Bank Failures And Presidential Transitions

by Chris Sturr | November 04, 2008

This is from Bob Feldman:

During periods of U.S. establishment presidential transitions in the past, U.S. commercial banks have sometimes failed. Presidential Transitions, by Laurin Henry, describes, for example, what happened after the 1932 presidential election:

“In the final months of President Hoover’s term, the nation reached the bottom of the depression. Financial panic swept the country and paralyzed most of the banking system…

“In January 1933…a new wave of closings began. Failures led to runs and more failures. As fear spread, people stopped putting money in banks…

“In early February 1933, the situation became acute in Michigan, where about 200 banks had failed in the previous month. Two of the largest institutions in Detroit were in serious trouble…On February 14 the governor of Michigan declared a `banking holiday.’…The Michigan closing shocked the business world, and panic ensued elsewhere, leading to more closings. By March 2, banking holidays had been declared in 10 states, and the major banks in New York and other larger cities–pillars of the financial structure–were beginning to crumble…

“Friday, March 3, was even more nerve-racking than the day before. During the night, banking holidays had been declared in several more states…But as the reports of the day’s banking transactions began to come in during the afternoon, it became clear that the downward slide was out of control. The big New York and Chicago banks were about at the end of their rope…”

–bf

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