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Wall Street’s Casino Banks, Taking Deposits from Savers, in 1929 and Today

Courtesy of Pam Martens

March 6, 1933 Front Page Headline of the Minneapolis Tribune

March 6, 1933 Front Page Headline of the Minneapolis Tribune

Bank Failures in the 1920s and 1930s

Source: FDIC

By Pam Martens and Russ Martens

Following the stock market crash in 1929, more than 9,000 banks in the United States failed over the next four years. In just the one year of 1933, more than 4,000 banks closed their doors permanently as a result of insolvency.

The 1930s banking crisis came to a head on March 6, 1933, just one day after President Franklin D. Roosevelt was inaugurated. Following a month-long run on the banks, Roosevelt declared a nationwide banking holiday that closed all banks in the United States. On March 9, 1933 Congress passed the Emergency Banking Act which allowed regulators to evaluate each bank before it was permitted to reopen. Thousands of banks were deemed insolvent and permanently closed. It is estimated by the Federal Deposit Insurance Corporation (FDIC) that depositors lost $1.3 billion to failed banks in that era. That would be approximately $25.5 billion in today’s dollars.

President Franklin Delano Roosevelt Signing the Glass-Steagall Act on June 16, 1933

President Franklin Delano Roosevelt Signing the Glass-Steagall Act on June 16, 1933

To restore the public’s confidence in placing their savings in banks, Roosevelt signed into law on June 16 the Banking Act of 1933, more popularly known as the Glass-Steagall Act after its authors Senator Carter Glass, a Democrat from Virginia, and House Rep Henry Steagall, a Democrat from Alabama. The legislation created federal deposit insurance for bank accounts for the first time in the U.S. while banning banks speculating in or underwriting stocks to hold deposits.

This separation of banking was not controversial at the time. Years of Senate hearings following the ’29 crash had informed the Congress of that era, as well as the public, that Wall Street’s casino banks gambling with depositors’ money in wild stock speculations had caused the stock market crash and ensuing run on the banks.

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