The Year the Banks Failed

Recent bank failures—and moves by the U.S. government to protect the banks’ depositors—have sent shock waves through banking stocks and jitters through the markets at large. Banking, of course, is all about confidence, and when confidence evaporates, things can change very quickly.

The First National was one of three banks founded in little Rock River, Wyo., in 1919. It failed in 1923, despite its officers' attempts to save it by looting town and school board funds. The building now belongs to the town. Tom Rea photo.

That’s what happened earlier this month, when Silicon Valley Bank in California suddenly sold off billions in bonds at steep losses to raise cash to pay off nervous depositors—and something similar happened at Signature Bank in New York. San Francisco-based First Republic Bank, as of this writing, is still in trouble despite a $30 billion infusion of capital from other, larger banks. Crédit Suisse, facing quite different problems from the American banks, also faltered and has been absorbed by a rival, UBS.

These events are pretty far from Wyoming geographically and, according to bankers here, economically as well. Wyoming banks are far smaller than the ones lately in the news, far more stable and focused on their local communities, the bankers say. Still, Wyoming is not entirely separate; First Republic has branches in Jackson and Wilson.

All these recent national and international banking events recalled for us the Wyoming bank crises of the early 1920s, when plunging crop and livestock prices after World War I sent Wyoming into an agricultural tailspin that preceded the Great Depression by nearly 10 years. Banks were failing all over the place. They were largely unregulated and there was no government insurance for depositors. But at the same time, the oil business in Wyoming was booming; different parts of the economy were more separate then.

This week, therefore, seems to us like a good moment to revisit the banking events of the 1920s, starting with the fortunes of a bank in the irrigated-farming town of Powell, Wyo., in the northern Bighorn Basin. When we wrote the article years ago, partly for our own education, we took the chance to peer back into Territorial times. Just what is a bank, anyway, and how did banks come to be what they are? And, most important, how safe are they? All good questions these days. See more at 1924: The Year the Banks Closed.