ition), which in turn encouraged banks to engage in still riskier ventures. Thus, in 1929, like a national Ponzi scheme, the speculative bubble burst with the crash in the stock market, followed by the Great Depression of the 1930s.
As in 1907 and other financial panics in the 1800s, but on a much larger scale, the Great Depression witnessed runs by depositors and subsequent bank failures throughout the nation (Trescott, 1963). With such failures, the life savings of millions of Americans were wiped out. Modest "deposit insurance" existed in only a handful of states (for instance, New York), so nearly all depositors lost everything. In addition, because interstate branch banking was not permitted for commercial banks, they were often small, community businesses that lacked the funds and geographic diversity to withstand the reverses of bad conditions in their local economy.
In 1932, President Franklin Roosevelt was elected with a mandate for change. Coincidentally, just as he took office in 1933,
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