The causes, consequences, and possibilities of preventing the banking panics of the Great Depression have been debated for seven decades. Some scholars, such as Milton Friedman and Anna Schwartz (1963) and Ben Bernanke (1983), believe the collapse of the banking system turned an otherwise ordinary downturn into a cataclysmic contraction. Other scholars, such as Peter Temin (1976) and Eugene White (1984), see bank failures as symptoms of ongoing economic events with no special role in the propagation of the downturn. One reason the debate continues is the nature of the evidence. The debate's factual foundations rest upon aggregate time series published during the 1930s and data on bank balance sheets assembled in recent decades. None of these sources provides comprehensive information about the nature and causes of bank distress. For example, none distinguishes banks that suspended operations temporarily from banks that ceased operating indefinitely, or banks bedeviled by illiquidity from banks beset by insolvency. None contains information about all possible events which could have occurred to all banks in the nation. The goal of this project is to provide such data. The investigator has discovered precise, detailed, and comprehensive information about categories of bank distress and causes of bank suspensions. The source for the new series is the archives of the Federal Reserve Board of Governors. From 1929 though 1933, the Board of Governors tracked changes in the status of all banks operating in the United States, both members of the Federal Reserve System and nonmembers, state and national, incorporated and private. The Board also analyzed the cause of each bank suspension. The Division of Bank Operations recorded this information on the St. 6386 series of forms. The series comprehensively covered the commercial banking industry from January 1929 through the national banking holiday in March 1933. Observations existed for every event affecting every bank. These events included the major, such as openings, closings, reopenings, receiverships, and consolidations, and the minor, such as changes in Federal Reserve membership, capital stock, charter type, and even street address. The forms also included financial information for each bank on the date of each transaction. This project will computerize and analyze the data.
The potential broader impacts of this project spans four broad areas. First, the project will help to illuminate the causes and consequences of the Great Depression. Understanding is a necessary step in efforts to prevent similarly severe contractions from occurring in the future. Second, the project will help scholars to understand financial systems, banking panics, and the links between commercial banking and the broader economy. Third, the project addresses a wide array of issues important for the regulation of banks. Fourth, the educational component of my project contains a mentoring and outreach program with a proven track record of encouraging minorities and women to pursue careers in academics, law, and government.
