Too-Big-to-Fail before the Fed

Gary Gorton and Ellis Tallman

No 1612, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: ?Too-big-to-fail? is consistent with policies followed by private bank clearing houses during financial crises in the U.S. National Banking Era prior to the existence of the Federal Reserve System. Private bank clearing houses provided emergency lending to member banks during financial crises. This behavior strongly suggests that ?too-big-to-fail? is not the problem causing modern crises. Rather, it is a reasonable response to the threat posed to large banks by the vulnerability of short-term debt to runs.

Keywords: Financial crisis; bank runs; banking panics; clearinghouses; bank-specific information; currency premium (search for similar items in EconPapers)
JEL-codes: E02 E32 E42 E52 E58 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2016-05-06
New Economics Papers: this item is included in nep-ban, nep-his, nep-mac and nep-mon
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Citations: View citations in EconPapers (8)

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Journal Article: Too Big to Fail before the Fed (2016)
Working Paper: Too-Big-To-Fail Before the Fed (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1612

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