The revolution in the Banking Theory

Summary

                During the time of the Great Depression, there were three major trends that could be seen within the banking system. One trend that led up to the depression were banks being unable to give people’s money back. In eight years, one sixth of banks in the United States were unable to give money back to the depositors. Another trend that could be seen within the banking system was the restriction of branching. Due to restrictions of branching within in the bank system, many banks started to chain together in corporations and partnerships. The last trend that could be seen was merging.  Banks started to merge which in turn led to weakness in the banking system. During the time period of the depression, the national bank was no longer capable of keeping up with the state banks. The state banks found loop holes with the prohibition of branching. New York for example continued to branch, but in city limits because of the scattered people living in the city. Since the people were in city limits, it did not alter the idea of a unit bank.

Analysis

                The article shows three main trends in the banking system that led up to the Great Depression. Banks were no longer able to give people their money, the restriction of branching, and banks merging. It is safe to say that many phenomenons occurred within the banking system in order to cause the depression. It is hard to believe that just one of these occurrences could of led to such a detrimental period in American history.

Question

Do you think that just one of the trends listed above could of caused the Great Depression?

 

Citation

Ostrolenk, B. (1930, February). The revolution in banking theory. The Atlantic , Retrieved from http://www.theatlantic.com/magazine/archive/1930/02/the-revolution-in-banking-theory/7111/