Summary/Analysis

Summary

                The Great depression was a time of struggle for Americans due to country-wide bank failures from 1929-1941. Many things within the banking system had happened that led up to the crash. The banking system grew too rapidly to control. There were more banks opening than the population demanded. From 1921-1930 many small banks opened in agricultural regions of America. The only reason so many small banks could open was because the money needed to open a bank during that time period decreased significantly. The results were unqualified people opening banks and too many banks opening at the same juncture in time. In 1929, 22 states stopped banks from branching. This was a punch to the face for banks, because it forced them to only stay in one geographic area for lending. This prohibited them from diversify, which made it hard to survive when the local economic status was at a low. Some say that contagion also had a factor in the crash, but others discredit the idea. Contagion in this text is referred to as, healthy banks failed due to trouble with more prominent banks. The reason why some people discredit the idea is because in the 1920’s contagion was not a factor in those bank failures, therefore there is no reason for it not playing a role in the 1920’s and then playing a role in the 1930’s.

Analysis

                There are many reasons why The Great Depression took place. Too many banks opened in unison for the population to support. People who were unqualified opened banks. In 1929 banks could no longer branch, which made it harder to stay afloat and function successfully. Contagion may have played a role, but many people are skeptical to say so because of the 1920’s crash. Contagion did not cause those crashes so; it is hard to believe that is caused the crash a decade later. It was not just one straight reason as to why the banking system flopped, but many reasons that can be further explored.

Reflection question

                Do you think that contagion played a role in the crash of the banking system?

Citation

Walter, John R. "Depression-Era Bank Failures: The Great Contagion or the Great ... "

QUARTERLY. ECONOMICWinter 2005: 39-54. SIRS Government Reporter. Web. 12 Feb 2012.