<P> The closures resulted in a massive withdrawal of deposits by millions of Americans estimated at near $6.8 billion (equivalent to around $60 billion in today's dollars). During this time the Federal Deposit Insurance Corporation (FDIC) was not in place resulting in a loss of roughly $1.36 billion (or 20%) of the total $6.8 billion accounted for within the failed banks . These losses came directly from everyday individuals' savings, investments and bank accounts . As a result, GDP fell from the high seven - hundreds in 1929 to the low mid six - hundreds in 1933 before seeing any recovery for the first time in nearly 4 years . Federal leadership intervention is highly debated on its effectiveness and overall participation . The Federal Reserve Act could not effectively tackle the banking crisis as state bank and trust companies were not compelled to be a member, paper eligible discount member banks heavily restricted access to the Federal Reserve, power between the twelve Federal Reserve banks was decentralized and federal level leadership was ineffective, inexperienced, and weak . </P> <P> Throughout the early 1900s banking regulations were extremely lax if not non-existent . The Currency Act of 1900 lowered the required capital of investors from 50,000 to 25,000 to create a national bank . As a result of this change nearly two thirds of the banks formed over the next ten years were quite small, averaging just above the 25,000 in required capital . The number of banks will nearly double (number of banks divided by Real GDP) from 1890 to 1920 due to the lack of oversight and qualification when banking charters were being issued in the first two decades of the 1900s . </P> <P> The unregulated growth of small rural banking institutions can be partially attributed to the rising cost of agriculture especially in the Corn Belt and Cotton Belt . Throughout the corn and cotton belts real estate increases drove the demand for more local funding to continue to supply rising agricultural economics . The rural banking structures would supply the needed capital to meet the farm commodity market, however, this came with a price of reliability and low risk lending . Economic growth was promising from 1887 to 1920 with an average of 6 percent growth in (GDP). In particular the participation in World War I drove a booming agricultural market that drove optimism at the consumer and lending level which, in turn, resulted in a more lax approach in the lending process . Overbanked conditions existed which pressured struggling banks to increase their services (specifically to the agricultural customers) without any additional regulatory oversight or qualifications . This dilemma introduced several high risk and marginal business returns to the banking market . Banking growth would continue through the first two decades well outside of previous trends disregarding the current economic and population standards . Banking profitability and loan standards begin to deteriorate as early as 1900 as a result . </P> <P> Crop failures beginning in 1921 began to impact this poorly regulated system, the expansion areas of corn and cotton suffered the largest due to the dust bowl era resulting in real estate value reductions . In addition, the year 1921 was the peak for banking expansion with roughly 31,000 banks in activity, however, with the failures at the agricultural level 505 banks would close between 1921 - 1930 marking the largest banking system failure on record . Regulatory questions began to hit the debating table around banking qualifications as a result; discussions would continue into the (Great Depression) as not only were banks failing but some would disappear altogether with no rhyme or reason . The panic of financial crisis would increase in the Great Depression due to the lack of confidence in the regulatory and recovery displayed during the 1920s, this ultimately drove a nation of doubts, uneasiness, and lack of consumer confidence in the banking system . </P>

• why was there so much optimism in the united states in the late 1920s
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