Abstract

Reinventing Bank Supervision during the New Deal, 1933-1938

In March 1933, U.S. President Franklin D. Roosevelt saved the American banking system. Taking office amid a wave of bank failures and state-level banking holidays, Roosevelt closed the nation’s banks and promised the American people that his government would only reopen those that were sound. Roosevelt’s banking holiday pulled the economy from the brink and set the stage for landmark reforms aimed at restraining finance and financiers. The story of these reforms—of the legislative contests between Carter Glass and Henry Steagall that produced the separation of commercial and investment banking and instituted national deposit insurance—are well known. So too are the new agencies—the Securities and Exchange Commission and the Federal Deposit Insurance Corporation—created through the New Deal’s reforms. New Deal financial reform, in short, is a story of invention. But what about reinvention? What about the banking agencies—the Comptroller of the Currency and the Federal Reserve—that passed through the fires of bank failure and emerged, intact but changed, on the other side? How did bank supervision, the institutions and practices of government financial oversight, adapt to the financial world the New Dealers made? To unpack how federal officials reinvented bank supervision during the New Deal, this paper examines two core debates within Roosevelt’s administration. First, it examines how U.S. policymakers sought—and failed—to consolidate bank oversight into one agency. Second, once consolidation failed, it shows how officials sought and achieved uniformity in bank oversight practices across the disparate banking agencies. Of critical importance in these debates were bank examination forms and the ways supervisors and bankers would use and interpret those forms in the oversight process. Through protracted negotiations mediated by the Secretary of the Treasury, the heads of the U.S. banking agencies wrestled with how the banking system had changed after the new deal by arguing (and arguing) over the content of the forms. In taking up this second debate, the paper also links back to the midyear conference panel on forms and reports.