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
Some important events in New York City history include the fire at the Triangle Shirt Waist factory in 1911, the stock market crash in 1929 and the terrorist attacks of 2001. These events are significant not only for their impact on New York City, but for how they affected the nation and the world.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 >
Reasons for the Great Depression include the stock market crash of 1929, the dust bowl storms of the Midwest, uneven distribution of wealth and rapid industrial expansion. A universally accepted list of causes does not exist, however.Full Answer >