Today in 1933 President Roosevelt officially signed a Proclamation declaring a Bank Holiday. All the banks in the nation were closed. The Bank Holiday was to go from March 6, Monday, to Thursday. No bank could transact any banking business except by permission of the Secretary of the Treasury. The stock exchange was closed. The declaration of a national bank holiday was somewhat secondary as the majority of banks in the United States had already been closed by their state governors. A small number of states still had their banks open, Delaware being one of them. The Banks in Delaware closed with the enactment of Proclamation 2039. The Federal Proclamation closed the banks until the March 9th, but a second proclamation Proclamation 2040 extended it indefinitely. Indefinitely was changed to March 13th, 1933.
So why did they close the banks in 1933? The great depression had been going on for a number of years and people were unable to pay their bank loans. The assets they put up, mostly farms, simply had no buyers so the banks were not able to sell them or had to sell them at a greatly depressed value. Now days of course the government would step in and bail out the banks at taxpayers expense, but this was prior to 1933 and the banks were losing assets. As we know in the banking system the money you deposit is loaned out and the bank only keeps from 6% to 15% of the total amount of deposits on hand to pay customers checks and withdrawals. As banks begin to close their doors because they did not have sufficient funds available to pay their depositors, people in panic or smartness begin to withdrawal money from the banks that were still operating, creating a run on the bank. You may recall in the movie “It’s a wonderful Life” George Bailey tries to stop the bank run on his saving and loan bank and he explains the banking system to everyone. Well at this period in time gold was the standard that backed the US Dollar and people could request their withdrawal to be made in gold. If they couldn’t get gold, they took silver, if they couldn’t get silver they took paper back money. It was being removed from the bank vaults at the rate of $20 million a day. At this time The US didn’t print money unless it was backed by gold, since the gold was being hidden at home and not in the banks they couldn’t print more money. All went into the mayonnaise jar buried in the backyard. The president referred to this as hoarding and to be labeled a gold hoarder was an awful thing (also a smart thing). More and more banks failed. In December 1932 State governors started closing their banks. In February, Maryland Governor Albert C. Ritchie closed the 200 banks in Maryland. The Bank of Delmar had to close down, however, on the other side of the street in Delaware was the First National Bank of Delmar and it was open. Needless to say business started to increase for the First National Bank as not only was it the only open bank in Delmar, it was the closest open bank for people in Wicomico County Maryland. The Delaware banks remained opened until the President closed them on March 6th.
So the bank closed what is the big deal? First, you couldn’t withdrawal the money you had in them. Second, the amount of cash in circulation was not enough to make change at stores, or pay employees in cash (checks were useless without a bank to cash them at). The excess cash people did get went into that mayonnaise jar buried in the back yard. The States that had closed their banks a couple of months before the National Bank Holiday had even more of a problem trying to find cash to circulate, they went to scrip. Local institutions supplied their own money. Towns and counties, factories and unemployment agencies, a fish processor in Massachusetts, and a college in California all created money for their communities. Emergency issues came from all of the forty-eight states, plus the territories of Hawaii and Alaska and the District of Columbia. In Cambridge, Maryland 200 merchants put up $1,000 to issue scrip. When you purchased from these merchants you received your change in scrip instead of US cash. In the collectors world today depression era scrip is a valuable thing. Business had to scramble to find cash to pay their employees, An exchange was established at the business office of the Salisbury Times Building in Salisbury to change larger denomination bills into coin or small denomination bills so people would have change to pay for things. The Eastern Shore Public Service Company (Today’s Delmarva Power) disbursed $22,000 in cash to its 300 odd employees in Maryland, Delaware and Eastern Shore of Virginia to meet it’s payroll. Standard Oil Company paid it’s employees by money order.
During this bank holiday banks had to submit financial statements of their conditions and the federal government determined if they could open again. An army of examiners fanned out and checked the solvency of banks across the United States. They certified the sound ones and closed the unsound ones.
By March 13th, a Monday, the Government had started issuing regulations to the Banks to re-open, the Bankers studied them on Tuesday and most re-opened on Wednesday, March 15th, although some had limitations placed on them and some didn’t open.
Complicating the bank holiday in Wicomico County was the Savings Bank of Nanticoke caught on fire and burnt to the ground. When the vault was opened all the funds were found intact. The money was removed and the bank reopened about a week after the bank holiday was removed in a building adjoining the burn structure. In addition, Joseph G. W. Purdue, cashier of the Bank of Delmar, died March 1st from an illness. He was 76 years old and before working for the bank had been a school teacher. All adding to the rumors floating about the conditions of the banking industry.
When the banks re-opened there were three categories of re-opening. First banks that allowed 100% withdrawal of deposits made before the bank holiday. Second, were those that allowed only a 2% withdrawal of deposits before the Bank holiday. Third were the banks that didn’t re-open.
In Delmar, Delaware The First National Bank of Delmar re-opened on Wednesday, March 15th with 100 per cent withdrawal. The Bank of Delmar in Maryland re-opened but with a two per cent withdrawal limitation on deposits made before February 25th (the day the Maryland banks shut down). It would not be until May 19th when the reorganization of the Bank of Delmar was completed and it would be on a 100% withdrawal basis. It had also applied for membership to the Federal Reserve System.
In Wicomico County; the Salisbury National Bank, Farmers and Merchants Bank, Bank of Fruitland, Hebron Saving Bank, Savings Bank of Nanticoke, and the Saving Bank in Pittsville, all opened with 100 per cent withdrawal privileges. The Eastern Shore Trust Company in Salisbury, The Farmers Bank of Mardela, and the Farmers Bank of Willards opened under a two percent withdrawal of deposits made before February 25th.
By the March 15th all but 4 of the 52 banks in Delaware were open. Among those on limited restrictions were the Fruit Growers National Bank and Trust in Smyrna and the First National Bank of Milton.