The Fed has, on at least two occasions since the Depression (and possibly more), prevented runs on the banking system, by simply guaranteeing the cash reserves of any bank that reported being under pressure. One has to dig into history a little to even find the situations (try "Adam Smith's" "The Money Game", or "Super Money". He described one of the situations in the late 60's in one of those two. I have long since given away my copies of both). The reason the stories are obscure is a tribute to the success of the Fed's efforts, and basically explains why few investors alive today have any familiarity at all with bank runs. In short, if no banks fail in 1929 to 1932, the Great Depression is a severe, but long-forgotten, recession, not even qualifying as a "panic".
Additionally, until recently, we all assumed that public accounting firms adhered to strict objective accounting standards regardless of what consulting services they offered. The Fed system has been a smashing success since the 30's. We can only hope that the accounting watchdog system about to be established will be as successful. Public accounting originated spontaneously around the beginning of the 20th century because similar disclosure frauds to what we have today were common then, also. (Yes, Virginia: Haskins and Sells, Touche and Ross, Peat and Marwick, Coopers, Lybrand, and even Authur Anderson were once real people). Public accounting's emergence made possible the giant corporation-with its economies of scale-like US Steel, General Motors, General Electric, etc. Today's large companies cannot survive without accounting being a rock of integrity, and that rock has recently been shown to have disappeared. That is a national emergency like plague, war, or famine. Despite the tawdry partisan sniping of the left wing Democrats, you will see both parties come together to solve the problem-just as they would if they were compelled to declare war... |
