Economists can debate whether bank failures caused the Great Depression, or the Great Depression caused bank failures, but this much is undisputed: By 1933, 11,000 of the nation’s 25,000 banks had disappeared.
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The run on America’s banks began immediately following the stock market crash of 1929. Overnight, hundreds of thousands of customers began to withdraw their deposits. With no money to lend and loans going sour as businesses and farmers went belly up, the American banking crisis deepened.
After taking office in March 1933, Franklin D. Roosevelt did his best to shore up the flagging banking system. When a third banking panic in less than four years threatened, he announced a three-day bank holiday to stop the run on banks by halting all financial transactions. When the banks were allowed to reopen, nearly 1,000 banks had been saved.
On January 1, 1934, the Federal Deposit Insurance Corporation (FDIC) was established, and since that time, not one depositor has lost insured funds.
Prior to the fall of 2008, FDIC insured bank accounts up to $100,000. The Bush Administration changed those levels to $250,000.
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