Boom and Bust

Question 1 • [HSSUS] US History, Sem 1 (26-27)

How did many banks fail consumers in the stock market crash of 1929?

Answer

Banks had invested customer savings in the stock market, losing depositors’ money in the crash.

Banks refused to pass on profits made in the stock market to depositors, keeping the money.

Banks refused to issue loans to help investors pay for their financial losses in the crash.

Banks only paid a small portion of insurance owed to depositors for their financial losses.

Explanation

Many banks used customers’ deposited money to invest in the stock market. When stock prices crashed in 1929, those investments lost value, putting depositors’ savings at risk and contributing to bank failures. So the choice describing banks losing customer savings through stock-market investments is correct; deposit insurance was not yet in place to protect most depositors.

AI-written and checked against the verified answer.

More from this Course

4.5 Prohibition

Boom and Bust

The Great Migration