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Emergency Banking Relief Act

Definition

The Emergency Banking Relief Act was a law passed during the first 100 days of President Franklin D. Roosevelt's administration in 1933. It aimed to stabilize the banking system during the Great Depression by closing all banks and allowing them to reopen only after being deemed financially sound.

Analogy

Think of the Emergency Banking Relief Act as a school nurse checking students for lice. If one student has lice, it can quickly spread and cause an outbreak (like a bank failure). To prevent this, the nurse checks everyone (the government inspecting all banks), sends home those with lice for treatment (closing unstable banks), and allows back only those who are clean (reopening financially stable banks).

Related terms

Bank Run: A bank run occurs when many customers withdraw their money simultaneously over concerns of the bank's solvency.

Federal Deposit Insurance Corporation (FDIC): Established in 1933, this is a U.S. government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions.

New Deal: A series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939.