Why did the stock market crash cause banks to fail?

Answer 1

AnswerThe reason for the stock marketcrisis is the credit crunch. People are short of money hence they are selling their stocks to raise cash.

The reason for the credit crunch is the Economic crisis. All banks & financial institutions are stuck with extraordinary amounts of dubious debt & derivative products which they cannot sell. Hence they are short of cash which in turn has caused the credit crunch.

One of the causes for the Economic crisis are the banks who went on a loan lending spree to everyone they could find. They lent even to people who dint have enough income to pay their monthly mortgages...

So to an extent Banks can be blamed for the Stock Market crash. They aren't the only reason but they are also part of t

Answer

Which stock market crash? Oh, never mind.. the answer is the same for all of them - sudden contraction of money supply by a major bank. Economic crises in 1907 and before were caused by major European banks. Since the creation of the Federal Reserve they have been the ones with enough power to create this economic turmoil. The Fed was supposedly created to stabilize the money supply, but economists have discovered that it has actually been LESS stable since 1913.

Since the actions of the Fed are secret and the government has no power over them the only way this can be stopped is to revoke the charter of the Fed, which was unconstitutional to begin with.

Answer 2

People were worried that the stock market crash put their money at risk which made them rush to the bank to pull out all their money and it made the banks lose all their money and forced them to declare bankruptcy and many ended up crashing.

Answer 3

Because everyone started to withdraw all their money and the banks could not give out any loans and thus could not gain interest and the loans the banks already had out, they could not call and say, "Yeah, you know that money we lent to you? Yeah, we need it back now. Thank you."

Answer 4

Since people had all their stocks stored in the banks which was also increasing their revenue, but when the stock market crashed the bank lost all of the people's stocks therefore making the bank lose money

Answer

Banks actively invest money that people have saved with them and they make a profit from a spread of what they earn and the interest they pay people.

The problem was that many banks invested in stocks based on bundled mortgages. Mortgages earn a set amount of interest over the period of repayment, so if they are well-loaned mortgages, they are a good bet. However, many of these bundled (or bungled, depending on your point of view) mortgages were defaulted on as people lost their jobs or walked away from mortgages that were higher than the house value. So in addition to not earning interest, these houses were costing thousands more to foreclose upon and sell. Bottom line, the value and return of these investments sunk many banks.

Answer 5

banks were forced to close due to the excess amount of people withdrawing their money out of their accounts. hope this helps! :D

Answer 6

banks had invested their deposits in the stock market.

Answer 7

Banks were one of the first institutions to feel the effects of the stock market crash because people feared for their money and rushed to withdraw their savings.