How Did Bank Failure Affect The Great Depression

1315 Words6 Pages
Kevin Guerra
Barclay/Strawn
Humanities 11
12 December 2017
Bank Failure’s Impact on The Great Depression
Before the Great Depression began in the United States in 1929, President Woodrow Wilson created a very critical sector to the financial aspect of government, the Federal Reserve. The Federal Reserve was created to act as a central bank that would oversee the monetary funds and “reserves,” of the country, as well as manage the banks and implement certain economic policies. Although some policies were deemed successful, bank failures during the 1920’s and 30’s were essentially unsuccessful as a result of Federal Reserve mismanagement. This mismanagement further worsened the economy during the Great Depression as it increased the amount of debt and bankruptcy, all while failing to resolve the deflation issue.
Weak banking systems lead to widespread panic as the public no longer trusted the Federal Reserve in handling the people’s private funds. According to the article “The Story of Bankers Trust Company During the Great Depression,” author describes the depression and the toll banking issues had in Philadelphia where a total amount of “30 of Philadelphia’s 89 banks and trust companies and hundreds of the city’s building and loan associations failed between July 1930 and March 1933” (Wadhwani). Wadhwani refers to the system as a “house of cards” where many of these local banking institutions “too small to survive” keeping them marginalized, thus explaining why up to “9,000
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