Depression-Era Bank Failures: The Great Contagion or the Great Shakeout?

16 Pages Posted: 6 Dec 2012

See all articles by John R. Walter

John R. Walter

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 2005

Abstract

Contagion-induced bank runs are widely viewed as the cause of widespread bank failures during the Great Depression. Federal deposit insurance was created in 1934 to prevent future contagion-generated bank failures. Yet the cycle of bank failures appears quite similar to an industrial shakeout, a frequent occurrence in other industries, even though other industries are not subject to contagion-induced runs. If a large portion of bank failures during this period were caused by a shakeout rather than by contagion, the need for deposit insurance is less clear.

Suggested Citation

Walter, John R., Depression-Era Bank Failures: The Great Contagion or the Great Shakeout? (2005). FRB Richmond Economic Quarterly, vol. 91, no. 1, Winter 2005, pp. 39-54. Available at SSRN: https://ssrn.com/abstract=2185582

John R. Walter (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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