6.2 FDR and the First New Deal: Banking, Relief, and Recovery

Franklin D. Roosevelt took the oath on March 4, 1933, with the banking system in ruins and unemployment near its Depression peak. Independent OpenExamPrep teaching for History of the United States II treats the First New Deal as a burst of statutes and agencies aimed at relief (immediate hardship) and recovery (getting farms, factories, and credit moving), plus banking reform that would last. The political claim was that the peacetime federal government now had a duty to manage a national economy—an argument later exams will contrast with Hoover’s volunteerism and with conservative critics.

The Hundred Days and the Bank Holiday

Roosevelt’s Hundred Days run from March 9 to June 16, 1933, when Congress passed a stack of emergency laws, many drafted in the executive branch. Even before that window, on March 6, 1933, he proclaimed a nationwide bank holiday, suspending banking transactions after states had already imposed their own closing orders. Depositors had been hoarding cash; uncoordinated state holidays were not enough.

On March 9, 1933, Congress passed the Emergency Banking Act. The statute retroactively legalized the holiday, authorized the Treasury to license and reopen banks found solvent, expanded Reconstruction Finance Corporation authority so the RFC could buy preferred stock and recapitalize banks (not merely lend to them), and allowed the Federal Reserve to issue additional currency backed by sound assets. Reopenings were staggered by city size beginning March 13. The panic broke: money flowed back into vaults once people believed the government would not let every bank fail.

Fireside Chats and Public Psychology

On March 12, 1933, Roosevelt delivered his first fireside chat by radio, explaining in plain language that remaining closed banks were being examined and that currency in a reopened bank was safe. The chats mattered because the Depression was a crisis of confidence as well as of balance sheets. Independent OpenExamPrep items often treat the fireside chat as a new presidential tool: using mass media to teach policy and to pull savings out of mattresses. They were not statutes. They were persuasion attached to the Emergency Banking Act.

Glass-Steagall, the FDIC, and a New Credit Order

The Banking Act of 1933, commonly called Glass-Steagall after Senator Carter Glass and Representative Henry Steagall, attacked the 1920s mix of commercial lending and securities affiliates. It separated commercial banking from investment banking so deposit-taking banks could not gamble customers’ money in the underwriting business that had fed the boom. Most exam-relevant, it created the Federal Deposit Insurance Corporation (FDIC). A temporary fund, effective January 1, 1934, insured deposits up to $2,500 (raised to $5,000 in 1934). Insurance plus examination changed depositor incentives: a rumor no longer required a midnight run. Combined with RFC capital and Federal Reserve liquidity, FDIC coverage is why bank suspensions collapsed after 1933.

Relief and Recovery Agencies of 1933

The First New Deal did not stop at banks. Roosevelt’s advisers—sometimes labeled a Brain Trust—designed overlapping agencies. Learn the function, not just the acronym.

The Civilian Conservation Corps enrolled unemployed young men, often ages 18 to 25, in military-style camps run with War Department help. They planted trees, built firebreaks and parks, and fought erosion. Typical pay was $30 a month, with about $25 required to be sent home—relief for families as well as for the enrollee. Camps were racially segregated, and African American enrollment was capped, a reminder that First New Deal relief was not color-blind.

FERA, headed by Harry Hopkins, funneled federal grants to states for food, cash, and work relief. Hopkins’s bias was speed: get money to people. In the winter of 1933–34 he also ran the short-lived Civil Works Administration (CWA) as a federal make-work burst when FERA’s state machinery was too slow. Do not confuse FERA with the later Works Progress Administration; WPA is Second New Deal employment on a larger, more federalized scale.

AAA, TVA, NRA, and HOLC

The Agricultural Adjustment Act tried to lift farm prices by scarcity: the federal government paid producers to take land out of staple crops (cotton, wheat, corn, hogs, and others). Funds came from a processing tax on millers, packers, and similar firms. In 1933 the AAA even paid farmers to plow under growing cotton and to slaughter piglets while city breadlines continued—politically toxic, but consistent with the surplus-reduction logic. Benefits flowed mainly to landowners; many sharecroppers and tenants, a disproportionate number of them African American in the cotton South, were pushed off the land when acreage shrank.

In United States v. Butler (1936) the Supreme Court struck down that AAA. The Court described a broad congressional power to tax and spend for the general welfare, then held that the processing tax was a device to regulate agricultural production, a matter the majority said belonged to the states. Exam takeaway: the first AAA died as an unconstitutional use of the taxing power to control farming, not because the Court denied that farmers were in distress. (A 1936 soil-conservation workaround and the second AAA in 1938 came later.)

The Tennessee Valley Authority (May 1933) was regional planning in a poor, flood-prone river valley: hydroelectric dams, navigation, cheap electricity, and nitrate fertilizer. Private utilities denounced it as public-power socialism. For the exam, TVA is the cleanest First New Deal example of the federal government producing a service, not merely regulating or lending.

The National Industrial Recovery Act created the National Recovery Administration (NRA) under Hugh Johnson. Industries wrote codes covering prices, wages, output, and trade practices; firms that complied displayed the Blue Eagle. Section 7(a) declared that workers could organize and bargain collectively—an opening wedge for unions, weakly enforced. In A.L.A. Schechter Poultry Corp. v. United States (1935)—the “sick chicken” case—the Court held that the NIRA unconstitutionally delegated legislative power to the executive and that the commerce power did not reach a local Brooklyn slaughterhouse whose chickens had come to rest in intrastate sale. Black Monday (May 27, 1935) wrecked the NRA. Remember Schechter for NIRA/NRA and Butler for AAA; swapping the cases is a common error.

The Home Owners’ Loan Corporation refinanced urban mortgages that were in or near foreclosure, stretching payments into longer, amortized loans at lower rates. That shift toward the long-term mortgage is a durable institutional change. HOLC’s later neighborhood-grading maps also classified many Black and mixed areas as high risk, a federal contribution to redlining patterns that subsequent housing agencies amplified. The National Housing Act of 1934 created the Federal Housing Administration (FHA) to insure new mortgages—another First New Deal housing tool.

Changing Federal Role and Incomplete Recovery

Taken together, the Hundred Days and 1933–34 statutes put Washington into deposit insurance, conservation jobs, farm allotments, public power, industrial codes, and home refinance. Unemployment fell from its 1933 peak but remained catastrophic by later peacetime standards. Recovery was real and incomplete. When the Court killed NIRA and the first AAA, Roosevelt’s coalition turned toward the Second New Deal—Wagner, WPA, and Social Security—which the next section covers. Do not place those 1935 labor and social-insurance statutes inside the Hundred Days.

Exam traps: dating FDIC to the Emergency Banking Act (the holiday reopened banks; Glass-Steagall created insurance); calling TVA a private utility; treating Schechter as the AAA case; and assuming the First New Deal “ended” the Depression.