01:220:301 Lecture Notes - Lecture 17: Savings And Loan Crisis, Business Cycle, Rein
29 Feb 2016
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Document Summary
The banking system: commercial banking bank crises and panics. It is not altogether unreasonable to say that the history of banking in the united states is a history of panics and crises. Most history books cite at least ten distinct bank panics in the 1800s alone, and bank crises in 1907, 1929, and 2007-2009 had significant impacts on the u. s. economy. In many respects, most banking crises are quite similar. Banks make increasingly risky lending decisions during economic expansions and fail to rein in their activities before a turn in the economy. Eventually businesses struggle during the downturn, fail to repay their loans, a few banks collapse and then depositors run to get their money out before their bank collapses. With the sudden outflow of money, banks curtain their lending activity, the business cycle continues to worsen, more loans go bad and more banks go bust. The great depression was quite possibly the greatest of all bank crises.
