QUESTION: Martin,
Love your blog, especially your historical perspective.
You recently responded to a viewer that we should take precious metals out of safety deposit boxes. Is there a reason for this? To my understanding the bail-in rules for banks in N.america put deposits and bonds at risk only?
Thanks.
ANSWER: The contents of a safe deposit boxes are not covered by FDIC insurance. Never store a passport or any document you might need to get a hold of in emergency in a safe deposit box. The government can simply close all banks as they did in 1933 in a “Banking Holiday”. At 1:00 a.m. on Monday, March 6, President Roosevelt issued Proclamation 2039 ordering the suspension of all banking transactions, effective immediately. He had taken the oath of office only thirty-six hours earlier.
From March 6 to March 10, banking transactions were suspended across the nation except for making change. Roosevelt presented the new Congress with the EMERGENCY BANKING ACT at this time. The law empowered the President through the TREASURY DEPARTMENT to reopen banks that were solvent and assist those that were not. The House allowed only forty minutes of debate before passing the law unanimously, and the Senate soon followed with overwhelming support.
Banks were divided into four categories. Surprisingly, slightly over half the nation’s banks were deemed first category and fit to reopen. On the Sunday evening before the banks reopened, Roosevelt addressed the nation through one of his signature “FIRESIDE CHATS.” Roosevelt assured sixty million radio listeners that the crisis was over and the nation’s banks were secure. The bank run was over. On June 16, 1933, Roosevelt signed the GLASS-STEAGALL BANKING REFORM ACT, and also created the FEDERAL DEPOSIT INSURANCE CORPORATION. Keep in mind the the government can close all banks for there is precedent. Whatever you have in a safe deposit box can also be seized and inspected.
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