Question

How did the banking panic contribute to the Great Depression as more people went to withdraw money from their accounts as unemployment increased?

Answer 1

Caused bank closure--panicked withdrawals caused the money supply of banks to diminish causing banks to close all across America.

Banks were responsible for investing in business and providing loans when a person or company needed it. However, if their investments lost, the bank lost money. Banks had money in the stock market which they had lost meaning they lost the money of those storing their money in banks. When people began to withdraw money it reduced the money supply of those banks until they had to close. With banks closed, there was no money for investment to start businesses back up or help keep families above poverty.

Answer 2

The banks started to close as people had panic withdrawals of their money. A Washington Senate bill  185 was released that made temporary bank closure because of this uncontrollable condition. It added to the problems of the people in spending their own money. This was the time when banks opened themselves to lending and credit.