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A History of US Financial Panics

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    This article discusses the history of banking panics in the United States. It begins with a brief history of major banking panics in the United States, including the 1873, 1929, and 2008. It then discusses the causes of banking panics, including the failure of major banks and the collapse of the stock market.

    Banking panics were common in the United States during the 19th and early 20th centuries. They were usually caused by a combination of factors, including bank failures, stock market declines, and economic recessions. The panics often had severe consequences, including bank runs, bank failures, and economic depressions. While we don’t have time to cover every panic, this article will cover the major ones.

    The Panic of 1873

    The first major banking panic in the United States occurred in 1873. It was caused by a combination of factors, including the failure of several major banks and a stock market crash. The panic led to a wave of bank failures and a sharp economic downturn. The economy did not recover until 1879.

    The Panic of 1893

    In 1893, another banking panic occurred. It was caused by a combination of factors, including the failure of the National Bank of the Republic and a sharp decline in the price of silver. The panic led to a wave of bank failures and an economic depression that lasted for several years. The economy did not recover until 1897.

    The Panic of 1907

    The next major banking panic occurred in 1907. It was caused by a combination of factors, including a run on the Knickerbocker Trust Company and a stock market crash. The panic led to a wave of bank failures and an economic recession. The economy did not recover until 1908.

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    The Great Depression

    The most severe banking panic in the United States occurred in 1929. It was caused by a combination of factors, including the failure of the stock market and the collapse of the credit system. The panic led to a wave of bank failures and an economic depression that lasted for several years. The economy did not recover until 1933.

    Creation of the FDIC

    The Great Depression led to the enactment of the Banking Act of 1933, which created the Federal Deposit Insurance Corporation (FDIC). The FDIC insured bank deposits up to $5,000, which helped to prevent future banking panics.

    Savings and Loans Crisis of 1980s

    The next major banking panic in the United States occurred in the early 1980s. It was caused by a combination of factors, including high interest rates, a weak economy, and the failure of several major banks. The panic led to a wave of bank failures and an economic recession. The economy did not recover until 1983.

    The Financial Crisis of 2008

    The most recent banking panic in the United States occurred in 2008. It was caused by a combination of factors, including Lehman Brothers’ failure and the housing market’s collapse. The panic led to a wave of bank failures and an economic recession. The economy did not recover until 2009.

    The 2008 banking panic led to the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the Consumer Financial Protection Bureau (CFPB). The CFPB is responsible for protecting consumers from predatory lending practices and ensuring that they have access to credit.

    Crypto Exchange Crisis?

    While the decentralized nature of different crypto coins prevents the currencies from failing, the centralized nature of crypto companies creates the same risk of banking failures. As the saying goes, “not your keys not your coins.” Over time we shall see if the recent crypto exchange implosions have as great of a negative impact on the economy as banking panics or will be relatively self-contained.

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