Black Tuesday Research Paper

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The Great Depression was a period of history marked by a devastated worldwide economy and the financial struggle of many people. Several factors contributed to this nearly ten-year economic downturn in the 1930s, but the stock market crash was the catalyst in the United States. After a five-year boom, the values of stocks rapidly dropped on Black Tuesday, October 29, 1929, resulting in a loss of over forty billion dollars in one day. Following this event, the consequent bank failures and high unemployment rate kept the economy from fully recovering for years to come. The events leading up to the famous Black Tuesday crash began in 1924 when the stock market started its remarkable rise. The practice of buying securities, such as stocks…show more content…
In the 1920s, the United States saw a rapid growth in the number of personal loans offered by banks; the prevalence of financial institutions extending credit to less qualified clients lead to more consumer debt than in the past. About one year after the crash, banks began to fail due to defaults on consumer loans. Banks today have the backing of the Federal Deposit Insurance Corporation, which insures up to $250,000 in deposits, but this program did not exist back then. Before the FDIC was implemented, if a bank failed its members simply lost all of the money they had entrusted to that bank. A banking panic in October 1930 resulted in many thousands of people attempting to withdraw their money from financial institutions nationwide. They were understandably worried their bank might go bust next. The average American citizen during this time did not understand that banks don’t merely take the deposited money and put it away in a safe deposit box for storage. In order to function as intended, banks invest deposited money into further business ventures such as mortgages, car loans, and other forms of credit. When countless customers started to demand the money in their accounts, banks simply did not have enough currency to fund them. For this reason, forty percent of banks failed between 1929 and 1932. The banks that remained open for business were more wary and less willing to extend new loans, even to seemingly well-qualified buyers, for fear of failing as others
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