The recent news that three (or is it four?) notable banks have just failed has me worried. I’ve spent a lifetime depositing my paychecks into a bank and taking it for granted that I would always be able to use the money I saved. I never paid much attention to how our banking system operates, but I assumed that the banking collapse of the 1930s and the Great Depression was something that couldn’t happen again.
Now I’m not so sure.
Having only a vague sense of what caused the Great Depression, I decided to do some research. I found an article “The Bank Run that Helped Create the Great Depression.” From what I read, the banking collapse of 1930, which triggered the Great Depression, started with a liquidity crisis not unlike what shuttered the Silicon Valley and Summit Banks today. According to the US government’s Social Security History web page, in 1930,
“9,000 banks failed--taking with them $7 billion in depositors' assets.And in the 1930s there was no such thing as deposit insurance--this was a New Deal reform. When a bank failed, the depositors were simply left without a penny. The life savings of millions of Americans were wiped out by the bank failures.”
Still, even then there was a system in place to prevent bank failures from turning into widespread catastrophes, as the Federal Reserve and major banks would work together to cover failed banks’ obligations so everyone could access their savings. This process worked fine in 1907 but collapsed in 1930 because key players refused to participate in the rescue process.
In 1930, JP Morgan, the most powerful voice in the New York Clearing House, spoke up to say, “I am not helping these people.” By referring to “these people,” Morgan meant immigrants –- Jewish-Americans, Italian-Americans, and other newcomers that the Clearning House served. Morgan was voicing common anti-immigrant and anti-semitic sentiments. It’s a process now familiar to us as “Othering,” or considering another person, or group of people, as fundamentally different from “us,” thereby failing to acknowledge their subjectivities and complexities. Immigration had surged at the turn of the 20th century, reaching a high of 15% of the total population by 1920, according to the Library of Congress. People like Morgan and others were reacting to a perceived threat to society posed by increasing numbers of immigrants.
Today, we have more systems in place to prevent bank failures and avert the kind of catastrophe that happened in the 1930s. We have the Federal Deposit Insurance Corp, designed to guarantee deposits up to $250,000, and we have the Dodd-Frank Wall Street Reform and Consumer Protection Act, giving the Federal Reserve a chance to identify risks to the system and impose new regulations as needed. And earlier this month the Federal Reserve announced a new Bank Term Funding Program offering one year loans to stabilize banks. It took Acts of Congress to authorize the FDIC and Dodd-Frank.
Of course, the US Congress oversees the Federal Reserve. And that’s where I get worried.
Both at the start of the Great Depression and today, society was/is split by culture wars and an anti-immigrant backlash. Except for the term “woke,” our country’s divide today seems remarkably similar to the divide in 1930 that JP Morgan was acting on. The immigrant percentage of the US population, for example, only approached a similar level to the pre-Great Depression era at 13.6% in 2021.
In the 1920s this led to a rise in socialist, Christian fundamentalist, anti-semitic, and anti-immigrant movements. That sounds disturbingly familiar– the past two decades have seen dramatic changes including an exponential rise in Christian fundamentalism, the sowing of the #MeToo movement (2006), the election of a Black president (2008), the start of the #BlackLivesMatter movement (2013), the legalization of same-sex marriage (2015), the election of an admitted “disruptor” as president (2016), and the US Supreme Court’s overturning of Roe v Wade (2022).
As I watch the US Congress and President Biden try to address the relatively routine process of raising the national debt limit, we are seeing the ongoing “culture wars” play out. U.S. House Republicans are eyeing $150 billion in spending cuts that reflect a hardline drive to target education, healthcare, and housing - addressing racial inequities that conservatives deride as "woke" - as they push forward in talks on the federal debt ceiling.
It looks to me like our leaders have gotten caught up in Othering and a discomfort with the changes that are raging through our society. By exploring history and looking at the forces that are behind today’s divisiveness, I gain perspective to see beyond my fears and outrage to remember that our elected leaders are also my fellow citizens. While I am very concerned that our current Congress looks hopelessly mired in culture wars, if we are to have hope of a government that can make effective decisions to preserve our economy and navigate new crises, I think we need -- as Courageous RI is recommending -- to “move from a spectator democracy to true participation as empowered citizens.”
For me, this means getting to know the positions of my elected representatives, following their votes and public statements, communicating with them when I approve and when I don’t, and continually insisting that they keep cooperation at the forefront.
If you want to join me, you can find your representatives at House.gov and Senate.gov. Call them, write to them, email them. It’ll all be more interesting than hiding our money in our mattresses.