cover image: Businesses and Borrowing during the Roaring ‘20s and at the Onset of the Great Depression

20.500.12592/2lxu5g5

Businesses and Borrowing during the Roaring ‘20s and at the Onset of the Great Depression

5 Sep 2024

Which firms relied on commercial banks for credit and which firms did not at the onset of the Great Depression would seem to be an important question given the vast literature discussing banking distress in the United States during the 1930s. The question, however, has not been answered. This essay addresses that issue by analyzing data from an Internal Revenue Service publication, Statistics of Income. The hitherto unexplored data reveals that small firms in all industries borrowed heavily from commercial banks and relied on them for credit necessary to fund ongoing operations. The largest firms in most sectors deposited more in banks than they borrowed from them. Sectors whose firms depended most on commercial banks for credit were wholesaling, retailing, services, and the processing of agricultural products. In contrast, nearly half of economic activity in mining and construction, the majority of output in manufacturing, and the preponderance of firms in transportation operated independent of commercial banks
history macroeconomics monetary economics financial history development of the american economy money and interest rates macroeconomic history

Authors

Gary Richardson, Marco Del Angel

Acknowledgements & Disclosure
The authors received financial support from NSF Grants SES- 2214557 and SES-2214565 while completing this research The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
DOI
https://doi.org/10.3386/w32918
Pages
45
Published in
United States of America

Table of Contents

Related Topics

All