A period during which all banking operations are temporarily suspended, this action was notably undertaken during the Great Depression in the United States. The immediate effect was to stem the tide of bank runs, where panicked depositors withdrew their savings en masse, threatening the solvency of financial institutions. A prominent instance of this occurred in 1933 under President Franklin D. Roosevelt, serving as a critical component of his early New Deal initiatives.
The implementation of such a measure provided a crucial pause, allowing the government to assess the stability of the banking system and restore public confidence. This intervention facilitated the passage of legislation like the Emergency Banking Act, which aimed to reorganize and strengthen banks, thereby preventing future collapses. The successful execution of this strategy ultimately contributed to the stabilization of the financial sector and fostered renewed trust in American economic institutions.
