Signals and stigmas from banking interventions: Lessons from the Bank Holiday of 1933

A nationwide panic forced President Roosevelt to declare a banking holiday in March 1933. The government reopened banks sequentially using a process that sent noisy signals about banks’ health. New microdata reveals that the public responded to these signals. Deposits at rapidly reopened banks rebounded quicker than at comparable or stronger banks that reopened even a few days later. The stigma of late reopening shifted funds from stigmatized to lauded banks and among communities that they served. Despite persisting over a decade, the shift had no measurable impact on the rate at which localities recovered from the Great Depression.