According to History.com, when the U.S. stock market crashed in October 1929, many American banks began closing because consumers pulled all of their money out of the banks, including investments and cash accounts, and began to default on loans. Because the banks had to liquidate loans and sell assets to pay consumers withdrawing their funds, the banks began to fail due to lack of funds.Continue Reading
History.com notes that banks rarely keep the full amount of deposits and securities it holds in cash on the premises. When consumers began to panic, worried about the security of their funds in banks after the stock market crash, the banks had to take a financial loss to pay all of their customers immediately. Without an influx of cash, the banks closed.
Public Broadcasting Service notes that the American banking system was largely non-existent by 1933. The remaining banks couldn't give out loans to businesses. Consumers didn't know what checks to accept because many were worthless, and banks had huge amounts of assets in uncollectable loans and low value stock certificates. President Franklin D. Roosevelt attempted to help surviving banks by closing them for three days in 1933 for a "bank holiday" before allowing them to reopen with cautionary limits on withdrawals. As confidence began to return to the banking system, the government set up the Federal Deposit Insurance Corporation to prevent future bank runs. The FDIC insures consumers' bank deposits so that if the bank closes, the government reimburses the consumer for any money lost.Learn more about US History
Greg Sabin for CNN reports that Joseph Kennedy Sr., the patriarch of the Kennedy family, built his fortune during the 1920s and managed to get out of the stock market before the 1929 crash. Other families that prospered during the Great Depression were headed by Michael J. Cullen and J. Paul Getty.Full Answer >
The stock market crash occurred on Oct. 29, 1929. Also referred to as "Black Tuesday," the crash marked the beginning of the Great Depression, which lasted from 1929 to 1939.Full Answer >
The stock market crash and subsequent economic depression, known as the Great Depression, hit the deep South much harder than the rest of the country. Life was difficult for all Southerners, particularly African-Americans, during this decade, as cotton prices fell and the boll weevil wiped out crops on a large scale.Full Answer >
The stock market crash of 1929 was largely caused by bad stock market investments, low wages, a crumbling agricultural sector and high amounts of debt that could not be liquidated. Upward trends in the stock market caused many people to invest money, even if they did not have the financial assets to back up their investments.Full Answer >