Business failures led to a collapse in commercial paper values, which banks had heavily invested in. The Devastating Consequences The impact of these bank runs extended far beyond the immediate loss of savings for individuals.
How Bank Runs Started After 1929 Crash
Depositors lost an estimated $140 billion in today's value, devastating middle-class families who had trusted the banking system. The table below illustrates the peak years of bank failures and the staggering rate of closures.
In the years following the 1929 market crash, a loss of confidence transformed prudent saving into a frenzied rush, as millions of depositors lined up outside failing institutions demanding cash they believed was safely stored. A bank run during the Great Depression exposed the fragility of this arrangement, as the simultaneous withdrawal of funds by panicked depositors created a liquidity crisis.
How Bank Runs Started After 1929 Crash
Widespread unemployment reduced the ability of borrowers to repay loans, further straining bank reserves. Rumors of insolvency, amplified by a lack of deposit insurance and instantaneous communication through newspapers and word of mouth, created a self-fulfilling prophecy.
More About Bank run during the great depression
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