Generating the Wealth of Nations 21: Banking and Bank Failures in the US, 1915-1930

Bank failures became significant well before the onset of the Great Depression.  The number of banks in the US fell by nearly 18% from its peak (of about 31,000 banks) in 1921 to about 25,500 banks in 1929.  From 1921 through 1929, 5,664 banks in the US failed, very nearly equal to the decline in the number of banks.  Most of the bank failures were small town banks that depended on agriculture lending for their profits, and the decline in farm incomes hit them very hard.  (For comparison, the US currently has less than 9,000 commercial banks, largely due to consolidation, not banks failing.)  The following chart shows the number of banks in the Us, and the second chart shows bank failures as a % of banks. 



(Click to enlarge.)

Source: Historical Statistics of the United States from Colonial Times to 1970.