'Loans for the Little Fellow:' Credit, Crisis, and Recovery in the Great Depression

Abstract

This paper identifies the importance of credit supply for local economic activity during the Great Depression. Using archival data and narrative evidence, I study Bank of America's branch network in 1930s California. Bank of America's use of internal capital markets helped it to maintain a 37 percent higher rate of growth in lending between 1929 and 1933 compared to its competitors. Bank of America's presence caused smaller city property value contractions and stronger recoveries through 1940. Linked individual data show better credit supply hastened the transition away from agricultural employment and towards human capital-intensive sectors, raising wages in the recovery.

Keywords: Great Depression, Credit Supply, Branch Banking, Structural Transformation

JEL Classification: E44, G01, G21, N22, R23