mills' office, my own, and the Board meeting. Mr. Ballantine, Mr. James Douglas, Assistant Secretary of the Treasury and
later Secretary of the Air Force, and Mr. Woodin were in and out
of the meeting.
When the Senate adjourned, the possibility of enacting the joint
resolution was out, and neither the outgoing or incoming administration could get together on the proclamation. The deadlock
remained the same as the day before. Mr. Roosevelt felt that
President Hoover had ample authority under the Trading with the
Enemy Act to take care of the immediate situation, and he refused
to make any commitments or assume any authority until noon of
March 4. President Hoover would not sign a proclamation unless
Mr. Roosevelt said he was agreeable and would agree to call an
extra session to enact emergency legislation. Mr. Hoover was acting
on the advice of Attorney General Mitchell, although some of his
advisers felt he should go ahead and take the chance, and the
Federal Reserve Board sent the President a letter advising him of
the great necessity to act. This letter, however, was not delivered
until about 2:00 A.M., March 4.
In the meantime, Secretary Mills advised the Board that there
was no chance of Mr. Hoover declaring a national holiday, and the
only thing left was to persuade the governors of the states where
Federal Reserve Banks were located to declare a holiday. This was


a large order to accomplish before the banks were to open the
following morning, but Governor Meyer and his staff attacked the
problem. My recollection is that the Governor of Illinois would not
declare a holiday unless the Governor of New York acted first.
Governor Herbert H. Lehman of New York, when first approached
would not declare a holiday since he had not been asked by any
responsible authority in the state. Governor Clyde L. Herring of
Iowa assented at once, as did Gifford Pinchot, of Pennsylvania
when located in Washington about 5:00 A.M. Mr. Meyer has
recently reminded me that it was impossible to get Governor Pinchot to answer the telephone or to answer the door. They finally
sent a fire engine to the house, and it succeeded in rousing him.
Holidays were declared in New York, Illinois, Massachusetts,
Pennsylvania, New Jersey, and elsewhere. Since March 4 fell on
a Saturday, the banks in most states were closed, or operating on a
restricted basis. None of the Federal Reserve Banks opened for
business. In the District of Columbia it was a legal holiday, being
Inauguration Day.

After breakfast on March 4, I attended a conference called by
Secretary Mills in his office to discuss the basis of some plan of
approach to the problem of reopening the banks. Present were Mr.
Ballantine, Mr. James Douglas, Mr. Parker S. Gilbert, a partner in
the New York banking firm of J. P. Morgan & Company, and Dr.
Emanuel A. Goldenwiser of the Federal Reserve Board staff. At
this time no proclamation had been issued, but it was apparent Mr.
Roosevelt had no other alternative except to issue one, and Mr.
Mills was looking ahead.
Two main questions confronted us: (1) what banks could be
opened quickly in order that the country might function; and (2)
how to keep them open. We had no positive knowledge of the
condition of the state banks, especially those which were not members of the Federal Reserve System. As to the national banks, which
numbered 5,938, we had reasonably accurate information. But,
since examinations were made twice a year for most banks and
the economic situation had changed materially in the crisis, we
could not, at this stage, be accurate in knowing the exact condition
of all of them.
I estimated that about 2,200 national banks which were liquid
could be reopened at once, and meet all demands made on them.


Thisfigurewas about 400 too low. We designated these banks as
Class A. Class B banks were the banks that had to be bolstered in
someway.We knew some would not open at all, or only if reorganized,andwe designated these as Class C. We figured the state
banks did not have proportionately as large a number in Class A.
As a result of this conference, the afternoon was devoted to
setting on paper a possible plan — Mills dictating, with Dr. Goldenwiser and me sitting in. Mr. Mills addressed a letter to Mr. Woodin
at the Carlton Hotel. With this letter he enclosed the typewritten
draft of what he termed a "tentative outline of a possible line of
approach to the solution of our banking problem." He further
stated in the letter that the outline was sketchy and "susceptible to
a number of variations," but that it would furnish a basis for
"discussion at the meeting tomorrow." He advised Mr. Woodin
that he would be home all evening March 4 in case Mr. Woodin
desired to call him.
The outline stated that, since the problem was nation-wide in
character, no solution was possible without national action, and
that the "first and immediate step that should be taken would be
to put all banks on the same closed basis by means of a national
proclamation." Further, the reopening of banks that could be
reopened should probably be staggered in point of time. The objectives were: (1) to deal with the immediate situation by furnishing the people a credit or currency medium through which they
could carry on their necessary transactions; (2) the reopening of
the banks of the country; and (3) their reopening on such a sound
basis as would insure against a recurrence of the then collapse.
The outline then suggested the reopening at the earliest date of
all Class A banks and the furnishing to them of currency adequate
to meet all demands. It was further stated that, after a brief
interval during which the public, by experience, would unquestionably find out that these banks were able to meet all demands
which would go a long way toward restoring confidence, those
banks in Class B should be reopened on a sound basis. In order
to do this, it might be necessary to scale down deposits and furnish
capital which, if not available from private sources, would be
furnished through the purchase of preferred stock by the Government.
The meeting scheduled for March 5, 1933, had been called by
President Roosevelt and Secretary Woodin. It had been suggested
to Woodin that it might be helpful to have several representative
bankers at the conference. Joseph Wayne, Jr., President of the


Philadelphia National Bank, Melvin A. Traylor, President of the
First National Bank of Chicago, James R. Leavell, President of the
Continental National Bank of Chicago, Daniel A. Wing, Chairman
of the Board of the First National Bank of Boston, George I. Davison
of the Hanover Bank of New York and Chairman of the New York
Clearing House, and John M. Miller, Jr., President of the First and
Merchants National Bank of Richmond, attended.
In addition to the above, and the members of the Federal Reserve
Board, there were present: Senator Carter Glass, Congressman
Henry B. Steagall, Jesse Jones, George L. Harrison, Jim Douglas,
Arthur Ballantine, Homer Cummings, Attorney General of the
United States, Adolph A. Berle, Jr., one of the brains trust, Arthur
Mullen, Democratic National Committeeman from Nebraska, and
Walter Wyatt. Why Arthur Mullen was present, I never knew.
So far as I know, he offered no suggestions, but he did listen attentively. Raymond Moley was not at the meeting but, at least part
of the time, he was in the Treasury in another room and was consulted by Berle, and probably others, from time to time.
Many things were discussed, but the only agreement reached
was to recommend the banking holiday. A draft of the previously
prepared proclamation was used as a basis for the one to be signed
by the President, and with a few minor changes was approved by
Cummings and signed by the President late at night on March 6,
1933. This proclamation covered the period from March 4 to March
9, both dates inclusive. A new proclamation was issued by the
President on March 9. The national emergency under this later
proclamation was continued until further proclamation by the
Conference continued on March 6. Mr. Mills was more in the
background, but in close touch; Parker Gilbert was still more in
the background, and it became increasingly evident that a J. P.
Morgan partner was not wanted around. Shortly after noon, Mr.
Mills asked me if I thought the conference was getting anywhere.
My answer was no. He stated that he felt the same way, and he
proposed to have a few people in his office and work out something
When I arrived at his office, I found Dr. Goldenwiser and Mr.
W. R. Stark, Chief of the Section of Financial and Economic Research of the Treasury. The discussion centered around the basis
of the plan sent to Woodin on March 4, i.e., opening the banks
which were or could be made, on the basis of their assets, one
hundred per cent liquid, or Class A banks. It was estimated on a


conservativebasisthat around 2,500 national banks and 2,500 state
banks, could be thus opened. Mills first suggested these banks use
scrip, where necessary. Dr. Goldenwiser suggested that, inasmuch
as the necessary machinery, the Federal Reserve System, was available it should be used to furnish currency. This suggestion finally
crystalized into the plan for the banks to borrow on anything they
might have with the Federal Reserve System to issue Federal
Reserve Banks notes against the borrowings.3
It was necessary that, as far as possible, banks be opened to afford
every community with some banking service, and it was suggested
that where banking facilities were absent, the Federal Reserve
Banks make direct loans. In the course of those discussions, various
other persons were called in on particular phases, or to discuss the
suggested plan. Eugene Meyer, Walter Wyatt, Floyd Harrison,
Chester Morrill, Secretary of the Board, Edward L. Smead, Head
of the Statistical Division of the Board, Leo Paulger, Chief Examiner
of the Board, Parker Gilbert, and W. P. Folger were among those
present. At 2:30 A.M., March 7, the plan was in definite form.
Adolph Berle had sat in on the drafting from about 11:00 A.M. on.
Tuesday, March 7, was spent in a discussion of the plan and the
general form of the legislation. The Mills' plan was finally adopted,
although later modified in scope to include a larger number of
banks. Late that night, or rather early the morning of March 8,
I sent a telegram to the twelve Chief National Bank Examiners
asking them to wire in before 6:00 P.M., a list of all national banks
divided into groups. In the meantime, the Legislative Counsel and
some of his staff met in the Treasury with Arthur Ballantine, Walter
Wyatt, and some of his staff, to draft the legislation, which was
finally enacted as the Emergency Banking Act of 1933.

The act was divided into five titles. The first reaffirmed and
approved actions previously taken, amended the Trading with the
Enemy Act as to currency or bullion payments, hoarding, etc., and
gave power to require the calling in of gold and the regulation of
banking. Title II, known as the "Bank Conservation Act," dealt
with the appointment by the Comptroller of the Currency of Conservators and the reorganization of national banks. Title III covered

Despite Woodin's statement to Raymond Moley, as published in Mr. Moley's book
AfterSevenYears,that Woodin grasped the idea of the Federal Reserve System furnishing
currencywhileplaying his guitar, it was passed on to him by Mills in the plan sent with
hisletterofMarch 4, but he would not have told Moley the origin at that time.



the issue of preferred stock for banks. Title IV covered loans by
Federal Reserve Banks to banks and others, and the issuance of
Federal Reserve Bank notes. Title V dealt with an appropriation
to make the Act effective.
One of the interesting facts in connection with this Act was that
some portions of the Act had been drafted months before. Title II
the "Bank Conservation Act," was lifted in full from a draft of an
act which I had under lock and key in my office. The Comptroller s
office had been experiencing difficulty in getting one hundred per
cent of the creditors and stockholders to agree to reorganizing bank
which had closed. In most cases, a small minority could block a
reorganization. It occurred to me that, using the theory of the
bankruptcy law, a law could be drafted covering this situation.
Walter Wyatt confirmed my opinion, and I asked him to cooperate
in the drafting of such a law. I locked up the finished draft, and it
was not taken out until the banking crisis, there being no opportunity for its enactment into law prior to that time.
Several persons have been given credit for the idea of preferred
stock [which became Title III of the Emergency Banking Act].
Actually, the credit for the idea of preferred stock belongs to
Franklin W. Fort, then President of the Lincoln National Bank of
Newark, New Jersey, formerly a Republican Congressman and a
member of the Banking and Currency Committee of the House of
Representatives. In the early part of March 1932, Mr. Fort talked
with President Hoover and suggested the possibility of the issuance
of debentures or preferred stock for banks, calling attention to the
inability of raising private funds for common stock carrying double
liability. Mr. Hoover seemed favorable and suggested that he talk
to the then Comptroller of the Currency, Mr. John W. Pole.4
Strange as it may seem to some, both Mr. Hoover and Mr. Mills were both greatly
interested in new ideas and were not as conservative as one has been led to believe. But
both were hammered hard by the New York financial thinking. It was only natural that
Mr. Hoover should turn to the Chairman of the Federal Reserve Board, Mr. Eugene Meyer,
and to Mr. Mills on any new financial ideas advanced. But the Federal Reserve Board was
in large measure dominated by the Federal Reserve Bank of New York, through its brilliant
Governor, George Harrison, a disciple of Benjamin Strong, his predecessor, who followed
the same line. Moreover, Mr. Mills was in constant contact with New York bankers, such
as Winthrop Williams Aldrich, Chairman of the Board of the Chase National Bank of New
York, George I. Davison, of the Hanover Bank of New York and Chairman of the New
York Clearing House, and others. To my way of thinking, New York had too much to say
in the shaping of policies.
One of the instances of Mr. Mills' thinking is illustrated by the fact that in thefallof
1932 he was considering the effect of going off the "gold standard," and how it could be
accomplished. In 1918 Milton Elliott, then counsel for the Federal Reserve Board, had the
thought in mind that at some future time the government might desire to place an embargo
upon the export of gold and at that time he talked to Walter Wyatt, then a member of his
staff, and to Magruder Wingfield, one of Mr. Wyatt's assistants, as to how this might be
accomplished. The result was that in amending the Trading with the Enemy Act, certain
wording was placed therein which could be relied on to accomplish this purpose.
In June 1932, Dr. Adolf Miller, then a member of the Federal Reserve Board,spoketo



Mr. Fort did talk to Mr. Pole and handed him a two and onequarterpagememorandum on the subject. Mr. Pole objected to
the suggestion, at the time, because he feared the effect on public
psychologyofstillfurther legislation in the assistance of banks on
top of the creation of the Reconstruction Finance Corporation
which came into being on January 22, 1932. Early in January 1933,
Mr. Fort took up the subject with me, the then Acting Comptroller
of the Currency. We discussed the matter over lunch at the Willard
Hotel, and I thought well of the plan, but pointed out that if it was
possible to get the R.F.C. to become interested in the matter, more
could be done for the banks then by relying on the sale to private
A luncheon conference was arranged for the following day at the
Powhatan Hotel with Mr. Charles A. Miller, then Chairman of
the Board of Directors of the Reconstruction Finance Corporation,
at which the matter was discussed by Mr. Fort and me. Mr. Miller
seemed favorably impressed, but stated that he would take the
matter up with the Board of Directors. He subsequently reported
that they seemed lukewarm to the plan. I then discussed the matter
briefly with Mr. Ogden Mills, Secretary of the Treasury, who stated
that if I thought well of the plan, he would suggest that the legislation be drafted.
Prior to the conference with Mr. Miller, Mr. Fort had worked out
a revised memorandum of his ideas, which was delivered to Mr.
Miller and me. A copy was also sent to Senator Glass with a letter
from Mr. Fort. Following Mr. Miller's suggestion, I requested Mr.
Walter Wyatt to cooperate in drafting a bill. This was done and
I placed a draft of the bill in the safe for future use.
Subsequently, Mr. Melvin Traylor called at the Comptroller's
office in Washington and discussed the question of capitalization of
the First National Bank of Chicago. He agreed that more capital
Mr. Wyatt about the possibility of placing an embargo on gold, or the hoarding of gold,
and whether there was any authority to accomplish this purpose or to go off the gold
standard. He requested a memorandum. Mr. Wyatt, in talking with Governor Meyer of
the Federal Reserve Board, mentioned the matter, and Governor Meyer suggested that no
memorandum be given, but that the matter be answered verbally. Mr. Meyer, in making
this comment, stated that the President was so jittery that if he had a memorandum which
showed him he had the authority, he might exercise it.
Subsequently, in the fall of 1932, Mr. Ogden Mills spoke to Mr. Wyatt about the
matter, and Mr. Wyatt advised Mr. Mills that the Trading with the Enemy Act would
accomplish the purposes. Subsequently, when the question came up of the closing of the
banks, Mr. Wyatt, having already looked into the matter from the Trading with the Enemy
Act, was of the opinion that that Act could be used and had sufficient authority in it to
control the entire situation, and an executive order was prepared on the basis of the
Trading with the Enemy Act for the signature of President Roosevelt, all being quite
contrary to the statements that have been made that Attorney General Cummings, or
someone in his office, dug up the authority with the Trading with the Enemy Act to close
the banks.



was needed, but that common stock bearing double liability could
not be sold to the public. I asked him whether or not he would be
able to sell preferred stock if there was a law allowing preferred
stock, and he said he could. This led to an immediate conference
between Mr. Traylor, Mr. Mills, and me, at which it was decided
that Mr. Traylor would see Senator Glass concerning the introduction and passage of legislation which would permit the issuance of
preferred stock. The afternoon of Mr. Traylor's visit to Senator
Glass, Senator Glass called me on the telephone and requested a
draft of legislation on preferred stock. I immediately sent Senator
Glass the draft which had been prepared, but which did not include
the R.F.C. purchasing feature. The legislation was not introduced
by Senator Glass. No further action was taken with respect to the
matter until the draft of the Emergency Banking Act, which incorporated therein the formerly prepared draft on preferred stock,
with certain changes, including the right of the R.F.C. to purchase
such stock.

All during the day of March 8, 1933, telegrams were coming in
from the twelve Chief National Bank Examiners giving the grouping of the banks. The geographic position of the banks under the
plan adopted was most important. To test the spread, it was decided
to place colored pins on a map of the United States, showing their
I had previously asked several lawyers who were familiar with
bank work to come to Washington as a patriotic duty and help in
the emergency. J. P. Dreibelbis, later Assistant General Counsel
of the Board of Governors of the Federal Reserve System and Senior
Vice President of the Bankers Trust Company of New York, John
S. Sinclair, President of the Federal Reserve Bank of Philadelphia,
and Kenneth C. Royall of North Carolina, afterward Secretary of
War and now senior partner in a New York and Washington law
firm, immediately responded. Dreibelbis' first job was to stick the
colored pins in the map, which we had borrowed from the Federal
Reserve Board. He worked all the night of March 8 and, in the
morning, the map was taken to the White House for President
Roosevelt's inspection. The President thought it great.
While the banks showed a fair geographical distribution, it was
obvious that the country would still be paralyzed unless we could
open more banks. We could, if we obtained the necessary legis366


lation. I appeared as the only witness before the Banking and
Currency Committee of the Senate, which met at 2:00 P.M., March
9. It was a very solemn occasion. Senator Glass explained and
the bill. Very few questions were asked. One, I remember well was how many national banks we could open with and
without legislation. My answer was about 5,300 with, and 2,600
without. The Senators were inclined to object; Senator Couzens
said that it would not necessarily help the Michigan situation, and
Senator W. M. McAdoo felt that the currency features were not
broad enough —he wanted more freedom for the issuance of currency. The bill was reported and quickly passed the Senate; it had
at that time already passed the House.
As was natural in a crisis of this nature, Congress was willing to
give the executive what he thought necessary. It has always
seemed to me that the shock of the banking holiday was largely
responsible for the executive getting most of the legislation he
wanted for many days to come.
In the meantime, from March 6 on, various regulations were
prepared and issued, designed to permit the shipment, transportation, and delivery of food or food products, and to keep the nation
going. Arthur Ballantine and Jim Douglas were principally in
command of this operation with help from the Comptroller's office
and the Federal Reserve Board.
On March 10, the President issued a statement to the press announcing that banks would open, progressively, on Monday, March
13, Tuesday, March 14, and Wednesday, March 15. Those located
in Federal Reserve Cities were to be opened first, those in cities
where clearing houses were located second, and all others third.
At this juncture we still did not know what banks would be opened.
A matter of procedure was in dispute between the Treasury and
the Federal Reserve Board.
The Secretary of the Treasury was to issue the licenses for the
opening of the banks belonging to the Federal Reserve System,
both national and state. Mr. Woodin and I wanted each Federal
Reserve Bank to approve the opening of each of these banks in
their respective districts, but Eugene Meyer and his advisors were
opposed, feeling the responsibility was on the Treasury, and they
did not want the Federal Reserve Banks to shoulder such responsibility.5 The argument waxed hot and bad feelings were engendered.
Mr. Floyd Harrison and Mr. Chester Morrill were conscientious, brilliant public servants, and their loyalty to the Chairman of the Federal Reserve Board, Mr. Eugene Meyer,



On its face, the difference of opinion seemed silly, but it had real
significance. No one knew how the public would react when the
banks opened. If they demanded their money, they either had to
have it or the reopening would be a failure. It was felt that the
various Federal Reserve Banks must back the reopened banks to
the hilt, and that it was no time for any conservative head of a
Federal Reserve Bank to exercise his conservatism, should demand
be made for currency. We reasoned, therefore, that if the Federal
Reserve Bank agreed to a reopening of a particular bank, it would
necessarily be forced to back it one hundred per cent.
The Treasury was finally successful in getting its way. In addition, the reopening of national banks was recommended by the
Chief National Bank Examiner in the particular district, by an
assistant in the Comptroller's office, and by me.
One vivid illustration of the necessity for the Federal Reserve
to be in harmony and to recommend the opening of banks is shown
by the situation surrounding the reopening of the Bank of America
(National Trust and Savings Association, San Francisco, California). This bank, controlled by Transamerica holding the stock of
banks throughout the Pacific Coast, had deposit liabilities of over
$600,000,000. In the report of examination completed in July 1932,
the examiner had commented in part:
A continuation of existent economic conditions and the present management will place this bank in jeopardy, nor may relief be expected from
any of the affiliate corporations, all of which have problems of their own.

Prior to the time of the consideration of the opening of the
various banks, a new examination report had been made, and it was
on the basis of this report that the bank was allowed to open. However, it was quite obvious that with the huge amount of deposits
which might be withdrawn and the slow assets in the bank's portfolio, it would be necessary that the Federal Reserve Bank of San
Francisco furnish it with all available funds upon reopening to keep
it open. It was also quite obvious that if the bank did not open,
was unquestioned. They became known as his "watchdogs," and everything presented to
Mr. Meyer was looked over by them for what I considered to be matters which could in
any way embarrass him. Consequently, when the Treasury was insisting on itsplanto
have the Federal Reserve Banks recommend the opening of particular banks in their
respective districts, both Harrison and Morrill were zealously attempting to protect Eugene
Meyer, and the Federal Reserve System, from any embarrassment or future criticism. Part
of their technique, which they claimed to be usual, was to have a stenographer present
when Secretary Woodin desired to discuss something, to take down verbatimanythinghe
said. Mr. Woodin resented this and finally told me he would refuse further to go to the
Federal Reserve Board to discuss the matters pending, and it was up to me to goinhis
place. I was just as irritated and made my position very plain. We finally dispensed with
the stenographer.


such banks as the Continental National of Chicago should not open.
The effect on our economy, and on the entire situation from Chicago
west, would be disastrous.
Since the report of examination did not show the bank to be
insolvent, I was determined that it should be reopened. But, I
could not take that chance without the Federal Reserve Bank of
San Francisco backing us. Mr. Woodin fully understood the situation and agreed with me. We had visited President Roosevelt, and
the President had taken the position that he knew nothing about
the situation and that it was a matter for our determination. But
he agreed that if we felt the way we did, we should do our utmost
to persuade the Governor of the Federal Reserve Bank of San
Francisco, Governor Calkins, to recommend the opening of the
bank and to stand by it.
Mr. Woodin and I returned to the Treasury and to Mr. Woodin's
office, where we were later joined by Professor Moley. We first
talked to Governor Calkins by phone around 6:00 P.M., our time,
with respect to the matter. He was adamant that the bank should
not be opened, and he continued this position until about 2:00
A.M., our time, when he finally agreed to recommend the opening
of the bank. This session was a long one, but Moley did not seem
to feel the tension and slept from time to time on the couch in
Woodin's office.6
During the course of the evening, Senator William G. McAdoo
and Senator Hiram Johnson of California sat for sometime in the
Secretary's outer office. We could give them no assurances as to
what would be forthcoming; certainly, we told them, the bank
would not be opened because of political pressure. This was not
done in any case of which I know. The statement contained in
Marquis James' Biography of a Bank; The Story of Bank of America
N.T.&S.A. that the Bank of America would not have opened except
for the intervention of the Hearst interests, is, I believe, absolutely
incorrect. Certainly, I never knew of any Hearst intervention, and
the President indicated nothing of the sort.
On Saturday, March 11, I was requested by Secretary Woodin
to accompany him to the White House to confer with the Presi6
The long hours and continuous pressure on all of the staff involved was enormous.
Sleep was practically unknown to many of us. My usual routine was to arrive home in the
morning, around seven, get a hot toddy, prepared by Mrs. Awalt, sleep for at least an
hour, have a shower and return to the Treasury. Without Mrs. Awalt's warding off the
telephone calls, which came in constantly during the brief period I was home, I undoubtedly
would not have survived.



dent. Upon our arrival there we found Governor Adolph Miller of
the Federal Reserve Board who had also been summoned to take
part in the conference.
The President asked us to be seated around his desk and explained that he wanted to read to us the speech he intended to
deliver to the nation on the following evening, Sunday, March 12.
Woodin was seated to the President's left, Miller directly across the
desk, I to the President's right, and Louis M. Howe was in back of
me on the sill of a window overlooking the south portico of the
White House.
Mr. Roosevelt read the speech, turned to Woodin, and asked him
what he thought of it. Woodin replied that he thought it was great
He then asked Miller his reaction, and Miller replied that it was an
excellent speech and would accomplish its purpose. The President
then asked what I thought of it and I, not knowing the President's
disposition too well, rushed in, as a fool where angels fear to tread,
and said that it was a fine speech, but —. This was as far as I got
when the President snapped "But what?" I told him that he had
stated we would open only sound banks and, in our hurry to complete the program, there might be some exceptions. He stated in
no uncertain terms that that was what we were going to do, "open
only sound banks." I had nothing more to say.
The state banks which were not members of the Federal Reserve
System were turned back to the state authorities to open. Many of
us felt this was a mistake, but it was impossible to handle them
with our limited knowledge, in the time allotted.
Having the power to supply currency and the right to subscribe
to capital, we felt we could go further than the original Mills' Class
A banks and, in general, take in those which were not insolvent and
which had assets upon which they could borrow at the Federal
Reserve banks. The needed capital funds we expected to put into
them later. Mills by this time was definitely out of the picture. He
was anxious to be of help in the emergency, but the wall of hostility
toward him had closed in so tightly that he told me he knew he was
not wanted.
We then entered the phase of the reopening the banks on a
staggered basis and the reorganization of as many as could be
opened in the quickest possible time. This proved to be a tremendous job and required the expansion of the Comptroller's office to
twice its normal size. The problems were complex, but wherever
possible reopenings were made and reorganization was accom370


plished, all of them on a sound basis. One of the first problems was
thecreationof a new bank in Detroit and the paying out of a large
percentage of frozen deposits through the aid of this new instrumentality and the help of the R.F.C.