Banking panics, bank failures, and the lender of last resort: the Showa Depression of 1930–1932

2009 ◽  
Vol 61 (4) ◽  
pp. 776-800 ◽  
Author(s):  
Fumio Akiyoshi
Keyword(s):  
Bank Failures ◽  
Lender Of Last Resort ◽  
Banking Panics

Bank Failures, The Great Depression, and Other “Contagious” Events

2019 ◽  
pp. 909-927
Author(s):  
Charles W. Calomiris
Keyword(s):  
Public Policy ◽  
Great Depression ◽  
Deposit Insurance ◽  
Policy Implications ◽  
Bank Failures ◽  
Historical Evidence ◽  
Lender Of Last Resort ◽  
Safety Nets ◽  
The Public ◽  
The Great Depression

Deposit withdrawal pressures on banks, which sometimes take the form of sudden runs, have figured prominently in the discussion of public policy toward banks and the construction of safety nets such as deposit insurance and the lender of last resort. This chapter examines historical evidence from the Great Depression, and other episodes, on the factors that prompted withdrawals, the discussion of contagious runs, and the public policy implications. The historical evidence is presented in detail and is connected to the debate over the proper roles of deposit market discipline via the threat of withdrawals, the insurance of deposits, and lender-of-last-resort support for banks facing withdrawal pressures.

scholarly journals The Federal Reserve and Panic Prevention: The Roles of Financial Regulation and Lender of Last Resort

2013 ◽  
Vol 27 (4) ◽  
pp. 45-64 ◽  
Author(s):  
Gary Gorton ◽  
Andrew Metrick
Keyword(s):  
Federal Reserve ◽  
Financial Regulation ◽  
Institutional Design ◽  
Regulatory System ◽  
Lender Of Last Resort ◽  
The Great Depression ◽  
Board Of Governors ◽  
Discount Window ◽  
Banking Panics ◽  
Panic Prevention

This paper surveys the role of the Federal Reserve within the financial regulatory system, with particular attention to the interaction of the Fed's role as both a supervisor and a lender-of-last-resort. The institutional design of the Federal Reserve System was aimed at preventing banking panics, primarily due to the permanent presence of the discount window. This new system was successful at preventing a panic in the early 1920s, after which the Fed began to discourage the use of the discount window and intentionally create “stigma” for window borrowing—policies that contributed to the panics of the Great Depression. The legislation of the New Deal era centralized Fed power in the Board of Governors, and over the next 75 years the Fed expanded its role as a supervisor of the largest banks. Nevertheless, prior to the recent crisis the Fed had large gaps in its authority as a supervisor and as lender of last resort, with the latter role weakened further by stigma. The Fed was unable to prevent the recent crisis, during which its lender of last resort function expanded significantly. As the Fed begins its second century, there are still great challenges to fulfilling its original intention of panic prevention.

Book Reviews

2012 ◽  
Vol 50 (4) ◽  
pp. 1109-1113
Keyword(s):  
Financial Crises ◽  
Market Integration ◽  
Asset Prices ◽  
Exchange Rate Volatility ◽  
Asset Markets ◽  
Financial Contagion ◽  
Bank Failures ◽  
Interbank Market ◽  
Lender Of Last Resort ◽  
Private And Public

Goetz von Peter of Bank for International Settlements reviews, “Liquidity and Crises” by Franklin Allen, Elena Carletti, Jan Pieter Krahnen and Marcel Tyrell. The EconLit Abstract of this book begins: “Twenty-five previously published papers examine liquidity and its role in financial crises. Papers discuss preference shocks, liquidity, and central bank policy; endogenous liquidity in asset markets; financial intermediaries and markets; financial fragility, liquidity, and asset prices; interbank market integration under asymmetric information; banks as monitors of other banks-evidence from the overnight federal funds market; private and public supply of liquidity; liquidity, efficiency, and bank bailouts; financial crises, payment system problems, and discount window lending; liquidity, risk taking, and the lender of last resort; coordination failures and the lender of last resort-whether Walter Bagehot was right after all; competition among regulators and credit market integration; money in a theory of banking; liquidity and asset prices; collateral constraints in a monetary economy; inefficient credit booms; financial contagion through capital connections-a model of the origin and spread of bank panics; information contagion and bank herding; cash in-the-market pricing and optimal resolution of bank failures; credit risk transfer and contagion; estimating bilateral exposures in the German interbank market-whether there is a danger of contagion; asset market linkages in crisis periods; strategic complementarities and the twin crises; inefficient foreign borrowing-a dual- and common-agency perspective; and exchange rate volatility and the credit channel in emerging markets-a vertical perspective. Allen is Nippon Life Professor of Finance, Professor of Economics, and the codirector of the Wharton Financial Institutions Center in the Wharton School at the University of Pennsylvania. Carletti is Professor of Economics and Joint Chair of the Economics Department and the Robert Schuman Center for Advanced Studies at the European University Institute. Krahnen is Chair of Corporate Finance at Johann Wolfgang Goethe-University Frankfurt. Tyrell is Professor of Entrepreneurship and Finance at Zeppelin University. Index.”

Panics, payments disruptions and the Bank of England before 1826

2012 ◽  
Vol 19 (3) ◽  
pp. 289-309 ◽  
Author(s):  
John A. James
Keyword(s):  
Nineteenth Century ◽  
New York ◽  
Late Nineteenth Century ◽  
Bank Failures ◽  
Lender Of Last Resort ◽  
Early Nineteenth Century ◽  
Nineteenth Century America ◽  
Bank Of England ◽  
Regular Event ◽  
Financial Transactions

The structures of the banking systems in early nineteenth-century England and later nineteenth-century America were quite similar. In each the multitude of independent country or interior bankers maintained correspondent accounts with bankers in the metropolis, London and New York respectively, to hold reserves and to clear and settle financial instruments used in intercity financial transactions. In spite of such similarities in structure, the performances of the two systems were, however, rather different. Although panics were frequent and their extent widespread in late eighteenth- and early nineteenth-century England involving numerous bank failures, there was never a nationwide paralysis of the payments system such as had become a regular event in late nineteenth-century America. This was due to the Bank of England's functioning as a de facto lender of last resort even though such a role was not explicitly recognized or acknowledged until decades later.

Shadowy Banks and Financial Contagion during the Great Depression: A Retrospective on Friedman and Schwartz

2013 ◽  
Vol 103 (3) ◽  
pp. 73-78 ◽  
Author(s):  
Kris James Mitchener ◽  
Gary Richardson
Keyword(s):  
New York ◽  
Great Depression ◽  
Federal Reserve ◽  
Banking System ◽  
Financial Contagion ◽  
Bank Failures ◽  
Government Bonds ◽  
Real Effects ◽  
The Great Depression ◽  
Banking Panics

This essay assesses whether network linkages within the banking system amplified the real effects of bank failures during the Great Contraction. In 1929, nearly all interbank deposits held by Federal Reserve member banks belonged to “shadowy” nonmember banks which were outside the regulatory reach of federal regulators. Regional banking panics in the early 1930s drained these interbank deposits from central reserve city banks. Money-center banks in Chicago and New York responded to volatile and declining interbank deposits by changing their asset composition. They reduced their lending to businesses and individuals, and increased their holdings of cash and government bonds.

Early Warning Models for Bank Failures: Lessons from the Late 2000s Great Recession

2012 ◽  
Author(s):  
Xiaofei Li ◽  
Cesar L. Escalante ◽  
James E. Epperson ◽  
Lewell F. Gunter
Keyword(s):  
Early Warning ◽  
Great Recession ◽  
Bank Failures
Sign in / Sign up

Export Citation Format

Share Document