Banking

• The banking system in the US was fragile in the extreme in 1929
• The difficulties in the banking system became entangled with the international and financial crisis in 1931
• There was insufficient purchasing power in the economy, especially in consumer durables like cars and radios. By 1927, the majority who could afford to buy , had done so.
• Many Americans lost all their savings when their bank collapsed
• In October 1929, the New York Stock Exchange crashed - this led to widespread panic as people rushed to withdraw their money from banks.
• The majority of rural banks were small and lacked reserved to cope with pressure.
• There was a lack of banking regulation: no federal deposit insurance system existed to provide security and the majority of banks operated independently.
• The federal reserve was crucial in controlling the amounts of money in circulation - but was inherently weak.
• The Federal Reserve based in Washington, not New York, led to Communication problems
• The Federal Reserves Board was made up of private bankers who were believers in the old system.
• The Federal Reserve failed to prevent speculation on Wall Street
• Federal Reserve System = Main duties include conducting national monetary policy, supervising and regulating banks, maintaining financial stability and providing banking service.