During World War I, American farmers benefited from high prices. Enjoying the extra income, many borrowed money to buy more land and equipment. But agricultural prices fell suddenly after the war. The cost to produce a bushel of wheat was seventy-six cents, but wheat was selling for only sixty cents!
Farmers lost money on every bushel, just as they did on every other agricultural product. Heavy farm debt, combined with low commodity prices, led to farm foreclosures. And in North Dakota, the economic problems were compounded by severe drought. The value of farmland plummeted. Land worth forty-one dollars an acre in 1920 was worth only thirteen dollars by 1940.
North Dakota’s banks were soon on shaky ground. They made money by charging interest on loans, and they needed the money deposited by customers to make those loans. Banks had made too many loans to farmers in the 1920s when agricultural prices were high. By the 1930s, farmers couldn’t repay those loans.
Banks began going out of business. By 1933, over five hundred North Dakota banks had shut their doors. Bank customers, afraid of losing their deposits, rushed to withdraw their money, deepening the crisis.
In the presidential election of 1932, Americans did not believe President Herbert Hoover could get the country back on track. Franklin D. Roosevelt was propelled into the White House in a landslide victory. Inaugurated on March 4, 1933, Roosevelt knew he had no time to waste. He had to take drastic measures very quickly. On this date in 1933 he declared a bank holiday. Banks had to remain closed for a week. The Emergency Banking Act was intended to stabilize the American banking system, stemming bank failures and restore the faith of Americans in the financial system.
The move had an almost immediate effect. Within two weeks, North Dakota newspapers were reporting that the banks were back to normal. But the Depression continued. Over 80,000 people gave up and left the state during the ‘30s, and it took the oil boom of 2010 for the state to finally surpass the population of 1930.
Dakota Datebook by Dr. Carole Butcher
Sources:
- The Bismarck Tribune. “Banking System is Approaching Normal.” Bismarck ND. 3/13/1933. Page 1.
- The Bismarck Tribune. “City Banks Back to Normal.” Bismarck ND. 3/15/1933. Page 1.
- ND Studies. “The Great Depression.” https://www.ndstudies.gov/gr8/content/unit-iv-modern-north-dakota-1921-present/lesson-2-making-living/topic-2-great-depression-and-drought/section-1-great-depression Accessed 2/5/2023.
- Federal Reserve History. “The Bank Holiday of 1933.” https://www.federalreservehistory.org/essays/bank-holiday-of-1933 Accessed 2/5/2024.
