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Book examines Toledo bank crash during Depression |
| By
Vicki L. Kroll |
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Mar 7, 2005 |
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| Dr. Timothy Messer-Kruse posed for a photo outside the long-closed Commercial Bank. In June 1931 on the day withdrawals were suspended, more than $1 million was taken by insiders while the doors were locked to the public. |
When Dr. Timothy Messer-Kruse read Toledo led the nation in job loss and people on federal relief during the Great Depression, he wanted to know why.
“My interest was piqued. Why Toledo?” he said. “The most important event was the bank crash of 1931. I began investigating the Toledo bank crash and found there was very limited information published about it.”
So the UT associate professor and chair of history began digging.
“Once I started researching, it became like pulling on a loose thread on a sweater — it just kept unraveling, and it became more interesting the more it unraveled,” Messer-Kruse said.
The result of his work, Banksters, Bosses and Smart Money, was published by Ohio State University in January. The 196-page book examines the social and political causes of the Glass City’s economic demise during the Depression. It details the interlocking directorships, political machines and insider deals that made some rich at the expense of depositors.
In the summer of 1931, five of Toledo’s largest banks failed. The U.S. leader in employment growth in the 1920s turned into the city that lost the most jobs, Messer-Kruse said. President Franklin D. Roosevelt called Toledo’s financial fiasco “the worst banking experience of any city of the nation.” Deposits totaling more than $125 million were frozen in the closed vaults.
Mention bank runs of the 1930s and images of George Bailey trying to quell the panicked populace of Bedford Falls come to mind. Scenes from “It’s a Wonderful Life” have helped perpetuate the myth the public caused the banks to go under, Messer-Kruse said.
“I think there’s a number of reasons why historians and economists and the public at large believe the bank runs were caused by public panic as opposed to mismanagement,” he said. “The deeds of bank managers are not easily modeled economically. Modern economics likes to rely on modeling behaviors — the bank itself is usually modeled as a constant, a non-variable factor, and the public is the variable. It’s easy to discount bankers taking money out the back door while it’s going out the front door.”
Messer-Kruse added politics figures into that equation. “If the public begins to question the decisions and behaviors of bank officials, it calls into question the stability of the bank institution in general. There was a moment in the beginning of the 1930s when the public did lose faith in public financial institutions. The political response over time was to reinforce the authority of financial institutions by disallowing the misdeeds of the bank institutions. This resulted in the uncertainties receding from public consciousness, much like Enron has.”
In the book, Messer-Kruse wrote, “… there had indeed been a bank run, only it was a raid on the deposits of the bank conducted primarily by the owners, directors and officers of the banks themselves.” Documenting this proved difficult as records from the failed banks were destroyed. But there’s still evidence to suggest fraudulent banking practices.
Five years ago, he began poring over Toledo newspapers from the 1930s. Messer-Kruse started with The Blade and The Toledo News-Bee, which yielded bits of information. “The lively suburban shopper papers — The East Side Sun, The Sylvania Sentinel — nobody took them seriously, but I discovered upon looking at them closely it was the suburban newspapers that took up the story of the bank crashes. They were the least connected to the wealthy in the community.”
A visit to the Lucas County Recorder’s Office was the final way the researcher dealt with the lack of official information. “In a capitalist economy, the property records aren’t destroyed. Neatly bound in volumes are the tracks of the misdeeds of the banking community — a trail of loans, mortgages, subdivisions. They couldn’t destroy these records or they would have destroyed their own property.”
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