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A Reconsideration of the Causes of the Banking Panic of 1930

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  • Wicker, Elmus

Abstract

The banking panic of 1930 has special significance for assessing the causal role of money during the Great Depression. A detailed examination of the panic-induced bank closings in November reveals that poor loans and investments in the 1920s was the principal factor contributing to the accelerated rate of bank suspensions. These findings are consistent with the. Friedman-Schwartz interpretation of the 1930 banking panic as a purely autonomous disturbance largely unrelated to the decline in economic activity. It is inconsistent with Peter Temin's conjecture that declining prices of lower-grade corporate bonds and the agricultural situation played an important causal role.

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  • Wicker, Elmus, 1980. "A Reconsideration of the Causes of the Banking Panic of 1930," The Journal of Economic History, Cambridge University Press, vol. 40(3), pages 571-583, September.
    • Handle: RePEc:cup:jechis:v:40:y:1980:i:03:p:571-583_08
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    Cited by:

    1. Rösl, Gerhard & Seitz, Franz, 2022. "On the stabilizing role of cash for societies," IMFS Working Paper Series 167, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    2. Sara Hsu, 2013. "Financial Crises, 1929 to the Present," Books, Edward Elgar Publishing, number 14419.
    3. Erik Heitfield & Gary Richardson & Shirley Wang, 2017. "Contagion During the Initial Banking Panic of the Great Depression," NBER Working Papers 23629, National Bureau of Economic Research, Inc.
    4. Charles Calomiris, 2009. "Banking Crises and the Rules of the Game," NBER Working Papers 15403, National Bureau of Economic Research, Inc.
    5. Bordo, Michael D., 1986. "Explorations in monetary history: A survey of the literature," Explorations in Economic History, Elsevier, vol. 23(4), pages 339-415, October.
    6. Gary Gorton & Andrew Metrick, 2013. "The Federal Reserve and Panic Prevention: The Roles of Financial Regulation and Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 45-64, Fall.
    7. Damiano Sandri & Francesco Grigoli & Yuriy Gorodnichenko & Olivier Coibion, 2023. "Keep Calm and Bank On: Panic-Driven Bank Runs and the Role of Public Communication," NBER Working Papers 31644, National Bureau of Economic Research, Inc.
    8. Kris James Mitchener, 2007. "Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression," Journal of Law and Economics, University of Chicago Press, vol. 50(2), pages 273-302.
    9. Michael D. Bordo & John Landon-Lane, 2010. "The Lessons from the Banking Panics in the United States in the 1930s for the Financial Crisis of 2007-2008," NBER Working Papers 16365, National Bureau of Economic Research, Inc.
    10. Rockoff, Hugh, 2022. "Milton Friedman on bailouts," Journal of Financial Stability, Elsevier, vol. 63(C).
    11. Cortes, Gustavo S. & Taylor, Bryan & Weidenmier, Marc D., 2022. "Financial factors and the propagation of the Great Depression," Journal of Financial Economics, Elsevier, vol. 145(2), pages 577-594.
    12. Mardini Patrick, 2016. "The Case for Repairing Broken Channels without the Use of Unconventional Monetary Policy," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 22(1), pages 61-76, July.
    13. Michael D. Bordo, 1989. "The Contribution of "A Monetary History of the United States, 1867-1960" to Monetary History," NBER Chapters, in: Money, History, and International Finance: Essays in Honor of Anna J. Schwartz, pages 15-78, National Bureau of Economic Research, Inc.
    14. Gary B. Gorton & Andrew Metrick, 2013. "The Federal Reserve and Financial Regulation: The First Hundred Years," NBER Working Papers 19292, National Bureau of Economic Research, Inc.
    15. Richardson, Gary, 2007. "Categories and causes of bank distress during the great depression, 1929-1933: The illiquidity versus insolvency debate revisited," Explorations in Economic History, Elsevier, vol. 44(4), pages 588-607, October.
    16. du Plessis, Emile, 2022. "Multinomial modeling methods: Predicting four decades of international banking crises," Economic Systems, Elsevier, vol. 46(2).
    17. Sanjiv R. Das & Kris James Mitchener & Angela Vossmeyer, 2022. "Bank Regulation, Network Topology, and Systemic Risk: Evidence from the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1261-1312, August.
    18. Alexander J. Field, 2014. "The Interwar Housing Cycle in the Light of 2001-2012: A Comparative Historical Perspective," NBER Chapters, in: Housing and Mortgage Markets in Historical Perspective, pages 39-80, National Bureau of Economic Research, Inc.
    19. Charles W. Calomiris, 1993. "Financial Factors in the Great Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 61-85, Spring.
    20. Alexander J. Field, 2013. "The Interwar Housing Cycle in the Light of 2001-2011: A Comparative Historical Approach," NBER Working Papers 18796, National Bureau of Economic Research, Inc.
    21. Luc Laeven, 2011. "Banking Crises: A Review," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 17-40, December.
    22. Cullen F. Goenner, 2024. "Robust lessons learned from bank failures during the Great Financial Crisis," Review of Quantitative Finance and Accounting, Springer, vol. 62(2), pages 449-498, February.
    23. Franklin Allen & Elena Carletti, 2007. "Banks, Markets and Liquidity," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Jeremy Lawson (ed.),The Structure and Resilience of the Financial System, Reserve Bank of Australia.
    24. Franklin Allen & Ana Babus & Elena Carletti, 2009. "Financial Crises: Theory and Evidence," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 97-116, November.
    25. Mary A. O'Sullivan, 2022. "History as heresy: Unlearning the lessons of economic orthodoxy," Economic History Review, Economic History Society, vol. 75(2), pages 297-335, May.

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