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Banking Holiday

Definition

A banking holiday is a temporary closure of banks for an emergency situation. FDR declared a "banking holiday" in March 1933 to prevent further bank failures during the Great Depression.

Analogy

Think about your school closing temporarily due to a snowstorm. It's not because they don't want you to learn; it's because they want to ensure everyone's safety until conditions improve. That's what FDR did with banks - he closed them temporarily so that they could reopen stronger and safer.

Related terms

Emergency Banking Act: Passed during FDR’s first days in office after declaring banking holiday. This act allowed healthy banks to reopen under Treasury Department supervision.

Federal Deposit Insurance Corporation (FDIC): Created by Glass-Steagall Act as part of New Deal reforms after banking holiday. It provides deposit insurance guaranteeing safety of depositor's accounts in member banks up to certain amount.

Glass-Steagall Act: An act passed by Congress in 1933 that prohibited commercial banks from participating in investment banking activities, aiming at preventing another financial crisis like one which led to banking holiday.