The Journal of Economic History


A Reconsideration of the Causes of the Banking Panic of 1930

Elmus Wicker


The banking panic of 1930 has special significance for assessing the causal role of money during the Great Depression. A detailed examination of the panic-induced bank closings in November reveals that poor loans and investments in the 1920s was the principal factor contributing to the accelerated rate of bank suspensions. These findings are consistent with the. Friedman-Schwartz interpretation of the 1930 banking panic as a purely autonomous disturbance largely unrelated to the decline in economic activity. It is inconsistent with Peter Temin's conjecture that declining prices of lower-grade corporate bonds and the agricultural situation played an important causal role.