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The Stock Market Crash of |

Why did a large number of banks fail after the stock market crash? Are you sure you want to delete this answer?

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Trending Now Reese Witherspoon Amy Poehler Demi Lovato Megan Anderson Sears Appliances Sale Reverse Mortgage Chris Cornell Honda Cr-v Alyssa Milano Henry Cavill. Banks make money by charging interest on the loans they give. People go to them and ask them to purchase a house or a car and in return, they will pay the bank a little at a time alone with a little extra interest until all is paid off. In as is today, they loaned out more money than they had coming in.

People got scared and withdrew their savings, leaving the banks with only the money they were counting on from the interest rates they were charging. When people began to default on their loans not only did the bank lose money from the interest it was no longer getting, but then they had to foreclose on the defaulted home loans.

It then became a matter of reselling usually at a loss the homes they took back. Because no one was buying homes , the asking price for the homes dropped meaning the banks would get even less and if they could not sell, they were stuck with a property that was not bringing in any money.

Banks back then were not federally insured. People began pulling their money out of savings and suddenly, there simply was no more money. The banks had used people's money savings to buy the homes they'd loaned money for and so, the money was non-existent , it was tied up in the homes that were now in foreclosure. People wanted to withdraw their money, but there was no money left. Today, the banks are federally insured. Trouble is, those insurance companies Fannie Mae, Freedie Mac and AIG thought themselves to be so large that nothing could topple them and so, they kept approving loans they knew were high risk and the likelihood was, those they were loaning to could not repay.

They Fannie, Freddie and AIG were all being backed by people like Congressman Barney Frank and when people began to question the loaning practices, Frank told them they needn't worry. Frank is still in charge. You don't throw money at money problems, instead you change your mindset and apporach.

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The financial meltdown initiated by Wall Street's Great Crash of caused billions of dollars in assets to vanish into thin air. Need new office furniture?

Bank Failures During The Great Depression | Bank Failures

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Why did many banks fail after the stock market crashed

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