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| L to R: Asst Sec James Douglas, Treasury Sec Will Woodin, and Bureau of Engraving Dir Alvin Hall. From The Highland Recorder, Monterey, Virginia, March 31, 1933. |
This March 5 will be the 85th anniversary of the collapse of the banking system.
Some states were issuing scrip because so many panicked customers were taking cash out of the banks that their tills and safes were empty, and their reserves had often dwindled to below the insolvency mark.
Henry Morgenthau, who was then working with financially distressed farmers (commodity prices had fallen disastrously) suggested that the new Treasury Secretary should issue federal scrip, using a 1907 precedent. In 1907, the Treasury had created temporary federal dollars (“scrip”) to pay off panicked depositors. [“Moves to Reopen All Farm Markets,” The New York Times, March 8, 1933, 2.]
Woodin's friend and colleague Raymond Moley, leader of FDR's Brain Trust, wrote (in his book After Seven Years) that Woodin figured out while he was playing the guitar for relaxation, that greenbacks were federal scrip, if they weren't gold or silver certificates.
So there was no need to call a new issue "scrip". There just had to be a lot of greenbacks printed, fast. Starting with the Woodin, currency was called "Federal Reserve Note" rather than a certificate for something else. Currency was issued in 1933 against sound bank assets. (Arthur Krock, “Washington Sifts Ideas: Woodin Paves Way for a New Currency…,” The New York Times, March 8, 1933, 1.) A “sound” asset was one not “classified" by a bank examiner. Banks were required to write off some or all classified loans. George J. Benston and John Tepper Marlin, “Bank Examiners' Evaluation of Credit,” Journal of Money, Credit and Banking, 6:1 (Feb. 1974). Schlesinger, “The Coming…,” 7.
John T. Flynn, The Roosevelt Myth (The Devin-Adair Company, 1948). Schlesinger, Flynn, and Smith (FDR, 332) agree that Woodin served FDR well in this arena, both by listening to the outgoing Hoover staff and by focusing on the central issues.
Will Woodin personally supervised the printing of greenbacks to make sure that banks were not short of cash and currency. Rather than delay even a day by starting a new 1933 series with a new plate, he issued a 1928 Series with his signature on it, even though the bills were printed in 1933. The 1928 Series has a red Treasury seal.
Will Woodin personally supervised the printing of greenbacks to make sure that banks were not short of cash and currency. Rather than delay even a day by starting a new 1933 series with a new plate, he issued a 1928 Series with his signature on it, even though the bills were printed in 1933. The 1928 Series has a red Treasury seal.
1928 Series dollar bill, signed by Woods and Woodin (as were all of the 1928 Series
dollar bills with the red seal). From the author's coin and currency collection.
These 1928 dollar bills are the last notes to have been issued with a red Treasury seal. A circulated 1928 Series is sold for an estimated average of $75, depending on condition. An uncirculated note is sold for $200-$500 (so says AntiqueMoney.com). One with a serial number that begins with a star instead of a letter is called a Star Note and is sold for about $2,000 circulated and $15,000 or more uncirculated.
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| An example of the 1928 Series Star Notes. These are rare, offered for $15,000 and up if uncirculated. |
Woodin worked round the clock making sure the new currency was printed right. Then on March 20 he had Universal Newsreels cameras rolling to show the trucks leaving the Bureau of Engraving and Printing for the big-city banks. The newsreel film clip was shown in cinemas before the featured movie. .
FDR declared a Bank Holiday for the four days March 6-9, 1933. The Emergency Banking Bill was passed through both Houses of Congress in a few hours in a special session called for March 9. It was immediately signed into law by FDR. The Bank Holiday was extended until Monday, March 13. One-third of the banks opened right away. The others had to be examined for solvency. But panic disappeared. Someone was in charge.
The next day, March 6, FDR introduced the Economy Act, which cut veterans' pensions to balance the budget and was unpopular among Democrats. This was not a Keynesian action, unlike most of FDR's other moves in 1933, but it passed both Houses of Congress, with the support of many Republicans. It passed the Senate on March 20 only because it was immediately followed by a popular bill that partly ended Prohibition. Roosevelt like to make deals.
The 73rd Congress stayed in session for its first year until June 18, 1933. Three major pieces of legislation were passed in June – the Securities Act on June 5, the Glass-Steagall Banking Act on June 12, and NIRA (which established the brilliant Public Works Administration and the less successful National Recovery Administration) on June 16. The PWA was not as successful as it should have been, because Harold Ickes was put in charge and he hated to spend money. When NIRA was declared unconstitutional, the PWA was reorganized as the Civil Works Administration under Harry Hopkins. The CWA was a roaring success because Hopkins knew that the key was to get the money out to create new jobs. (Jean Edward Smith, FDR, Random House, 2007, 343-345.)
FDR declared a Bank Holiday for the four days March 6-9, 1933. The Emergency Banking Bill was passed through both Houses of Congress in a few hours in a special session called for March 9. It was immediately signed into law by FDR. The Bank Holiday was extended until Monday, March 13. One-third of the banks opened right away. The others had to be examined for solvency. But panic disappeared. Someone was in charge.
The next day, March 6, FDR introduced the Economy Act, which cut veterans' pensions to balance the budget and was unpopular among Democrats. This was not a Keynesian action, unlike most of FDR's other moves in 1933, but it passed both Houses of Congress, with the support of many Republicans. It passed the Senate on March 20 only because it was immediately followed by a popular bill that partly ended Prohibition. Roosevelt like to make deals.
The 73rd Congress stayed in session for its first year until June 18, 1933. Three major pieces of legislation were passed in June – the Securities Act on June 5, the Glass-Steagall Banking Act on June 12, and NIRA (which established the brilliant Public Works Administration and the less successful National Recovery Administration) on June 16. The PWA was not as successful as it should have been, because Harold Ickes was put in charge and he hated to spend money. When NIRA was declared unconstitutional, the PWA was reorganized as the Civil Works Administration under Harry Hopkins. The CWA was a roaring success because Hopkins knew that the key was to get the money out to create new jobs. (Jean Edward Smith, FDR, Random House, 2007, 343-345.)
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| Treasury Secretary Steve Mnuchin, poses in 2017 with a sheet of new $1 notes bearing his signature; his wife is at his side. The photo is clearer than in Woodin's case, but the public purpose of the photo is less clear. |
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