Question

What was the role of the US government in the banking industry at beginning of the Depression?

A.) Federal agencies forced banks to close if they could not insure all of their accounts.
B.) The government passed laws to provide insurance on individual accounts.
C.) Individual banks were inspected and supervised by agents of the government.
D.) The government had little involvement with monitoring the health of banks.

Answer 1

The role of the US government in the banking industry at beginning of the Depression was little. The answer is letter D. Their limited involved was one of the factors that led to the Depression.
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Answer 2

D.) The government had little involvement with monitoring the health of banks.

Going into the Great Depression the government had pulled back regulations on the economy and had very little to do with banking.

The 1920s presidents (Harding, Coolidge, and Hoover) were conservatives who believed in a free economic system. As a result, many of the economic policies of the decade removed regulations and allowed banking to work independently of the government. Private banks were allowed to operate as they wished. Many banks before the Great Depression were active in the stock market and were wiling to take risks with the money held in their banks.