Question

In an attempt to restore trust in the nation's banks, what did FDR do?

1) Closed all banks for 4 days
2) Created the FDIC
3) Allowed only solvent banks to reopen
4) Stopped runs on the banks

Answer 1

FDR implemented the Emergency Banking Act and created FDIC to restore trust in the banking system, ensuring only solvent banks could reopen and insuring individual deposits to prevent future bank runs.

Step-by-step explanation:

During a time of widespread panic and distrust in the financial system, President Franklin D. Roosevelt took action to restore confidence in the nation's banks. FDR created the Emergency Banking Act, which initiated a bank holiday and allowed federal agencies to inspect the health of all banks. This period allowed the government to determine solvency and restore trust. Only the banks deemed solvent were allowed to reopen, which reassured the public of their stability. Furthermore, with measures such as the Federal Deposit Insurance Corporation (FDIC), Roosevelt implemented a system to insure individual deposits, which helped prevent runs on banks in the future by ensuring that depositors' savings were safe even if a bank failed.