Re: Peter Schiff vs. Jeremy Siegel on the Depression

Great video, Lew! Jeremy Siegel’s faith that the government (in particular the FDIC) can save us from another depression as bad as the 1930s would be touching if it wasn’t so dangerous. One new thing I learned. Peter Schiff said that only 2% of deposits were lost in the 1930s. Does anyone know the facts behind that claim? Is that 2% of dollars on deposit? 2% of accounts (but 100% of those accounts)? Individual or corporate depositors? Let me know the details and I’ll add them as an update to this post.

Great responses from two readers…

Patricia Meserole writes:

I found a paper written by Harold Cole and Lee Ohanian of the Minneapolis Federal Reserve that says that “Deposits of suspended institutions were less than 2 percent of deposits in every year of the decline except 1933, when the president declared a national bank holiday.”
Here is the link.

It is found on page 9 of the paper, and there is also a table on page 25 that illustrates the percentages of deposits in operating and suspended banks during the period of 1929 to 1939.

Jeremy Horpedahl wrote up a post on his blog in response to my question:

Here is some research I did on the amount of deposits lost in the 1930s.

Bottom line: Schiff’s figure of 2% was low, but the correct figure (about 4%) is still pretty small (at least for the worst banking crisis in U.S. history).


12:13 pm on October 17, 2008