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Bank Distress During the Great Contraction, 1929 to 1933, New Data from the Archives of the Board of Governors

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  • Gary Richardson

Abstract

During the contraction from 1929 through 1933, the Federal Reserve System tracked changes in the status of all banks operating in the United States and determined the cause of each bank suspension. This essay introduces that hitherto dormant data and analyzes chronological patterns in aggregate series constructed from it. The analysis demonstrates both illiquidity and insolvency were substantial sources of bank distress. Contagion (via correspondent networks and bank runs) propagated the initial banking panics. As the depression deepened and asset values declined, insolvency loomed as the principal threat to depository institutions. These patterns corroborate some and question other conjectures concerning the causes and consequences of the financial crisis during the Great Contraction.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12590.

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Date of creation: Oct 2006
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Handle: RePEc:nbr:nberwo:12590

Note: DAE ME
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  1. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
  2. Meltzer, Allan H., 1976. "Monetary and other explanations of the start of the great depression," Journal of Monetary Economics, Elsevier, vol. 2(4), pages 455-471, November.
  3. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
  4. Kris James Mitchener, 2004. "Bank Supervision, Regulation, and Instability During the Great Depression," NBER Working Papers 10475, National Bureau of Economic Research, Inc.
  5. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441, December.
  6. Lucia, Joseph L., 1985. "The failure of the bank of United States: A reappraisal," Explorations in Economic History, Elsevier, vol. 22(4), pages 402-416, October.
  7. Mark Carlson, 2004. "Are Branch Banks Better Survivors? Evidence from the Depression Era," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 111-126, January.
  8. Wheelock, David C, 1990. "Member Bank Borrowing and the Fed's Contractionary Monetary Policy during the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(4), pages 409-26, November.
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Cited by:
  1. Gary Gorton, 2009. "The Subprime Panic," European Financial Management, European Financial Management Association, vol. 15(1), pages 10-46.
  2. Gary B. Gorton, 2008. "The Panic of 2007," NBER Working Papers 14358, National Bureau of Economic Research, Inc.
  3. Stephen Quinn & William Roberds, 2008. "The evolution of the check as a means of payment: a historical survey," Economic Review, Federal Reserve Bank of Atlanta.

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