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The Chicago plan was a collection of banking reforms suggested by University of Chicago economists in the wake of the Great Depression. A six-page memorandum on banking reform was given limited and confidential distribution to about forty individuals on 16 March 1933. The plan was supported by such notable economists as Irving Fisher, Frank H. Knight, Lloyd W. Mints, Henry Schultz, Henry C. Simons, Garfield V. Cox, Aaron Director, Paul H. Douglas, and Albert G. Hart.
Between March and November 1933, the Chicago economists received comments from a number of individuals on their proposal, and in November 1933, another memorandum was prepared. The memorandum was expanded to thirteen pages; there was a supplementary memorandum on "Long-time Objectives of Monetary Management" (seven pages) and an appendix titled "Banking and Business Cycles" (six pages).
These memoranda generated much interest and discussion among lawmakers. However, the suggested reforms, such as the abolition of the fractional reserve system and imposition of 100% reserves on demand deposits, were shelved and replaced by less drastic measures. The Banking Act of 1935 institutionalized Federal deposit insurance and the separation of commercial and investment banking. It successfully restored the public's confidence in the banking system and ended discussion of banking reform.
A Program for Monetary ReformEdit
After apparent recovery in the mid-1930s, America entered the Recession of 1937-1938. This caused renewed discussion of the key elements of the Chicago plan, and in July 1939 a new proposal was drafted, titled A Program for Monetary Reform. The draft resurrected proposals for banking and monetary reform from the original Chicago plan, but did not result in any new legislation.
The proposal was never published. A copy of the paper was apparently preserved in a college library. Copies of the paper, stamped on the bottom of the first and last pages, “LIBRARY – COLORADO STATE COLLEGE OF A. & M. A. – FORT COLLINS COLORADO” were circulated at the 5th Annual American Monetary Institute Monetary Reform Conference (2009) and the images were scanned for display on the internet.
A Program for Monetary Reform was attributed on its cover page to six American economists: Paul H. Douglas, Irving Fisher, Frank D. Graham, Earl J. Hamilton, Wilford I. King, and Charles R. Whittlesey.
- Phillips, Ronnie J. (June 1992), The 'Chicago Plan' and New Deal Banking Reform,Working Paper No. 76 (PDF), The Levy Economics Institute.
- Huerta de Soto, Jesús (2006), Money, Bank Credit, and Economic Cycles (PDF), Ludwig von Mises Institute, pp. 731–735
- Douglas, Paul H.; Hamilton, Earl J.; Fisher, Irving; King, Willford I.; Graham, Frank D.; Whittlesey, Charles R. (July 1939), A Program for Monetary Reform (PDF), (draft proposal – scanned image)., archived from the original (PDF) on 26 July 2011
- Douglas, Paul H.; Fisher, Irving; Graham, Frank D.; Hamilton, Earl J.; King, Willford I.; Whittlesey, Charles R. (July 1939), A Program for Monetary Reform (PDF), (draft proposal – text)., archived from the original (PDF) on 3 November 2012