Financial Failure and Depositor Quality: Evidence from Building and Loan Associations in California

Todd Messer

No 1354, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Flightiness, or depositor sensitivity to liquidity needs, can be an important determinant of financial distress. I leverage institutional differences that attract depositors with varying flightiness across building and loan associations in California during the Great Depression. A new type of plan, the Dayton plan, involved less restrictive savings plans and lower withdrawal penalties. Dayton plans in California were more likely to close during the Great Depression. Archival evidence on lending rates and returns supports the flightiness mechanism.

Keywords: Bank Failures; Banks, credit unions, and other financial institutions; Building and Loan; Great Depression (search for similar items in EconPapers)
JEL-codes: G21 G23 N22 (search for similar items in EconPapers)
Date: 2022-08-08
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-fdg and nep-his
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1354

DOI: 10.17016/IFDP.2022.1354

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