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The Lender of Last Resort and the Run on the Savings and Loans

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  • Peter M. Garber

Abstract

Speculative runs on asset price fixing schemes are most often attributed either to an inexplicable mass hysteria or to a sudden, unpredictable random disturbance. Such attribution places runs and panics outside of the realm of scientific inquiry. Alternatively, in this paper I define the notion of a run as a discontinuous shift in portfolio asset holdings brought about by a belief in the end of the price fixing regime. I also argue that runs are foreseeable events and employ the current difficulties of S & L's to serve as an extended example which emphasizes such predictability.

Suggested Citation

  • Peter M. Garber, 1981. "The Lender of Last Resort and the Run on the Savings and Loans," NBER Working Papers 0823, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0823
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    1. Jack Guttentag & Richard Herring, "undated". "The Insolvency of Financial Institutions: Assessment and Regulatory Disposition," Rodney L. White Center for Financial Research Working Papers 17-81, Wharton School Rodney L. White Center for Financial Research.
    2. Stephen W. Salant & Dale W. Henderson, 1976. "Market anticipations, government policy, and the price of gold," International Finance Discussion Papers 81, Board of Governors of the Federal Reserve System (U.S.).
    3. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    4. Sargent, Thomas J & Wallace, Neil, 1973. "The Stability of Models of Money and Growth with Perfect Foresight," Econometrica, Econometric Society, vol. 41(6), pages 1043-1048, November.
    5. Salant, Stephen W & Henderson, Dale W, 1978. "Market Anticipations of Government Policies and the Price of Gold," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 627-648, August.
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    Cited by:

    1. Bordo, Michael D., 1986. "Explorations in monetary history: A survey of the literature," Explorations in Economic History, Elsevier, vol. 23(4), pages 339-415, October.
    2. François Marini, 1992. "Les fondements micro-économiques du concept de panique bancaire, une introduction," Revue Économique, Programme National Persée, vol. 43(2), pages 301-326.
    3. Michael D. Bordo, 1988. "The Contribution of a Monetary History of the United States: 1867 to 1960 To Monetary History," NBER Working Papers 2549, National Bureau of Economic Research, Inc.
    4. Nancy Marion, 1999. "Some Parallels Between Currency and Banking Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 473-490, November.

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