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Quote of the Day
Warren Buffett on Romance:
February 14th – This Day in Stock Market History
February 14th, 1933 – At 1:32 AM on a Tuesday morning, Governor William Comstock of Michigan declares a 8 day banking holiday as Michigan banks struggle to remain open.
The Dow Jones Industrial Average would fall nearly 5% on the news.
In the midst of the great depression banks nationwide were stressed, but Michigan was hit particularly hard by the great depression. After failed negotiations with Henry Ford for help capitalizing the banks, the governor was forced to declare a banking holiday to prevent bank runs and defaults.
However the banks would not open in just 8 days. The crisis would spread across the country as banks in many other states were not in any better condition than those in Michigan. By early March 1933, 36 states had banking operations suspended.
Then on March 6th 1933, just 36 hours after being sworn into office, President Roosevelt declared a week long national bank holiday. Over the next week panic would subdue and with the help of legislation from congress, the worst of the bank runs would be over.
Best February 14th in Dow Jones Industrial Average History
2003 - Up 2.05%, 158.93 points.
Worst February 14th in Dow Jones Industrial Average History
1933 - Down 4.81%, 2.86 points.
Read of the Day
What is the role of the Federal Reserve system in a financial panic, such as the one on this day in 1933? One is to provide currency (and gold in 1933, as we had a gold based dollar) to the banks. In bank runs, customers withdrawal cash and hoard it outside of the banking system. This is evident in the Federal Reserve Board's 1933 annual report, which tracked the currency in circulation at the time of the panic:
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