In 1933, when the banks closed, Detroit printed its own currency

The images of the time are striking.

In one, a gaunt man holds a handwritten sign that reads, “WORK IS WHAT I WANT – NOT CHARITY.” WHO WILL HELP ME FIND A JOB? “

The stock market crash of 1929 hit the nation like a fist. Shocked by the unexpected calamity, ordinary workers and businessmen braced for the worst. The following years turned out to be so draconian that in 1933 the city of Detroit government was forced to pay its payroll with certificates – a substitute for real money.

Detroit essentially printed its own greenbacks, authentic-looking tickets that are still circulating today – among collectors.

At the head of the city during one of its darkest hours was an empathetic guide, Mayor Frank Murphy, the former Recorder’s Court judge who would go on to become Governor of Michigan, United States Attorney General and Judge of the Supreme Court of the United States.

During his tenure, Murphy viewed his role as similar to that of President Franklin Delano Roosevelt. Listening intimately to the plight of the unemployed, Murphy created the Mayor’s Unemployment Committee which has set up soup kitchens and vegetable gardens to serve those in need. Murphy even dined with unemployed men at free food sites.

Detroit also had a welfare service, one of the few such municipal agencies in the country. In 1932, the department helped homeless families by placing them in vacant city-owned housing. Support was urgent. According to the Free Press, in the summer of 1932, landlords threatened with eviction a hundred tenants a day.

Massive layoffs at each of Detroit’s automakers have made the city’s plight particularly acute. Eighty percent of Detroit’s manufacturing capacity has been idle. In 1933 Michigan’s unemployment rate was 34%, while Detroit’s tax crime rate was the highest in the country.

Amid the financial carnage, Roosevelt caught Michigan in a landslide in 1932, making FDR the first Democrat to carry the state since Franklin Pierce in 1852. Determined to respond with bold action, the new president also saw his role as adviser to the nation.

“When you get to the end of your rope, tie a knot and hang on,” Roosevelt told the Americans.

Following:How Detroit paved the way for a bank collapse in 1933

Following:Once-chic Detroit building is the scene of a mysterious crime that has never been solved

A race for money

As the Depression progressed, the people of Detroit in early 1933 began to withdraw from their accounts to get back on their feet. The First National Bank of Detroit was forced to honor some $ 250 million in withdrawals. Collectively, up to $ 3 million per week came from the city’s financial institutions, which also included the Guardian National Bank of Commerce and the Union Guardian Trust Company. If those institutions were to fail, experts believed the remaining banks in Michigan – and ultimately the country – would soon follow suit.

On Valentine's Day in 1933, Michigan Governor William Comstock issued a proclamation shutting down all banks.  He signed it at 1:32 am that day, and the next morning people gathered at their banks, stunned by the news.  Business was crippled and the crisis hit rock bottom when President Franklin D. Roosevelt shut down all banks nationwide on March 6.

As an emergency measure, Michigan Governor William Comstock declared a statutory holiday at 1 a.m. on February 14. Originally scheduled to last only eight days, it was extended until March 6. On that date, the newly inaugurated Roosevelt, alarmed by the panic withdrawals. nationally, imposed a national holiday, which remained in effect until March 13. These measures put all banking activities on hold, averting potentially disastrous bank runs until a permanent solution can be found.

While public holidays have allowed institutions to avoid insolvency, they left a huge problem: how were people supposed to survive without having access to their money? The solution was a solution of last resort: certificates – also known as promissory notes – which would circulate as an alternative medium of exchange.

On February 25, even before Michigan Day was declared, the Detroit Clearing House Association announced plans to begin issuing certificates to its member banks. Counterparts in other cities quickly followed.

On March 5, Detroit City Comptroller Charles Richter revealed a municipal certificate program to pay municipal employees. Although it was born out of an emergency, the effectiveness of the program stands out as a civic achievement, albeit a stopgap.

An advertisement published in the Free Press in 1933 for the Hotel Barlum.

The program paid all municipal salaries, including police and firefighters, in certificates rather than cash. Merchants in the city willing to accept the alternative currency could redeem it as payment against unpaid municipal tax debts.

The city even allowed tenants with overdue homeowner taxes to present their certificate to the city treasurer’s office. A receipt would be issued that satisfied the person’s rent obligation, with the funds credited to the landlord’s tax debt. The fine print of the script document indicates that this was technically a municipal obligation, thus avoiding the legal prohibition for a local government to issue its own currency.

At first, the business community wholeheartedly embraced the program. Vintage advertisements in the free press from companies as diverse as guesthouses at JL Hudson Co. promote their willingness to accept the certificate.

Hudson's has run thousands of Detroit newspaper ads over the decades.  This notice, from 1933, is one of the most unusual.

“City Scrip accepted for room and board — Barlum Hotel, Cadillac Square in Bates St,” read a May 1933 advertisement.

Publix Theaters, a national theater operator, has announced its acceptance of city scrips at its three locations in Detroit, the Fisher, the Riviera and Michigan.

But soon after, several downtown businesses raised far more ersatz money than they expected.

“The city certificates arrived so quickly that we have now accepted almost enough to pay our entire municipal tax bill for this year,” said Hudson CEO Oscar Webber.

Hudson began to accept certificates only for payments to payment accounts. Soon after, Detroit Edison and Michigan Bell Telephone followed suit.

Times were different

Fortunately, the situation was only temporary.

During the first half of 1934 the city’s fortunes improved, with tax revenues more than doubling from 1933. After July, the city ceased issuing new certificates but would continue to credit certificates still in circulation against unpaid tax invoices. If the presenter had no tax debt, the tickets could be exchanged for cash.

Although it worked during the Depression years in response to the banking crisis, a hypothetical scripting program during a financial calamity in the 21st century would not be feasible. Wayne State University law professor John Mogk said such a move would be devastating for the city’s bonds and credit ratings. In addition, the factors contributing to the city’s cash position are very different from those of 1933.

Detroit designed their script to have the same visual feel as real money.

“Today the city benefits from a wide range of funding sources including municipal income tax, utility tax and state revenue sharing – none of which existed in 1933. “Mogk said.

To gain the trust of the public, the City of Detroit certificate notes were high quality engraved documents and mimicked the appearance of real money. The notes were issued in denominations of $ 1 to $ 1,000.

Today, surviving specimens can be found in antique shops and on various collectors’ websites. A $ 1 bill in good condition can go up to $ 50. Not a bad interest rate!

Don’t try to use one to pay your lighting bill.

Paul Vachon is a freelance writer and author specializing in local history.

About Thomas Brown

Check Also

World Cup Hosts: All time list of countries, cities, stadiums and venues in tournament history

With the 2022 World Cup drawing closer and the 2026 World Cup scheduled for the …