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Responding to a shadow banking crisis: the lessons of 1763

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  • Stephen F. Quinn
  • William Roberds

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.

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  • Stephen F. Quinn & William Roberds, 2012. "Responding to a shadow banking crisis: the lessons of 1763," FRB Atlanta Working Paper 2012-08, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:2012-08
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    Cited by:

    1. Accominotti, Olivier & Ugolini, Stefano, 2019. "International Trade Finance From the Origins to the Present: Market Structures, Regulation, and Governance," CEPR Discussion Papers 13661, C.E.P.R. Discussion Papers.
    2. Peter Koudijs & Hans-Joachim Voth, 2016. "Leverage and Beliefs: Personal Experience and Risk-Taking in Margin Lending," American Economic Review, American Economic Association, vol. 106(11), pages 3367-3400, November.
    3. Quinn, Stephen & Roberds, William, 2014. "How Amsterdam got fiat money," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 1-12.
    4. Stephen Quinn & William Roberds, 2014. "The Bank of Amsterdam Through the Lens of Monetary Competition," Financial and Monetary Policy Studies, in: Peter Bernholz & Roland Vaubel (ed.), Explaining Monetary and Financial Innovation, edition 127, pages 283-300, Springer.
    5. William Roberds & Francois R. Velde, 2014. "Early Public Banks," FRB Atlanta Working Paper 2014-9, Federal Reserve Bank of Atlanta.
    6. Mike Anson & David Bholat & Miao Kang & Ryland Thomas, 2017. "The Bank of England as Lender of Last Resort: New historical evidence from daily transactional data," Working Papers 0117, European Historical Economics Society (EHES).
    7. Milovan Stanisic & Danka Stefanovic & Nada Arezina & Vule Mizdrakovic, 2013. "Analysis of auditor`s reports and bankruptcy risk in banking sector in the Republic of Serbia," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 15(34), pages 431-441, June.
    8. Menno Broos & Krit Carlier & Jan Kakes & Eric Klaaijsen, 2012. "Shadow Banking: An Exploratory Study for the Netherlands," DNB Occasional Studies 1005, Netherlands Central Bank, Research Department.
    9. Stephen F. Quinn & William Roberds, 2017. "An Early Experiment with \"Permazero\"," FRB Atlanta Working Paper 2017-5, Federal Reserve Bank of Atlanta.
    10. Beau Soederhuizen & Bert Kramer & Harro van Heuvelen & Rob Luginbuhl, 2021. "Optimal capital ratios for banks in the euro area," CPB Discussion Paper 429, CPB Netherlands Bureau for Economic Policy Analysis.
    11. François R. Velde, 2018. "Neapolitan Banks in the Context of Early Modern Public Banks," Palgrave Studies in the History of Finance, in: Lilia Costabile & Larry Neal (ed.), Financial Innovation and Resilience, chapter 0, pages 201-241, Palgrave Macmillan.
    12. Gary B. Gorton, 2012. "Some Reflections on the Recent Financial Crisis," NBER Working Papers 18397, National Bureau of Economic Research, Inc.
    13. Avaro, Maylis & Bignon, Vincent, 2019. "At Your Service! Liquidity Provision and Risk Management in 19th Century France," CEPR Discussion Papers 13556, C.E.P.R. Discussion Papers.
    14. Gary B. Gorton, 2016. "The History and Economics of Safe Assets," NBER Working Papers 22210, National Bureau of Economic Research, Inc.

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