Hoover, the banks, the Depression: The Iowa experience, 1930-1933

A glut of corn, hogs, and community farm banks characterized Iowa's economy from 1920-1933. The 1920's agricultural depression preceded the worldwide depression in 1930 and exacerbated farmer and farm bank problems. Iowa exceeded all other states in farm mortgage debt and bank failures. Iowa's predominant structure of state-chartered unit banks was threatened by development of group banking and federal proposals to expand branch banking. Effective with the 1931 European financial crisis, wherein the international gold standard was largely abandoned, domestic bank failures and currency hoarding skyrocketed. President Hoover attempted to preserve both the banking structure and the U.S. monetary system tied to gold. The structure was to be preserved through loans to banks by the Reconstruction Finance Corporation; the system through provisions of the 1932 Glass-Steagall Act. Both were intended to increase confidence and finance economic recovery. Following the New Deal's first "100 days," the banking structure had been preserved, but the monetary system had been overhauled.;Iowa bankers supported Hoover's voluntary initiatives (like the National Credit Corporation and the Citizens Reconstruction Organization) and federalized initiatives (like the RFC). But because farm prices deflated faster than other industry sectors in 1931; and because of Iowa's farm mortgage debt, Iowa's farmers and banks were squeezed. Mortgage foreclosures and evictions became commonplace. The state's banking structure was threatened by multiple failures. Iowa bankers became intent on preserving the structure of independent unit banks. The Federal Reserve was more intent on preserving the monetary system based on gold. Hoover was committed to preserving both. Deflation was not arrested.;Bankers were castigated for not loaning despite deposit declines and asset deterioration. Currency hoarding and bank failures accelerated during the 1932 election interregnum. Following the collapse of both the banking structure and monetary system in March 1933, banks reluctantly accepted a federal guarantee on deposits in exchange for preservation of state bank structures. The deposit guarantee stabilized the structure and the monetary system.