Too Big to Fail in 1930: The Bank of United States, Anti-Semitism, and the Long Shadow of Immigrant Banking

Founded in 1906 by a Russian-Jewish immigrant to cater to his fellow immigrants economic needs, the Bank of the United States, despite its grandiose name, was actually a commercial bank that drew most of its clients from New York City’s immigrant neighborhoods. By 1930, it rapidly expanded to become the largest commercial bank in the country, with over 440,000 depositors and $300 million in assets. When questions arose about it solvency, the Federal Reserve of New York refused to help save the bank because of ‘its immigrant clientele and leadership;’ the bank closed its doors in December 1930. Analysis of the harm done by the failure of the Bank of United States has attracted economists’ attention for the past eighty years. Scholars spanning from Milton Friedman to Ben Bernanke have debated the role its closure played in propelling the United States from the recession of 1929 into “the great contraction.” Who were the ‘untrustworthy’ depositors in the Bank of United States that members of the Federal Reserve refused to help? Virtually erased in discussions of this historic bank failure are the ways in which anti-Semitism and suspicion of immigrants’ banking practices figured into this tale of failed bail out. In the age before the FDIC, depositors who held money in banks allowed to fail appreciated the inequality in the system as they saw first hand the role religion and immigrant status playing in deciding who were the ‘winners’ and ‘losers’ in America’s commercial banking industry.