Bank runs, like the ones we saw at Silicon Valley and Signature Bank this past month, are nothing new!
There have been other notable times in history when fear led depositors to withdraw their money from banks all at the same time.
The Panic of 1907
The panic of 1907 was probably the most significant financial crisis in U.S. History. At that time, there was no Federal Reserve Bank or FDIC to step in when commodity prices crashed and banks went under.
Without any pool of money to help bail the banks out, the U.S. Government had to rely on influential banker, J.P. Morgan to help remedy the situation. The ever resourceful Morgan invited the nation’s top financiers to his home for a locked-door meeting and convinced them to contribute money - totaling $25 million – which was enough to bail the banks out and stabilize the markets.
Five years later
in 1913
The Federal Reserve System
was created
Another historic bank run took place immediately following the stock market crash in 1929.
At that time, hundreds of thousands of Americans withdrew their money and held it at home, where they believed it would be safer.
As a result, over the next three years (1930 - 1933), nearly 9,000 banks failed.
In 1933, when Franklin Delano Roosevelt became president, he enacted emergency banking regulations to help restore public confidence in the nation’s financial system.
In 1934, the new regulations, which included the FDIC, were put in place. At the time, the FDIC gave the public a guarantee that up to $2,000 of their money, held in banks, would be insured.
In the year that followed, people regained confidence and started to again deposit their money in banks, and fewer banks failed.
As the years passed, the FDIC raised insured amounts to meet economic needs. In 2008, in the midst of another financial crisis, the insured amount rose, nearly overnight, from $100,000 to $250,000 – which is where it remains.
When thinking about money and investing, knowing a bit about our financial history can help forecast our financial future. In Wall Street 101, we cover history and facts, like what is written above, and provide the skills and knowledge necessary to make wise money choices.
