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Oh, How the Mighty Have Fallen: The Bank Failures and Near Failures That Started America’s Greatest Financial Panics

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  • Rockoff, Hugh

Abstract

This paper examines the failures or in some cases near-failures of financial institutions that started the 12 most severe peacetime financial panics in the United States, beginning with the Panic of 1819 and ending with the Panic of 2008. The following generalizations were true in most cases, although not in all. (1) Panics were triggered by a short series of failures or near-failures; (2) many of the failing institutions were what we would now call shadow banks; (3) typically, the source of trouble was an excessive investment in real estate; and (4) typically, they had outstanding reputations for trustworthiness, prudence, and financial acumen—before they failed. It appears that in these respects the Panic of 2008 was an old-school panic. [a panic] occurs when a succession of unexpected failures has created in the mercantile, and sometimes also in the non-mercantile public a general distrust in each other’s solvency; disposing every one not only to refuse fresh credit, except on very onerous terms, but to call in, if possible all credit which he has already given. —John Stuart Mill All of this has happened before, and it will all happen again. —Peter Pan

Suggested Citation

  • Rockoff, Hugh, 2021. "Oh, How the Mighty Have Fallen: The Bank Failures and Near Failures That Started America’s Greatest Financial Panics," The Journal of Economic History, Cambridge University Press, vol. 81(2), pages 331-358, June.
    • Handle: RePEc:cup:jechis:v:81:y:2021:i:2:p:331-358_1
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    Cited by:

    1. Rockoff, Hugh, 2022. "Milton Friedman on bailouts," Journal of Financial Stability, Elsevier, vol. 63(C).
    2. Cebula, Richard J. & Xu, Jiay, 2023. "A Brief Survey of Recent Studies of Bank Failures in the U.S," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(2), pages 265-274.
    3. Benjamin Schneider & Hillary Vipond, 2023. "The Past and Future of Work: How History Can Inform the Age of Automation," CESifo Working Paper Series 10766, CESifo.
    4. Schneider, Benjamin & Vipond, Hillary, 2023. "The past and future of work: how history can inform the age of automation," Economic History Working Papers 119282, London School of Economics and Political Science, Department of Economic History.

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    JEL classification:

    • N2 - Economic History - - Financial Markets and Institutions

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