NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Bank Distress during the Great Depression: The Illiquidity-Insolvency Debate Revisited

Gary Richardson

NBER Working Paper No. 12717
Issued in December 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 analyzes chronological patterns in aggregate series constructed from that data. The analysis demonstrates both illiquidity and insolvency were substantial sources of bank distress. Periods of heightened distress were correlated with periods of increased illiquidity. 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.

download in pdf format
   (320 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w12717

Published: Richardson, Gary. “Bank Distress during the Great Depression: The Illiquidity-Insolvency Debate Revisited." Explorations in Economic History 44, 4 (October 2007):586-607.

Users who downloaded this paper also downloaded* these:
Richardson w12715 Quarterly Data on the Categories and Causes of Bank Distress During the Great Depression
Calomiris and Mason w7919 Causes of U.S. Bank Distress During the Depression
Bernanke w1054 Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression
Calomiris w13597 Bank Failures in Theory and History: The Great Depression and Other "Contagious" Events
Richardson w12590 Bank Distress During the Great Contraction, 1929 to 1933, New Data from the Archives of the Board of Governors
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us