Greider on how to avoid a bank run
“On a Monday morning on the late summer of 1931, the lobby of the First National Bank of Ogden, Utah, was jammed with nervous depositors — people waiting in line to withdraw their money before the bank ran out of funds. Another Ogden bank, older and more distinguished, had failed to open that morning. Prudent citizens figured First National would be next, one more victim of the bank panics sweeping the country. “We can’t break this run today,” Marriner S. Eccles, the forty-year-old president, told his tellers. “The best we can do is slow it down. People are going to come here to close out their savings accounts. You are going to pay them. But you are going to pay them very slowly. It’s the only chance we have to deal with the panic.”
All day, as people waited nervously to get to the window, the tellers moved as instructed, with maddening lethargy. They paid out withdrawals in small bills and counted slowly. They looked up the signatures of everyone, even customers they had known for many years. As closing time approached, the bank was still jammed and the tension increased. If the bank closed at the regular hour, scores of disappointed depositors were going to be powerfully angry. If Eccles kept his bank opened longer, it might well run out of money.
Just in time, an armored car arrived at the door, delivering fresh cash from the Federal Reserve’s branch office in Salt Lake City. “As in the movies when the Union cavalry charges in to save all from the Indians,” Eccles wrote. He made a great show of ushering the armed guards to the vault. Then Eccles mounted a counter to address the crowd:
Many of you have been in line for a considerable time. I notice a lot of pushing and shoving and irritation. I just wanted to tell you that instead of closing that the usual hour of three o’clock, we have decided to stay open just as long as there is anyone who desires to withdraw his deposit or make one. Therefore, you people who have just come in can return later this afternoon or evening if you wish. There is no justification for the excitement or the apparent panicky attitude on the part of some depositors. As all of you have seen, we have just had brought up from Salt Lake City a large amount of currency that will take care of all your requirements. There is plenty more where that came from.
“This was true enough,” Eccles said to himself. “But I didn’t say we could get it.” The Federal Reserve did have plenty more cash. But none of it belonged to Eccles and the First National of Ogden.
Marriner Eccles’s theatrics succeeded. The crowd dispersed. Reassured depositors went home without withdrawing their accounts and his bank survived.”
— From page 304-305 of Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider (Simon and Schuster, 1987)
Greider passed away on December 25, 2019.
Eccles (1890-1977) would later become the Chairman of the US Federal Reserve under President Franklin S. Roosevelt, who enacted a series of programs called the New Deal, which helped provide relief and reform after the Great Depression.
