Frenzy
Large commercial banks and their securities affiliates helped to finance an unsustainable credit boom and stock market bubble during the 1920s. Charles Mitchell of National City Bank and Albert Wiggin of Chase National Bank pioneered a new universal banking (“financial department store”) business model for large commercial banks. The rise of universal banks resulted in frenzied competition between those institutions and private investment banks. That rivalry resulted in the widespread marketing and sale of speculative, high-risk securities to unsophisticated, poorly informed investors. More than $80 billion of debt and equity securities were issued in the U.S. between 1919 and 1930. The easy availability of financing during the 1920s caused many American companies and households to overexpand and take on excessive debts. Those debt burdens left businesses and consumers in a highly vulnerable position when the credit boom suddenly ended in late 1929.