4. Roosevelt’s first hundred days introduced the New Deal
During the first hundred days of his administration, FDR remained in constant contact with the Congress, which acceded to his every request, wary of the enormous political power Roosevelt held as a result of popular demand for government action. March 1933, the month in which Roosevelt took office, was the nadir of the American economy during the Great Depression. Improvement began the following month, and remained steady, though often slow. The Economy Act was passed on March 14, 1933, ten days after Roosevelt took office. The Economy Act cut veteran’s pensions and civil service salaries to balance what Roosevelt referred to as the “regular” federal budget. To Roosevelt, there was a regular budget and an emergency budget, the latter being a temporary expedient needed to fund the programs which would end the depression.
Five days before the passage of the Economy Act, Roosevelt proposed the Emergency Banking Act (which had been proposed to Hoover though he failed to act), under which some banks would be reopened under the supervision of the United States Treasury. Federal loans were made available to allow some banks to return to solvency. Within three days 75% of banks which were part of the Federal Reserve System reopened. Before the end of 1933 over four thousand small banks closed or merged into larger banks. Nearly all who had lost their savings received eighty-five cents for each dollar lost, still a loss but not the total loss long perpetuated by myth. The Banking Act also created the Federal Deposit Insurance Corporation, insuring individual savings accounts of up to $2,500, reducing the risk to banks caused by runs on the bank, in which panicked savers withdrew all of their money at once, forcing banks to close their doors due to insufficient cash on hand.