<P> At the beginning of the Great Depression, the economy was destabilized by bank failures followed by credit crunches . The initial reasons were substantial losses in investment banking, followed by bank runs . Bank runs occurred when a large number of customers withdrew their deposits because they believed the bank might become insolvent . As the bank run progressed, it generated a self - fulfilling prophecy: as more people withdrew their deposits, the likelihood of default increased and this encouraged further withdrawals . </P> <P> Milton Friedman and Anna Schwartz have argued that the drain of money out of the banking system caused the monetary supply to shrink, forcing the economy to likewise shrink . As credit and economic activity diminished, price deflation followed, causing further economic contraction with disastrous impact on banks . Between 1929 and 1933, 40% of all banks (9,490 out of 23,697 banks) failed . Much of the Great Depression's economic damage was caused directly by bank runs . </P> <P> Herbert Hoover had already considered a bank holiday to prevent further bank runs, but rejected the idea because he was afraid to trip a panic . However, Roosevelt gave a radio address, held in the atmosphere of a Fireside Chat, in which he explained to the public in simple terms the causes of the banking crisis, what the government will do and how the population could help . He closed all the banks in the country and kept them all closed until he could pass new legislation . </P> <P> On March 9, 1933, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's top advisors . The act was passed and signed into law the same day . It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed . Three - quarters of the banks in the Federal Reserve System reopened within the next three days . Billions of dollars in hoarded currency and gold flowed back into them within a month, thus stabilizing the banking system . By the end of 1933, 4,004 small local banks were permanently closed and merged into larger banks . Their deposits totalled $3.6 billion: depositors lost a total of $540 million and eventually received on average 85 cents on the dollar of their deposits--it is a common myth that they received nothing back . </P>

Which new deal critic encouraged the creation of a pension plan