Responding to a Shadow Banking Crisis: The Lessons of 1763

FRB Atlanta Working Paper Series No. 2012-8

68 Pages Posted: 9 Aug 2012

See all articles by Stephen Quinn

Stephen Quinn

Texas Christian University - Department of Economics

William Roberds

Federal Reserve Bank of Atlanta

Date Written: June 1, 2012

Abstract

In August 1763, northern Europe experienced a financial crisis with numerous parallels to the 2008 Lehman Brothers episode. The 1763 crisis was sparked by the failure of a major provider of acceptance loans, a form of securitized credit resembling modern asset-backed commercial paper. The central bank at the hub of the crisis, the Bank of Amsterdam, responded by broadening the range of acceptable collateral for its repo transactions. Analysis of archival data shows that this emergency source of liquidity helped to contain the effects of the crisis, by preventing the collapse of at least two other major securitizers. While the underlying themes seem to have changed little in 250 years, the modest scope of the 1763 liquidity intervention, together with the lightly regulated nature of the eighteenth century financial landscape, provide some informative contrasts with events of late 2008.

Keywords: shadow banks, central banks, liquidity

JEL Classification: E58, G01, G21, N21

Suggested Citation

Quinn, Stephen and Roberds, William, Responding to a Shadow Banking Crisis: The Lessons of 1763 (June 1, 2012). FRB Atlanta Working Paper Series No. 2012-8. Available at SSRN: https://ssrn.com/abstract=2126412 or http://dx.doi.org/10.2139/ssrn.2126412

Stephen Quinn

Texas Christian University - Department of Economics ( email )

Fort Worth, TX 76129
United States

William Roberds (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8970 (Phone)
404-498-8956 (Fax)

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