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The Banking Crisis (RLE Banking & Finance) by Jules Bogen, Marcus Nadler

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CHAPTER II.—WHY THE BANKS FAILED

WHAT BANK FAILUBES MEAN

A BANK failure is an economic, a. financial and a social disaster.

Bank failures hurt business in a number of ways. By tying up bank deposits, they reduce the supply of available purchasing power and thus contract the volume of business done. By the same token, they tend to lower commodity prices. Business men accustomed to rely upon bank loans suddenly find such customary accommodation cut off, and they are not infrequently forced to the wall as a result.

The closed bank is often liquidated, as a result of which a mass of securities and other assets are thrown on the market for sale at what they will bring. This procedure depresses prices on the exchanges. The rank and file of small depositors, ...

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