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Financial Failure and Depositor Quality: Evidence from Building and Loan Associations in California

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  • Todd Messer

Abstract

Flightiness, or depositor sensitivity to liquidity needs, can be an important determinant of financial distress. I leverage institutional differences that attract depositors with varying flightiness across building and loan associations in California during the Great Depression. A new type of plan, the Dayton plan, involved less restrictive savings plans and lower withdrawal penalties. Dayton plans in California were more likely to close during the Great Depression. Archival evidence on lending rates and returns supports the flightiness mechanism.

Suggested Citation

  • Todd Messer, 2022. "Financial Failure and Depositor Quality: Evidence from Building and Loan Associations in California," International Finance Discussion Papers 1354, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1354
    DOI: 10.17016/IFDP.2022.1354
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    References listed on IDEAS

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    JEL classification:

    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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