In attacking the varied finan cial problems created by the depression, the Federal Government made large loans and investments, directly and through govern mental corporations and credit agencies ; and it guaranteed a large volume of obligations issued by governmental corporations. In the appended statement of the assets and liabilities of governmental corporations and credit agencies as of June 3o, 1939, it will be observed that the proprietary interests of the Federal Govern ment exceeded $3,600,000,000. The liquidation of such assets will add to the funds available for the retirement of the public debt. Through the establishment of the Government-owned Home Own ers Loan Corporation and Federal Farm Mortgage Corporation, the Government provided facilities for the emergency refinancing of millions of dollars of mortgages on homes and farms. These corporations, together with the Federal land banks, the Federal Housing Administration, the Federal Savings and Loan System, and the Federal Savings and Loan Insurance Corporation operated to stem the flood of foreclosures on farms and homes, to reduce rates of interest on mortgage loans, and to bring about funda mental reforms in mortgage practices that will be of lasting bene fit to the country. In addition, emergency aid was provided for railroads, banking, insurance, industrial and commercial corpora tions by the Reconstruction Finance Corporation. Part of the funds employed by these organizations was provided directly from the general funds of the Treasury, thereby swelling the current deficit with recoverable investment outlays. The remainder was provided by funds raised in the market through the sale of the Government-guaranteed obligations of certain of these corpora tions.
These obligations, it is contemplated, will be repaid by the corporations from their earnings and assets.
Major changes in the country's monetary and banking system took place in the years 1933 to 1935. The disastrous deflation of the period immediately preced ing, coupled with heavy gold outflows and the mounting tendency on the part of the public to hoard gold as well as other forms of currency, finally made necessary the temporary suspension of banking operations throughout the country on March 6, 1933. On March 9, Congress passed the Emergency Banking Act, where under it was quickly possible to reopen a large majority of the country's banks. Confidence in the country's banking system was restored by the prompt action of the Administration ; money in circulation, which had mounted to a peak of over $7,500,000,000 in March in reflection of the hoarding movement, declined to about $5,600,000,000 by the end of August. A repetition of such banking difficulties was made virtually impossible by the establish ment of the Federal Deposit Insurance Corporation pursuant to the Banking Act of 1933, approved in June of that year. Under the terms of this Act, as amended by the Banking Act of 1935, the first $5,000 of the commercial or savings deposits of any cus tomer of an insured bank is guaranteed ; and all member banks of the Federal Reserve System, as well as most other banks in the country, became insured banks.
Meanwhile, congressional and executive actions were taken to make fundamental adjustments, in order, among other things, to free the price level from the deflationary forces still conspicu ous in gold-standard countries, through instituting a measure of deliberate management and control over the foreign exchange value of the currency. The Government took possession and title to all gold coins, gold bullion and gold certificates, with minor exceptions, paying therefor at the statutory price of $20.67 per fine ounce. It also took possession of all silver bullion held in the United States, except that required for commercial pur poses, paying therefor at so cents an ounce. Dollar obligations providing for payment in gold were declared payable in any legal tender coin or currency, and all the outstanding coins and cur rencies of the country were made legal tender. In line with con gressional measures authorizing the President to fix the weight of the gold dollar at not more than 6o% and not less than 5o% of the previous statutory weight (25A- grains nine-tenths fine), President Roosevelt, on Jan. 31, 1934, proclaimed the weight of the gold dollar to be 15 k grains nine-tenths fine, a reduction of
The dollar value of the gold held by the Treasury was thereby increased by $2,811,000,000. Of this amount, $2,000, 000,000 was allocated to a Stabilization Fund, under the control of the secretary of the Treasury, to deal in gold, foreign ex change and other credit instruments for the purpose of stabilizing the exchange value of the dollar. Much of the remainder was used in connection with the retirement of the Consols and Pan ama Canal bond issues, aggregating about $675,000,000; and the consequent elimination from the circulating currency of national bank notes, for which the retired bonds had served as security. The Gold Reserve Act of 1934 prohibited further gold coinage; made the acquisition of gold for export or other purposes subject to regulations prescribed by the secretary of the Treasury; and substituted gold certificates for gold coin in the reserve re quirements of the Federal Reserve banks.
Meanwhile, pursuant to the Silver Purchase Act of June 19,
declaring it to be the policy of the United States to increase the proportion of silver to gold in the country's monetary stock with the ultimate objective of maintaining one-fourth of the value of the stock in silver, the Treasury made large purchases of silver bullion at home and abroad. By June 30,
284,000,000 fine ounces of newly mined domestic silver, 1,706,000,000 of foreign silver and 113,000,000 of silver in the United States prior to Aug. 9,
had been purchased. The value of the monetary stocks of silver in the United States (at $1.29+ per fine ounce) on June 3o, 1939, was $3,600,000,000, that of the gold stocks (at $35 per fine ounce), $16,100,000,000.