What was one of the chief reasons for bank failures in 1929-1930?

During the contraction from 1929 to 1933, the Federal Reserve System tracked changes in the

status of all banks operating in the United States and determined the cause of each bank suspension.

This essay analyzes chronological patterns in aggregate series constructed from that data. The analysis

demonstrates both illiquidity and insolvency were substantial sources of bank distress. Periods

of heightened distress were correlated with periods of increased illiquidity. Contagion via correspondent

networks and bank runs propagated the initial banking panics. As the depression deepened and

asset values declined, insolvency loomed as the principal threat to depository institutions.