For more than a year, business economics major John Lee and his team have been collecting an impressive set of research detailing the lives of bankers, and the companies they ran leading into the Great Depression. 

Lee, who is a fourth year, leads one of two student groups assigned to collect data from the 1920s and 30s on characteristics and balances of major American banks. The other group, led by second-year economics student James Chao, focuses on the personal lives of bank CEOs of the time and, looking through old newspaper articles, determines which banks survived the Great Depression and which did not.

Both student research teams are overseen by economics professor Gary Richardson as part of a special workshop, supported in part by the UCI Program in Corporate Welfare, and continuing work conducted last year in the Summer Program in Corporate Welfare.

When Lee first found out about the opportunity to conduct undergraduate research with Richardson, he was eager to participate to gain experience for his senior thesis. Additionally, the historical component appealed to him.

“You could get a little bit of sense of how American history converges with economic history,” Lee says. This wasn’t the sort of topic he typically learned about in class.

Lee says that the statistics programming experience he gained from the project recently helped him land a job in a consulting firm, having been required to conduct analyses on vast data sets in the past year.

The group met about 20 times this academic year on Fridays, with 10 to 12 students attending each week. After having lunch together, members discuss their research, exploring the causes and consequences of bank failures during the Great Depression.

Lee and several members of his research team will present their findings on May 19 at the UC Irvine Undergraduate Research Symposium (UROP).

Mitigating Modern Day Risk

One of the most important trends the team found was that if a bank failed and was suspended during the Great Depression, banking executives — particularly the CEOs and CFOs — had to find a different job in order to make a living. Their incomes in 1940 were also on average over $1,000 lower than the salaries of executives of banks that did not fail. For perspective, the median income for a man in 1940 was less than $1,000.

Why is it important to collect historical data and analyze it? According to Lee, it’s an issue of policy making.

“The analysis will give us an insight of how banks operated during this time period and we can compare and contrast to modern times: Do we see the same type of behavior of the banks that operated today? How can lessons learned from the Great Depression be implemented so that this management or risky behavior can be mitigated in the modern time period?”

All in all, banking executives took more responsibility for misconduct compared to modern day executives; convicted executives served prison time and this suggested that running an unsuccessful bank could have affected the bankers’ lives more so during the Great Depression.

In the other student group, James Chao studies the personal lives of banking executives during the time period. He says that a lot of the research “has to do with the 2008 recession and the mortgage lending problems with the banks during 2008.”

At that time, trillions of dollars were lost perhaps because bankers did not face large consequences for misconduct. Following the devastating stock market crash in 1929, new policies were implemented protecting banking executives, making it harder to prosecute those whose fraudulent actions benefited them personally at the risk of everyone else.

“So we’re seeing whether or not these policies are good policies. And in order to do that, we have to basically track the differences between 2008 and the 1930s crisis,” says Chao.

Research Beyond the Classroom

Freda Jia, a graduate student who plans to pursue a career in economic research, saw the opportunity to do research with Professor Richardson on the Great Depression as a perfect transition from her honor thesis on the 2008 financial crisis. She received her undergraduate degree at UCI and is completing a one-year masters degree as part of the “four plus one” program.

Jia says she struggled to transition from undergraduate to more intense graduate studies, especially when it came to navigating data structures and specialized software. Working on Richardson's team as a graduate student helped change that.

She thinks it’s very important for beginning researchers to have supportive peers who can work together towards the same goal.

“We don’t have a very organized plan for research, we don’t know which website to look at and what software we should use and what kind of literature we should look into — but I think this program gives us a lot of direct guidance,” says Jia.

- Helena Carlson and Elyse Joseph, UC Irvine