Expansion of Commercial Banks.

Commercial banks greatly expanded during the 1920s. Led by such firms as the Bank of America and Chase Manhattan, commercial banks merged and consolidated and entered new fields, vastly increasing their construction and consumer loans. These banks also became deeply involved in the securities business and, to their future regret, put huge sums into brokers' loans and call money-market loans (short-term loans subject to recall at any time), many of which failed.

Expansion of Investment Banks.

Perhaps the most startling expansion took place in the investment-banking field. The number of investment banks (that is, banks that did little or no commercial business, such as handling checking accounts, but instead lent funds to new entrepreneurs) rose from 277 in 1912 to 1,902 by 1929. These banks fueled the enormous increase, which took place during the great boom, in corporate offerings and in businesses.

Consolidation.