The Influence of Banks on the Economy
Suggested Teaching Instructions
Topic: Influence of banks on the economy, Importance of banks
Skills: Map reading, Inferencing
These documents show the directors and budget of the Bank of Manhattan Trust Company in 1929 and locations of the Bank of Manhattan in NYC at the time.
Historical Context: In 1799, Aaron Burr forced through the NY Legislature a law allowing the establishment of a company to provide clean water to NYC during a period where outbreaks of yellow fever occurred often. The real purpose of the Manhattan Company, as it came to be called, may have been to conduct banking operations and break the monopoly held by federalist banking institutions. The company used its excess funds to offer “discount and deposit” services. Eventually, the Manhattan Company sold its water operations back to the city and continued on as a very important banking organization. Subsequently, the company merged with Chase and JP Morgan to emerge today as JP Morgan Chase.
This Statement of Conditions of the Bank of Manhattan Trust Company is from the company’s 1929 annual report. This record is courtesy of the Chase Manhattan Bank Archives. In addition to a listing of assets and liabilities, the annual report names members of the Board of Directors and includes a map of New York City in which all branches in the boroughs of Manhattan, Bronx, Queens, and Brooklyn are located. There is no mention of the October 1929 Stock Market crash.
Essential Questions: What does it mean to say “the economy is bad”? How can the status of banks indicate the level of the economy?
1. Project or write out the essential questions and brainstorm answers. Write the students’ responses on the board. (Unemployment, not spending money, debt, bankruptcy, etc.).
2. Inform the students that they will be looking at how economists use indicators to predict the health of the economy as a whole.
3. Project or have copies of the business cycle graphic. Explain the phases and have the students label them.
4. Ask the class what the purpose of the bank is. (To make money?)
5. How do banks fulfill their purpose? (Hold money, give out loans and charge interest)
6. Point out that banks can be one indicator of the economy and introduce the documents by defining depression, revenue, and liabilities
7. Have the class answer each of the following:
a. What does each document say about the status (health) of the bank?
ii. Statement of Condition
iii. Combined Statement of Condition
b. Using specific information from the documents, what does the status suggest?
c. What does this tell us about 1929?
8. Connect banking to causes and phases of depression.
Optional Extension Activity
The following activity could be completed in order to extend students’ thinking and encourage them to make connections:
1. Research Statement of Condition reports from banks that were written since 2005. How have the general conditions of banks impacted the economy?
2. Research what happens if a bank goes bankrupt. How does that impact its members and the economy?