On Valentine’s Day in 1933, Michigan Governor William Comstock issued a proclamation closing all banks. On March 6, President Roosevelt followed suit at the federal level to keep banks from going bankrupt due to the large number of anxious customers trying to withdraw their savings.
On March 5, 1933, as a stopgap measure,City of Detroit Controller Charles Richter announced a city scrip program to pay municipal employees. While born out of emergency, the effectiveness of the program stands out as a civic success story.
The program paid all municipal salaries, including those of police and firefighters, in scrip, in place of cash. City merchants willing to accept the alternate currency could redeem it as payment against outstanding city tax debts.
The city even allowed tenants whose landlords’ taxes were in arrears to present their scrip at the City Treasurer’s Office. A receipt would be issued that satisfied the person’s rent obligation, with the funds being credit toward the owner’s tax debt. The scrip document’s fine print states that it was technically a municipal bond, thus avoiding the legal prohibition against a local government issuing its own currency.
At first, the business community embraced the program wholeheartedly. Period ads in the Free Press from businesses as varied as boarding houses to the J.L. Hudson Co. promote their willingness to accept the scrip.
“City Scrip Accepted for Room and Meals—Barlum Hotel, Cadillac Square at Bates St,” reads an ad from May 1933.
Publix Theaters, a national operator of movie houses, advertised its acceptance of city scrip at its three Detroit venues, the Fisher, the Riviera and the Michigan.
But after a short time, several downtown businesses collected far more of the ersatz cash than they anticipated.
“City scrip has been coming in so rapidly that we that we now have accepted almost sufficient to pay our entire city tax bill for this year,” Hudson General Manager Oscar Webber said.
Hudson began accepting scrip only for payments on charge accounts. Soon after Detroit Edison and Michigan Bell Telephone followed suit.
Fortunately, the situation was only temporary.
By the first half of 1934 the city’s fortunes had improved, as tax receipts had more than doubled from 1933. After July, the city terminated the issuance of new scrip but would continue to credit scrip still in circulation against outstanding tax bills. If the presenter had no tax debt, the notes could be redeemed for cash.
Source: Paul Vachon, “In 1933, when banks closed, Detroit printed its own money“, Detroit Free Press, February 26, 2021.