The Stock Market Crash & Banking Crisis

US History: Spiconardi

STARBURST

Do NOT EAT the candy!

The Starbursts represent money and you have four (4) choice

1. Put your money (Starburst) in the bank. 2. Invest your money (Starburst) in the Stock Market. 3. Buy an expensive product (5 extra points on your next exam) using

installment buying with a down payment using your money (Starburst) and then pay off the rest in payments. Total cost = 4 Starburst

4. Save your money by keeping it under your mattress (in the cup) and use it later.

*You have one minute to make your decision, and you cannot change it once it has been made.

How does a bank work?

DEPOSIT People put their money into a

bank The bank pays the

depositor(customer) 2% interest on the money you put into the bank

BORROW Banks loan the customer’s

money to people purchasing homes, cars, and either expensive items

The bank charges 6%-10% interest on consumer's loans (That’s how they are able to pay you interest on your account)

Banks loan depositors’ money to other consumers

Your Savings Acct.

The Stock Market Crash

After stock prices soared in 1928, stocks prices plunged in 1929

Stocks had been overvalued October 24, 1929 – “Black

Thursday” 12.9 million shares of stock

were traded that day for a loss of $4 billion

Americans panicked To avoid further losses, J.P.

Morgan & Co. puts up $20 million and begins to buy stocks to restore confidence

The Stock Market Crash

While Morgan was able to help stocks rally the next day, many investors decided to sell their stocks rather than risk further losses.

Sell! Yes! All of it!

The Stock Market Crash

October 29, 1929 – “Black Tuesday” After losing 13% of its

value the previous day, 14 million shares traded for a loss of $14 billion

Rockefellers and others purchased large amounts of stock, as J.P. Morgan & Co. did, but the stock market continued to lose money all through November

Floor of the New York Exchange shortly after the crash.

The New York Stock Exchange would not recover its 1929 losses until 1954

The Banking Crisis

Millions of American investors lost all their invested money overnight

Recalling our unit on the Roaring Twenties, how did many investors purchases stocks? Purchased stocks on margin

Investors still have to pay back their brokers Where do you get the money to pay them?

Bank savings account

Upon losing all his money, a White Plains man actually took his own life by jumping from this building on Westchester Avenue at Main Street.

The Banking Crisis

Everyone runs to the bank to withdraw their savings Recalling an earlier part of the lesson,

what does the bank do with your savings?

Loans it to consumers purchasing a car, home, etc.

If everyone runs to the bank to withdraw money, the bank will not have all that money on hand

Why not? No one was paying back their loans

The Banking Crisis

Bank Failures In 1929 659 banks folded In 1930 bank failures increased to 1,350 In 1931 2,293 banks closed In 1932 an additional 1,453 banks shut down

This goes on top of the overproduction, declining demand, and unequal distribution of wealth problems we discussed yesterday