In 1939, responding to events caused by the Great Depression, President Franklin Roosevelt declared a "banking holiday," ordering all banks in the United States closed until government audits declared them solvent.
During the Great Depression, banks throughout the United States faced a financial crisis. In the 1920s, many banks had made ill-advised investments, including placing depositors' funds in the stock market. Bankers also provided mortgages to people who, during the Great Depression, did not have the means to pay back their debts. As a result of these investments and mortgages, many financial institutions faced bankruptcy. Many Americans withdrew their money from banks, believing that their funds were no longer safe. These runs on banks, as they were known, worsened in the first two months of 1933, as numerous financial institutions went bankrupt.
Attempting to restore confidence in the banking system, on March 6, 1933, President Franklin Delano Roosevelt declared that all banks in the United States were closed and would remain so until he proclaimed otherwise. In essence, Roosevelt had declared a holiday for all banks in the United States. Roosevelt decided that government auditors would determine which banks were financially sound. The auditors would then allow these banks to reopen, but the financial institutions had to follow strict regulations to guarantee their solvency.
State governments also implemented regulations to help keep banks open. In Ohio, in late February 1933, the state legislature limited the amount of money that a depositor could withdraw from the banks. The principal reason for the legislature's action was a large number of people from Michigan coming into Ohio to withdraw funds from banks. The Michigan legislature placed restrictions on withdrawals earlier than Ohio had done. Fearful that they might lose most of the money that they had deposited in banks, people from Michigan came to the Ohio branches of their banks and withdrew all of the funds that they had in these financial institutions. Once Roosevelt declared a "banking holiday," the Ohio legislature followed suit. Most banks in Ohio reopened, helping to re-instill in depositors a belief that their financial institutions were sound.