Banks Failures: The 1920’s and The Great Depression

From the FDIC (Federal Deposit Insurance Corp.) itself, a great brief history of banking failures in the 1920’s and the Great Depression.  see:  FDIC: Managing the Crisis: The FDIC and RTC Experience.

On average, more than 600 banks failed each year between 1921 and 1929. Those failures led to the end of many state deposit insurance programs. The failed banks were primarily small, rural banks, and people in metropolitan areas were generally unconcerned. Investors and other businessmen thought that the failing institutions were weak and badly managed and that those failures served to strengthen the banking system. A major wave of bank failures during the last few months of 1930 triggered widespread attempts to convert deposits to cash. Confidence in the banking system began to erode, and bank runs became more common. In all, 1,350 banks suspended operations during 1930. Some simply closed their doors due to financial difficulties, while others were placed into receivership.

To begin to understand both the severity of the crisis and the impact it had on everyday Americans, it is necessary to try to come to grips with its magnitude.  In the four years of 1930-1933 alone, nearly 10,000 banks failed or were suspended.  These banks held deposits of over $6.8 billion (equivalent to perhaps $60 billion today’s dollars, but representing a much larger share of depositor’s wealth then).  The depositors in these banks lost nearly 20% of these deposits when the banks failed.  Since there was no FDIC yet, and most state deposit insurance schemes had shut down already, this meant that everyday folks lost their savings, their money.  Imagine that impact.  You’ve worked hard. Saved money to buy a house on one of those shiny new Ford Model A’s or a Chevrolet.  Then one day, your money is just gone.  Disappeared.  It’s a life-changing event for many of those depositors. But then consider that the monies lost by these unfortunate bank customers represented (over the 4 years) approximately 4% of ALL DEPOSITS at ALL BANKS.  Even those fortunate (or lucky) enough to have their money in a sound bank would be scared.  Were they next?  With the Hoover administration and The Federal Reserve seemingly doing nothing to slow the accelerating trend of bank failures, it is no wonder that FDR won a landslide election in 1932 and that a bank holiday and bank reforms were job #1 of his New Deal.

Details in the table after the

There’s also this table of the failures and losses during each year of this period.

1921 – 1933:

Commercial Bank Suspensions
Year Number
of Suspensions
Losses Borneby Depositors($) Losses to Depositors as % of Deposits in All Suspended Banks Losses to Depositors as % of Deposits in
All Comm. Banks
1921 506 172,806 59,967
34.70 0.21
1922 366
41.92 0.13
1923 646
149,601 62,142 41.54
1924 775
37.77 0.23
1925 617
36.42 0.16
1926 975
260,153 83,066
31.93 0.21
1927 669
60,681 30.44 0.15
1928 498
30.77 0.10
1929 659
1930 1,350
1931 2,293
23.10 1.01
1932 1,453
Total 14,807*
$1,901,264 22.49


to table

Source: Federal Deposit Insurance Corporation:
The First Fifty Years.

10 thoughts on “Banks Failures: The 1920’s and The Great Depression

  1. Pingback: The Top 0.1% Vs. Rest of Us Throughout the 20th Century « EconProph

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  3. Thanks for the info! It’s great info, especially because my finals are coming up and I need all the studying I can get.

  4. Hello, I came across your notebook while I was doing some research on a history book. I concur with the student who said it’s great information, and I hope you don’t mind if I point out a couple punctuation errors. There should be no apostrophe in the word “its” when used as a possessive (i.e. “its magnitude” rather than “it’s”), or when referring to years in a decade (“1920s” is correct). Most editors would also omit it when forming the plural of a capitalized letter (“Model As” instead of “Model A’s”).
    Since your writing is otherwise top-notch, I thought you would want to correct these small punctuation errors.
    More information can be found here:

  5. On my second reading I also noticed this: “In the four years of 1920-1933 alone.” Should that be fourteen years?

  6. I have been told that my grandfather owned/operated/president of a bank in Chicago…Hill Bank, Hill State National Bank, Hill City Bank. It would have been in the 1920’s to 1930’s. I have found nothing. Is there a better location to search?

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