The light peeking over the horizon at dawn used to bring days of hope. Days of anticipation. The breeze picked up the America flag. The flapping of the flag was heard intermittently over the rooster singing. Farmers sat on their porches overlooking the dust. The winds and sandstorms picked up the soil and carried it off the property. Hopes and dreams shattered. Livelihoods lost and they sat shotguns and rifles in had waiting for the banks to run them off their property.

The great depression hit the farmers years before it hit the cities. The fight between banks and farmers went back to the 1800’s when railroad companies manipulated shipping rates. The complexities of the economy and the function of credit and loans led to political movements like the grange and the creation of the populist party. One of the core principles behind these movements was to educate farmers on the economy and new farming techniques. Farmers toil. They rise and work till dusk. Spreading economic knowledge and new farming methods to people that work all day was a challenge.

Before the dust storms in places like Oklahoma, farmers struggled to adjust to the end World War I. During the war, the Midwest fed the war effort home and abroad. Farmers were asked to produce crops at high rates but when the war ended and foreign countries rebuilt their farmlands, demand levels dropped. Farmers grew crops at war time levels and the price of crops dropped. The decreased value in crops led to farmers growing more crops which devalued the crops farther. The lack of money and lack of banks in farmland lead to banks failing and closing.

When banks failed the money people placed in the banks was lost. Bank failure can mean that outstanding loans are called in and failure to pay loans leads to property loss. Bank failure also meant the possibility of loans transferred to other institutions who could change the terms of the loan. The FDIC was not in place which meant that peoples deposits and money were not insured. When a bank goes under, people’s savings were lost.

By 1924, the economic struggles in the farmland led congress to act. The McNary-Haugen Farm Relief bill intended to subsidize American crops by raising prices. The goal was for government to keep agricultural prices at the same rate during the 1910’s.

The republican party push for less government involvement and the elevated status and influence of business led to the veto of the bill by President Coolidge.

The debt that plagued the farmers in the 1920’s infested the cities at the end of the decade. City dwellers rose at dawn and rushed banks to pull their cash out by noon. Financial institutions failed and the business lifestyle that was promoted and revered in the 1920’s was despised to the point where bank robbers like Bonnie and Clyde became icons and bank robberies were celebrated.

Bank closures during the 1920’s and the Great Depression had a deep psychological impact on Americans. The loss of farms relocated Americans throughout America. Oklahoma Boomers in the 1800’s were forced to load up their cars and travel west towards California. Bank failure brought displacement and loss of savings. Americans opted to keep their saving in their homes instead of trusting a bank ever again.

Recessions and stagnation have created memories of hardship for Americans since the Great Depression. The image of banks and the American businessman has been rebuilt since the 1930’s. The voices who can share their stories of suffering during the great depression are dying but the recent failure of Silicon Valley Bank in California and Signature Bank in New York have created apprehension and reminded American’s of the 2008 economic crisis.

Since 2000 565 banks have failed according to the FDIC and the newly released dataset on data.gov. Figure 1 breaks down the number of bank closures by year.

The economic crisis of 2008 was years in the making. Like the great depression lending and credit practices buried Americans and froze the economic gears by forcing banks to file for bankruptcy or close. The federal government had to make decisions on what banks to bail out. Lehman Brothers was not saved but AIG was. Fannie Mae and Freddie Mac were taken over by the government. The damage was done, the collapse started in 2008. According to figure 1, 25 banks closed in 2008 but the major effects of the economic crisis took place from 2009 to 2014. From 2009 to 2014, 464 banks closed. Most of these banks were acquired by other institutions or received bailouts to stay open while American’s lost their homes, jobs, and retirement savings.

Georgia, Florida, Illinois and California were the states hit the hardest by bank closures according to figure 2.

Banks function primarily on faith and trust. The federal government has put in mechanisms like the Federal Deposit Insurance Corporation to solidify American trust by insuring bank customer money up to a certain figure. American’s trust in the financial system was impacted. For some, the minimum discomfort was the merger of your bank onto another bank. The merger can bring changes like different checking account standards and the closing of certain branches. As a bank customer you did not lose your money but if your bank failed and was bought by another institution the merger is a reminder that the institution you trusted was not stable. There are varying degrees of what could be considered the worst-case scenario. The banks determined what type of loan you qualify for. The worst scenario I can think of is of a family who had paid off their mortgage. Their home was theirs, but they decided to refinance to upgrade their home and the loan they signed up for was a varying interest rate refinance. The reason why this is the worst scenario is because you had a positive relationship with your bank. You paid off your mortgage with a loan that had a fixed rate but then when you refinanced, a varying interest rate was sold to you. For years you came into the bank, greeted the security guard, got to know the bank tellers when you handed them your mortgage payment. You built trust with the bank and then a faulty product was sold to you. Yes, you should have read the fine print and looked out for your best interests, but you are also sold a pitch by an institution you had a relationship with. An institution you trusted, and, in the end, the bank failed. The bank either willfully sold you a product it knew you would get screwed over by or it was ignorant about the ramifications of selling mortgage after mortgage that customers could not afford to pay.

The pattern of bank closures is the same from state to state. In Georgia,

Florida,

Illinois and,

California, the majority of bank closures took place from 2009 to 2014. The failure of these banks created an opportunity for institutions to profit from the devistation.

First Citizen Bank & Trust Company purchsed 12 banks as did State Bank and Trust Company. The acquisition of failed banks by these institutions saved people’s money and loans. The intent is not to vilify these institutions for being in good standing and in a position to acquire failing banks because the figure that stands out at the top of the table is the number of banks that failed and did not get acquired by an institution. 31 banks closed and were not acquired by other banks. If these banks were not FDIC insured banks, then when they closed their doors, they lost their customers savings.

Aquiring institutions made their acquistions because they felt like they could profit from the acquisition. The acquisition was a business decision and by acquiring failing institutions, they saved the customers of those banks from further pain and agony. This is the eb and flow of the economy during an economic crisis. Opportunites open up out of misery. JP Morgan Chase was able to buy Bear Sterns for $2 a share and the deal was backed by $30 billion in fed financing. JP Morgan Chase became too big to fail but the federal reserve felt that if it did not back such a merger then the financial system would collapse.

Atlanta is a major metropolis and has the most banks closed in Georgia but the rest of the cities in Georgia are much smaller in scale. Winder has a population of 18,209 according to the US Census data. Macon has a population of 97,255. Woodstock has a population of 36,198. What is the impact of two banks closing in Winder? How deep was the damage to homeowners in Atlanta and farm owners in smaller communities in Georgia?

These are the 31 banks that were not acquired by other institutions after they closed. According to the LA Times, “regulators shut down the First Bank of Beverly Hills, saying they could find no buyer for the one branch institution after a takeover by an Illinois financial firm fell through.” The FDIC sent insured depositors checks and loans were taken over by the FDIC. The FDIC insures up to a certain amount so if there were any depositors with funds above the amount, the FDIC did not send depositors checks for funds above the insured amount.

Community Bank of West Georgia became inactive on June 26, 2009. The bank had $201,222,00 in total assets and $189,398,000 in total deposits.According to Marketwatch, depositors were mailed checks by the FDIC but there is no mention of what happened to loans.

The federal government spent billions of dollars to salvage the financial system after the 2008 economic crisis. Just like during the great depression and economic crisis before the great depression, people’s confidence in banks and the financial system was rocked.

The data on closed banks serves as a reminder that financial crisis does not happen overnight. Financial crisis are years in the making. The data also serves as a reminder that the most damage does not happen in the initial fallout. People remember the stock market crash of 1929 and the failure of Lehman Brothers but the pain and suffering of the great depression happened in the 1930’s. Many bank closures took place after the autumn of 2008.

The New York Times just published the results of a study on the possible effects of the closure of Silicon Valley Bank and Signature Bank. The study concludes that “The results show the continuing potential for widespread damage to the entire banking system, which has seen many banks’ financial positions deteriorate as the Fed has raised interest rates to tame inflation. Those rate increases have reduced the value of” The impact according to the study could cause “larger runs on banks vulnerable to rate increases could result in significant drop in credit available to store owners, home borrowers and more. Because so many counties rely on a relatively small number of financial institutions for deposits and loans .”

We are all connected to the financial system. The closure of two banks in California and New York is a sign that the financial system is vulnerable. The New York Times uses terms like “bank runs” and “drop in credit available.” These are terms synonymous with the Great Depression. The federal government, federal reserve and the FDIC took steps to try and control any possible fallout. It’s possible that these measures worked. It’s also possible that something else is brewing.

The economy is a world economy. It has been 15 years since the bitcoin white paper was released to the public. In that time frame there has been a proliferation of digital currency, a world pandemic, supply chain problems and inflation. The world has drastically changed since 2008 and its likely and conceivable that there are elements of the economy that the general public and experts do not comprehend. It is also probable that bath faith actors are on top of the pending problems and may opt to remain quiet because of greed and power.

If there is something brewing than the major damage will not take place in the initial fallout. The graphic above is a reminder that economic crisis are years in the making and take years to recover from a financial market perspective. Broken confidence takes years and sometimes generations to repair.

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