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The Stock Market in the '20s had gone through a bubble as people saw stock prices rising and rising and believed they'd keep rising. Banks were happy to lend investors money to buy stocks.
As with all bubbles, this bubble popped. Remember that the price of a stock has a real correlation to the value of the company--if a price is too high, eventually it will come back down to earth.
When prices started to fall to more sensible levels, a lot of people lost a lot of money. They'd borrowed money they didn't have to pay too much for stocks that suddenly weren't worth what they'd paid for them.
When that selloff started, so did a panic, and prices dipped far below a sensible level, but by then the damage was done. A lot of people were broke, on paper, like they'd been rich, on paper, and the stampede continued.
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What caused thousands of banks to fail?
banks invest money in the stock market, stock market crached, so did the banks
What was the relationship between the stock market and American Banks in the 1920's?
The banks were using their custumer's deposits to put money into the stock market.
Why did many banks fail after the stockmarket crashed?
on October 29, 1929, $10- $15 billion loss in value and stocks fell drastically. This is when the Stock Market crashed Why did many banks fail after the stock market crashed? because they invested in the stock markets, so when it crashed they lost all their money
Can banks invest in stock market?
Yes. But, they cannot invest the depositors money in the stock market. In the years since the financial crisis, central banks have leapt to the forefront of public policy making and have become major investors in stock markets.
Why did stock market crash cause banks to fail?
People were worried that the Stock Market crash put their money at risk which made them rush to the bank to pull out all their money and it made the banks lose all their money and forced them to declare bankruptcy and many ended up crashing.
Why were banks one of the first institutions to feel the effects of stock market crash?
Banks were one of the first institutions to feel the effects of the Stock Market crash because people feared for their money and rushed to withdraw their savings.
Why were the banks one of the first institutions to feel the effects of the stock market crash?
Banks were one of the first institutions to feel the effects of the Stock Market crash because people feared for their money and rushed to withdraw their savings.
Why were banks one of the first institutions to the feel the effects of the stock market crash?
Frightened depositors feared for their money and tried to withdraw it from their banks.
Why did the market crash during the Great Depression?
Because banks were taking the money from its investors and investing it in stocks, when people stopped buying stock the stock market crashed there fore people had lost all of there money. this is illegal now but it was a problem because no one was regulating the banks.
Why did the stock market crash take place?
Too many people got money from their stocks and the banks were running out of money. Everyone wanted their money, but the banks didn't give it to them. This resulted in everybody losing their money.
How do banks use mathematics?
The banks count money. They figure out the value of a loan, they figure how much they lost when the stock market hits rock bottom.
What was the character of the stock market in the late 1920s and what cause it to crash?
The Stock Market of the late 1920s was considered to be overvalued in comparison to the actual value of the member companies. The overvaluation lead to a bobble.
