For your notes.

Your notes should answer the following questions! 

If you don't know what to write: Write the question & answer!

1.  How did poor banking practices impact farmers?

2.  What did many banks do with their investors’ money?

3.  What did many people do when they heard rumors that banks were running out of money?

4.  Look at the images at this station, what do you think it must have been like for those standing in those crowds?

Bank Failures

During the 1920s, banks did three things that made the financial system shaky.

#1 They made lots of loans to farmers.  As the farmers overproduced, the prices fell and they could not pay back their loans.  The bank had to foreclose (take back land) on the farmers.

#2 Many banks practiced good business during the 20s, but some invested their depositors’ money in risky investments. Also, there was no government regulation at this time so banks made many poor decisions with people’s money.

When the stock market crashed, some banks had little money in the bank.

#3 Many people had gone into debt during the 20s, and when they heard of banking problems, they began to panic. There were “runs on banks” of people wanting to withdraw their money. Many banks could not pay the people back.

Examine the pictures of the banks at the start of the Great Depression to learn more about the chaos and craziness of the financial panic of the time.