What did Ben Bernanke identify as a key factor leading to the Great Depression in the U.S.?

Ben Bernanke, a renowned economist and former chair of the Federal Reserve, emphasized that the failure of banks due to a lack of regulation was a key factor leading to the Great Depression. During the 1920s, many banks operated with insufficient oversight, which resulted in risky lending practices. When the stock market crashed in 1929, it triggered a series of bank failures, as banks were unable to recover their investments or fulfill withdrawal demands from depositors. This loss of banking institutions not only decreased the availability of credit but also led to a widespread panic among the public. As trust in the banking system eroded, consumers pulled their money from banks, further compounding the crisis.

The impact of these bank failures extended far beyond immediate financial loss. The collapse of the banking system caused a significant contraction in the money supply, aggravating the economic downturn and deepening the recession. Bernanke's research indicates that this banking crisis was a crucial element in transforming a typical economic downturn into the protracted and severe Great Depression that lasted throughout the 1930s.