Stock Market Crash (continued)
Banks had loaned money to people to buy stocks. When the market crashed, people could not afford to pay back money owed to the banks. Banks ended up with collateral that could not be sold, such as homes and cars, and they began to fail. Since money was not insured at that time, people lost their entire savings. The banks that were able to weather the crash stopped lending money.
People could not afford to purchase goods, so businesses began to lay off workers and the number of unemployed Americans began to rise. Congress passed the Hawley-Smoot Tariff in June of 1930 to force industries to buy American goods by raising the tax on goods that were imported into the U.S. Since it was now harder for European nations to sell goods in the United States, European countries answered by raising their tariffs also, and the goal of the U.S. tariff had backfired. The Gross National Product (GNP), or total value of goods and services produced annually, in America had fallen from $103 billion to $56 billion between 1929 and 1933. The economic condition of the United States became known as the Great Depression.
Run on a bank in 1929