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What was the main cause of bank failures before the FDIC's creation?

  • Bank runs

  • Poor management

  • Natural disasters

  • Economic booms

Answer

Before the FDIC's creation, more than one-third of banks failed, and bank runs were common. Bank runs occur when a large number of customers withdraw their deposits simultaneously due to concerns about the bank's solvency. The FDIC was established to restore trust in the banking system and prevent bank runs.
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