The Founding of the Federal Reserve, the Great Depression and the Evolution of the U.S. Interbank Network

Financial network structure is an important determinant of systemic risk. This paper examines how the U.S. interbank network evolved over a long and important period that included two key events: the founding of the Federal Reserve and the Great Depression. Banks established connections to correspondents that joined the Federal Reserve in cities with Fed offices, initially reducing overall network concentration. The network became even more focused on Fed cities during the Depression, as survival rates were higher for banks with more existing connections to Fed cities, and as survivors established new connections to those cities over time.

Keywords: Interbank Networks, Bank Concentration, Contagion, Systemically Important Financial Institutions, Federal Reserve Act, Great Depression

JEL Classification: G21, L14, N22

Suggested Citation: Suggested Citation

Jaremski, Matthew and Wheelock, David C., The Founding of the Federal Reserve, the Great Depression and the Evolution of the U.S. Interbank Network (2019-01-17). FRB St. Louis Working Paper No. 2019-2, Available at SSRN: https://ssrn.com/abstract=3318870 or http://dx.doi.org/10.20955/wp.2019.002