NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Bank Distress During the Great Contraction, 1929 to 1933, New Data from the Archives of the Board of Governors

Gary Richardson

NBER Working Paper No. 12590
Issued in October 2006
NBER Program(s):   DAE   ME

During the contraction from 1929 through 1933, the Federal Reserve System tracked changes in the status of all banks operating in the United States and determined the cause of each bank suspension. This essay introduces that hitherto dormant data and analyzes chronological patterns in aggregate series constructed from it. The analysis demonstrates both illiquidity and insolvency were substantial sources of bank distress. Contagion (via correspondent networks and bank runs) propagated the initial banking panics. As the depression deepened and asset values declined, insolvency loomed as the principal threat to depository institutions. These patterns corroborate some and question other conjectures concerning the causes and consequences of the financial crisis during the Great Contraction.

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Document Object Identifier (DOI): 10.3386/w12590

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