Working Paper
Too-Big-to-Fail before the Fed
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; ;
JEL Classification: E02; E32; E42; E52; E58;
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https://www.clevelandfed.org/newsroom-and-events/publications/working-papers/2016-working-papers/wp-1612-too-big-to-fail-before-the-fed.aspx
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Provider: Federal Reserve Bank of Cleveland
Part of Series: Working Papers (Old Series)
Publication Date: 2016-05-06
Number: 1612
Pages: 14 pages