Part 3/8:
Historical Precedents: The Great Depression
Reflecting on historical precedents, the banking crises of the past serve as sobering reminders of the precarious balance financial institutions maintain. The collapse of a small bank named the “Bank of the United States” during the Great Depression exemplifies the panic that can ensue from mere rumors. Similar events demonstrate that while bank runs are a crisis, the resulting liquidations often have resolutions. Thus, understanding liquidity crises aids in predicting upcoming financial challenges.