The Free Banking Era (dec 26, 1836 – nov 9, 1865)

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During the 1920s Virginia Rep. Carter Glass warned that stock market speculation would lead to dire consequences. In October 1929 his predictions were realized when the stock market crashed, and the nation fell into the worst depression in its history. From 1930 to 1933 nearly 10,000 banks failed. If account holders become worried about their bank, they would rush to withdraw money before it failed, creating a bank run. By March 6, 1933, newly inaugurated President Franklin Delano Roosevelt declared a bank holiday that lasted four days, while government officials grappled with ways to remedy the nation’s economic woes. Many people blamed the Fed for failing to stem speculative lending that led to the crash, and some also argued that inadequate understanding of monetary economics kept the Fed from pursuing policies that could have lessened the depth of the Depression.

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