The (Dis)Advantages of Clearinghouses Before the Fed

Matthew Jaremski

No 23113, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Operating in individual cities, U.S. clearinghouses were the closest thing to a central bank before 1914, but they only assisted banks that chose to join the association. Using an annual bank-level database for seven states between 1880 and 1910, this paper shows that after the entry of a clearinghouse member banks were less likely and non-member banks in the same city were more likely to close. The results are driven by the fact that the presence of clearinghouses led all banks to become more exposed to systemic liquidity risk, yet only provided liquidity to member banks during panics.

JEL-codes: G21 G32 N21 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-his and nep-mon
Note: DAE
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Citations: View citations in EconPapers (1)

Published as Matthew Jaremski, 2018. "The (dis)advantages of clearinghouses before the Fed," Journal of Financial Economics, .

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