Alexander Hamilton, Central Banker: Crisis Management During the U.S. Financial Panic of 1792

Posted: 30 Jan 2009 Last revised: 11 Feb 2011

Richard Sylla

New York University - Stern School of Business, Department of Economics

Robert E. Wright

Augustana College - Division of Social Sciences

David J. Cowen

Quasar Capital Partners

Date Written: January 30, 2009

Abstract

Most scholars know little about the Panic of 1792, America's first financial market crash, during which securities prices dropped nearly 25 percent in two weeks. Treasury Secretary Alexander Hamilton adroitly intervened to stem the crisis, minimizing its effect on the nascent nation's fragile economic and political systems. U.S. policymakers soon forgot the crisis management techniques Hamilton invented but failed to codify. Many of them were later rediscovered, and became theoretical and practical standards of modern central bank crisis management. Hamilton, for example, formulated and implemented Bagehot's rules for central bank crisis management eight decades before Walter Bagehot wrote about them in Lombard Street.

Keywords: Panic of 1792, Alexander Hamilton, Bagehot's Rules, government bonds, securities markets, financial crises

JEL Classification: B10, B31, E44, E58, E61, E65, N11, N21, N41

Suggested Citation

Sylla, Richard and Wright, Robert E. and Cowen, David J., Alexander Hamilton, Central Banker: Crisis Management During the U.S. Financial Panic of 1792 (January 30, 2009). Business History Review, Vol. 83, pp. 61-86, Spring 2009. Available at SSRN: https://ssrn.com/abstract=1335332

Richard Sylla (Contact Author)

New York University - Stern School of Business, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0869 (Phone)

Robert Eric Wright

Augustana College - Division of Social Sciences ( email )

2001 Summit Ave.
Sioux Falls, SD 57197
United States
605-274-5312 (Phone)

HOME PAGE: http://faculty.augie.edu/~rwright/

David J. Cowen

Quasar Capital Partners ( email )

3 Becker Farm Road
Roseland, NJ 07976
United States

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