Working Paper
Origins of Too-Big-to-Fail Policy
Prescott, Edward Simpson; Nurisso, George (2017-05-24)
This paper traces the origin of the too-big-to-fail problem in banking to the bailout of the $1.2 billion Bank of the Commonwealth in 1972. It describes this bailout and those of subsequent banks through that of Continental Illinois in 1984. Motivations behind the bailouts are described with a particular emphasis on those provided by Irvine Sprague in his book Bailout. During this period, market concentration due to interstate banking restrictions is a factor in most of the bailouts, and systemic risk concerns were raised to justify the bailouts of surprisingly small banks. Sprague?s ...
Working Papers (Old Series) , Paper 1710

Journal Article
The 1970s Origins of Too Big to Fail
Prescott, Edward Simpson; Nurisso, George (2017-10)
In 1972, bank regulators bailed out the $1.2 billion Bank of the Commonwealth partly because they viewed it as ?too big to fail.? We describe this bailout and subsequent ones through that of Continental Illinois in 1984 and use the descriptions to draw lessons about too-big-to-fail policy. We argue that some of the same issues that motivated bailouts during this earlier period, particularly worries about banking concentration, are relevant today.
Economic Commentary , Issue October