In keeping with Republican Party ideology, both Coolidge and Harding were passionate believers in laissez-faire. This was the notion that the economy would prosper if left to operate with minimal government involvement. The idea was that government should set the rules of the game and then stand back and allow businesses to get on with investing and creating jobs.

As the 1920s progressed, it seemed that laissez-faire was working remarkably well. During this decade, the United States experienced unprecedented levels of prosperity. The stock market soared to record heights, productivity dramatically increased, and levels of unemployment remained low. With such impressive results, there seemed no need to change existing economic policy.

But in actual fact, the Republican administrations of the 1920s were storing up trouble for future generations. The lack of proper regulation, especially in relation to banks and other financial institutions, meant that when the good times ended—and they always would—the damage for businesses and workers alike would be catastrophic.

A foretaste of what would happen during the Great Depression took place during Coolidge's presidency when somewhere in the region of 5,000 banks in rural areas went out of business. Yet Coolidge pointedly refused to help those banks, believing as he did that they went out of business because they were unable to compete in the marketplace. Coolidge was so hide-bound by the ideology of laissez-faire that he was unable and unwilling to regulate the banking system properly or to help banks when they went out of business.