Stopping Contagion with Bailouts: Microevidence from Pennsylvania Bank Networks During the Panic of 1884

John Bluedorn and Haelim Park ()
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Haelim Park: Office of Financial Research

No 16-03, Working Papers from Office of Financial Research, US Department of the Treasury

Abstract: Using a newly constructed historical dataset on the Pennsylvania state banking system, detailing the amounts of "due-froms" on a debtor-bank-by-debtor-bank basis, we investigate the effects of the Panic of 1884 and subsequent private sector-orchestrated bailout of systemically important banks (SIBs) on the broader banking sector. We find evidence that Pennsylvania banks with larger direct interbank exposures to New York City changed the composition of their asset holdings, shifting from loans to more liquid assets and reducing their New York City correspondent deposits in the near-term. Over the long-term though, only the lower correspondent deposits effect persisted. Our findings show that the banking turmoil in New York City impacted more exposed banks outside New York City, but that bailouts of SIBs by the New York Clearinghouse likely short-circuited a full-scale banking panic.

Keywords: Bailouts; Contagion; Pennsylvania Bank Networks; Panic of 1884; Bank Runs (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016-03-30
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Citations: View citations in EconPapers (2)

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Journal Article: Stopping contagion with bailouts: Micro-evidence from Pennsylvania bank networks during the panic of 1884 (2017)
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