/ 25 September 2008

Financial crisis revives memories of Great Depression

When Wall Street crashed in 1929, retiree Helen Haas remembers lining up with her mother at a Chicago bank to withdraw her $50 in savings — and coming away with just $2.

Emerson Colaw recalls his family losing the farm in Kansas when the bank closed, leaving his father with no seed money to plant the next year’s crops.

As millions were pitched out of work in the Great Depression that followed, Carl Oles remembers having to stand in line for stale bread in Baltimore.

”We weren’t able to afford fresh bread, and there was a bakery right across the street. The best we could do was get bread that was a week old, bring it home and warm it up,” Oles said.

United States lawmakers are locked in a debate this week over a $700-billion bail-out for investment banks to head off what some say could be the biggest financial crisis since the Great Depression.

While most Americans have felt little effect from the turmoil on Wall Street, talk of financial crisis stirs memories of the credit crunch eight decades ago that drove a generation of workers off their farms, out of their jobs, and brought many to the brink of starvation.

Haas, at 94, is a snowy haired senior living in a Phoenix retirement home. She recalls how her mother took in boarders at the family’s west Chicago apartment in the 1930s to help make ends meet, while outside on the streets jobless workers faced hunger.

”People were starving. There were lines of people standing in line just to get an apple. It was pathetic,” she said.

Across the country in Baltimore, life was no easier for Oles, now 83. He swept the sidewalk and cleaned cars to make a few extra cents for his family, who got by on simple meals of peas and corn, padded out with musty old loaves.

Colaw, meanwhile, watched as families in rural Kansas resorted to a barter system to get by in the cash-strapped 1930s, when about 9 000 banks fell like dominoes across the United States.

”One of the great dramatic moments in my life was getting a bicycle. My mom delivered dressed chickens to the proprietor, to his home, that’s how she paid for my bicycle, God love her,” said Colaw, now aged 86.

Aversion to debt
Lawmakers in Congress continued to wrangle this week over a plan put forward by President George Bush to acquire up to $700-billion in home and commercial mortgages to stabilise banks by taking bad assets off their books.

The move seeks to avert a reprise of the kind of drastic credit crunch after the ”Great Crash” of 1929 that triggered a global recession.

The current crisis has already altered the landscape of Wall Street, where investment banks have gone bust, been taken over by the government, or forced into the arms of larger institutions.

For the now elderly generation that weathered the 1930s, the shattering experience of wiped-out savings, hardship and hunger changed the way they managed their finances in the long, slow recovery that followed.

Like most in her generation, Haas and her husband saved every dollar they could, setting aside money each month for their home mortgage, and buying big ticket items such as a car with cash after several years of saving.

”There was no such thing as a credit card then. My husband wouldn’t buy anything unless we could pay cash for it,” she said.

Colaw, who became a United Methodist minister and is now retired in Cincinnati, did not take a credit card until 1948, and ever since has been sure to settle the balance each month.

”Because I have such an aversion to debt, I have never carried over in my credit cards, they are always paid in full,” he said.

It is far from clear how the current financial crisis will be resolved. But as the markets continue to gyrate, like others of his generation, Colaw is clear that he would not like to see a return to Depression like-times.

”We hope we don’t get to that.” — Reuters