In Addition to maldistribution stood the credit structure of the economy, some farmers were in deep land mortgage debt, so they lowered their crop prices in order to regain credit, and because the farmers were no longer accountable for what they owed banks. Across the nation the banking system found themselves in constant trouble. In America both small and large bankers were concerned for their survival, so they began investing recklessly in stock markets and granting unwise loans. These unconscious decisions would lead a large consequence, such as families losing their life savings and their deposits became uninsured. “ More than 9,000 American banks either went bankrupt or closed their doors to avoid bankruptcy between 1930 and 1933.”Although
There was not as many qualifications in the 1920’s to take a loan from the bank as there is now. Back in the 1920s, basically anyone can take a loan from any bank without as many qualifications it takes to have now to take a loan out resulting to people constantly taking loans out without any regard to putting the money back. Many people who took out loans were not able to pay the bank back or did not have the jobs or working experience to work for the money and return it to the bank. The banks slowly lost money and stopped giving loans. Qualifications started to be a requirement to take loans, otherwise the banks would go broke and the federal government would have a big problem.
By this act, two bank systems were created. The regular privately owned state banks were regulated by a system of Federal Reserve Bank. This Federal Reserve Banks provided services to member banks. Initially, it was a system to decentralize the banks and keep the banks from failing. This act was also to determine interest rates for loans.
Banks became more and more popular, people eventually storing money with them. (Doc
What happened to all the banks then? Well first off people had complete trust in them, that is until the stock market crashed. Banks had invested a lot of money in the stock market also. But when it crashed they lost it all and
He introduced plans for the First Bank of the United States, established in 1791 which was designed to be the financial agent of the Treasury Department. The Bank served as a depository for public funds and assisted the Government in its financial transactions. The First Bank issued paper currency, used to pay taxes and debts owed to the Federal Government. Hamilton also introduced plans for a United States Mint. Though he wanted the Mint to be a structural part of the Treasury, he lost the battle to Jefferson and it was established in 1792 within the State Department.
Are the years between 1920 through 1940 different? The years between them were indeed different because through the years of 1920 to 1930 was called “The Roaring Twenties”, and throughout the years of the 1930's to 1940 was called “The Great Depression”. The Roaring Twenties was the time when everyone only cared about happiness, adventures, and freedom. As the years went by, so did the Great Depression. It was a time when everyone became depressed from bank corruption and failure.
In “The ‘Banking’ Concept of Education” Paulo Freire addresses the inefficient and oppressive nature of modern education. Freire explains that the way in which teachers conduct educating is harmful to the students as well as the teachers. He proposes an alternative method to the banking concept called the problem-posing method. This method treats the teacher and students the same and allows for knowledge to flow in both directions. What Freire tries to convey in his work is that the way the act of educating is performed has a profound impact on the way the students materialize into the real world and how education can be used, intentionally or not, to control the students.
During the 1920’s there was a sense of a booming economy leading more people to buy on credit with the economy being stable. However after the stock market crash droves of people rushed to withdraw their money. This caused many problems for the banks as they had invested money into the stock market themselves, many closed down leaving millions questioning where their money had gone. This is the main reason people viewed banks as untrustworthy and feared giving them there hard earned money. This is why President Roosevelt created programs such as the FDIC to create a trust between the people and the government.
Despite these two eras being completely different, our nation was forever changed afterwards. During the 20’s and 30’s there were multiple government changes that occurred. In the 20’s they instituted the emergency quota act which limited the amount of immigration that came into the united states. They also introduced the Bureau of the budget in which Harding cut down america's debt by ⅓. Whereas in the 1930’s they instated the glass steagall act, which was also known as the banking act.
These beliefs allowed for the buildup of loans and credit beyond what banks were able to cover financially, and once Black Tuesday sparked the beginning of the Great Depression banks found themselves in financial despair. The inability for banks to pay their customer, which had positive balances force these financial institutions to close their doors. This additional factor in the Great Depression drove the government to develop regulated banking practices. The Emergency Banking Act and the later development of the Federal Deposit Insurance Corporation assisted the availability of federal loans and the protection of depositor’s money (Murrin et al.,
FDR came up with a plan to put faith back into the banking system as well as insure the customer’s money was going to be their when they needed it. This program was called the FDIC “President Roosevelt signs this act on June 16, 1933, to raise the confidence of the U.S. public in the banking system by alleviating the disruptions caused by bank failures and bank runs. From 1929 to 1933, bank failures resulted in losses to depositors of about $1.3 billion. Before the FDIC was in operation, large-scale cash demands of fearful depositors often struck the fatal blow to banks that might otherwise have survived. Since the FDIC went into operation, bank runs no longer constitute a threat to the banking industry.”
From 1929 to 1933, more than two-fifths of the nation’s 24,970 banks disappeared through failure or merger Robert J. Samuelson: Revisiting The Great Depression; page 15). Banking panics began as large numbers of investors lost confidence in their banks and demanded deposits in cash. As more banks went bankrupt, it only increased the panic and the demand for Americans to withdraw their money from the banks because they did not trust them. In addition to the banking crisis around the country, banks reduced lending and there was a fall in investment.
The "roaring" 20's allowed the banks to make a lot of money, so they invested it in expanding the business. When the economic prosperity of the 1920's was flooded with all the stocks people were buying, the system didn't have enough money in it to continue. It was only a matter of time before total economy failure, the stock market crash just sped it up. Everyone went to the banks for their money so they could pay their debts, but the citizens didn't know the banks used the people's money for investments, and lost all the money in the stock market crash. One by one the banks began to fail.
The 1920s to late 1930s were a very controversial. A lot changed and flipped back and forth. The 1920s were full of cultural change. We were very conservative and people wanted change. After the stock market crash the government want to help bring Americans out of the gutter with the bad economy.
