Liquidity Creation Without a Lender of Last Resort: Clearinghouse Loan Certificates in the Banking Panic of 1907
Ellis W. Tallman
Jon R. Moen
University of Mississippi - Department of Economics
July 27, 2010
Revision of FRB of Atlanta Working Paper No. 2006-23
We employ a new data set comprised of disaggregate figures on clearing house loan certificate issues in New York City to document how the dominant national banks were crucial providers of temporary liquidity during the Panic of 1907. Clearing house loan certificates were essentially “bridge loans” arranged between clearing house members. They enabled and were issued in anticipation of gold imports, which took a few weeks to arrive. The large, New York City national banks acted as private liquidity providers by requesting (and the New York Clearing House issuing) a volume of clearing house loan certificates beyond their own immediate liquidity needs, in accord with their role as central reserve city banks in the national banking system.
Number of Pages in PDF File: 48
Keywords: clearing house, financial crisis, panic, lender of last resort
JEL Classification: N11, N21, E42, D71working papers series
Date posted: December 4, 2006 ; Last revised: July 30, 2010
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