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Reprint of: Stopping contagion with bailouts: Micro-evidence from Pennsylvania bank networks during the panic of 1884

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  • Anderson, Haelim Park
  • Bluedorn, John C.

Abstract

Using a newly constructed historical dataset on the Pennsylvania state banking system, detailing the amounts of “due-froms” on a debtor bank-by-debtor bank basis, we investigate the effects of the Panic of 1884 and subsequent private sector-orchestrated bailout of systemically important banks (SIBs) on the broader banking sector. We find evidence that Pennsylvania banks with larger direct interbank exposures to New York City changed the composition of their asset holdings, shifting from loans to more liquid assets and reducing their New York City correspondent deposits in the near-term. Over the long-term though, only the lower correspondent deposits effect persisted. Our findings show that the banking turmoil in New York City impacted more exposed interior banks, but that bailouts of SIBs by the New York Clearing House likely short-circuited a full-scale banking panic.

Suggested Citation

  • Anderson, Haelim Park & Bluedorn, John C., 2017. "Reprint of: Stopping contagion with bailouts: Micro-evidence from Pennsylvania bank networks during the panic of 1884," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 221-231.
    • Handle: RePEc:eee:jbfina:v:83:y:2017:i:c:p:221-231
    DOI: 10.1016/j.jbankfin.2017.07.015
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    More about this item

    Keywords

    Financial networks; Contagion; Systemic risk; Systemically important banks (SIBs); Banking crisis; Bailout; Liquidity provision; New York Clearing House; Panic of 1884;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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