nd the entertainment businesses. This brought on the constant danger of devastation by reverse leverage. This meant that money made by these operations was used to pay interest on the bonds of the holding companies. Thus, when there was a break in the money coming in, companies could not make payments and were forced into bankruptcy, which trickled down the ladder. The third reason given was the bad banking structure which was in place in the 20's and into the 30's. Banks at this time were run individually, thus, when a bank failed or went belly up because of aggregate deposits, it started a domino effect. In 1929 alone, 346 banks closed their doors, leaving people out in the cold, with no money, money which they had trusted in the hands of these banks. This of course left the people with a bad taste in their mouths, and caused them to stop putting money in banks, relying instead on the bottom side of their mattresses. The bad running of banks ties into corruption also. The men who ran banks, men like Charles E. Mitchell, were more interested in keeping the stock market boom going rather then the health of the banks which they ran. These men kept interest rates low and gave bad loans to people who mostly had no hope of ever paying back. The fourth reason stated was the dubious state of the foreign balance. During the 20's, America was exporting more then importing. This was mostly because of high tariffs, and this resulted in other nations not being able to pay their debts to the United States. J. and W. Seligman and Company and the National City Company were thus giving out loans to nations such as Peru and Cuba. This of course made no sense economically. American companies were loaning money to people to pay America. The only way this could be stopped was to raise the level of imports coming in from these nations and congress saw to it that would not be done. Thus, export levels went down and this had a dramatic effect especially on f...
