By 1933 Americans were losing faith in the banking system. Banks had been failing by the thousands since 1930. When a bank failed it took everyone’s life savings with it.
On February 14, 1933, a coalition of major banks asked Governor Comstock of Michigan to declare a statewide bank holiday. He granted it.
The governors of Iowa, Tennessee and Kansas declared bank holidays in January, but it was Michigan that tipped the scales. It set off a nationwide panic that led to bank holidays in almost every state. On March 4, 1933, the Federal Reserve Bank of New York requested a statewide bank holiday be declared. On the same day that FDR was inaugurated as President of the United States, New York, Illinois, New Jersey, Massachusetts, and Pennsylvania all declared bank holidays.
The banking system had utterly and completely failed. In most counties there wasn’t a single working bank even before the bank holidays. Now the entire banking system simply vanished from the face of America despite years of federal government support.
No one was sure if any bank in America would ever open again.
When FDR instituted the Emergency Banking Act the following week there was no one to oppose it.
It was in this atmosphere of crisis that famous economist Irving Fisher proposed a radical new idea for money.