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Clearinghouse Loan Certificates as Interbank Loans

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  • Christopher Hoag

    (Department of Economics, Trinity College)

Abstract

Before the founding of the Federal Reserve, bank clearinghouse associations served as a lender of last resort during the National Bank Era (1863-1913). This paper clarifies the operation of clearinghouse loan certificates during panic periods. If clearinghouse loan certificates are prohibited from circulating among the general public, then clearinghouse loan certificates should be viewed as interbank loans among clearinghouse member banks and not loans from a central clearinghouse organization to individual members.

Suggested Citation

  • Christopher Hoag, 2015. "Clearinghouse Loan Certificates as Interbank Loans," Working Papers 1504, Trinity College, Department of Economics, revised Jun 2015.
    • Handle: RePEc:tri:wpaper:1504
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    File URL: http://www3.trincoll.edu/repec/WorkingPapers2015/WP15-04.pdf
    File Function: Third version, 2015
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    References listed on IDEAS

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    1. Moen, Jon R. & Tallman, Ellis W., 2000. "Clearinghouse Membership and Deposit Contraction during the Panic of 1907," The Journal of Economic History, Cambridge University Press, vol. 60(1), pages 145-163, March.
    2. Nason, James M. & Tallman, Ellis W., 2015. "Business Cycles And Financial Crises: The Roles Of Credit Supply And Demand Shocks," Macroeconomic Dynamics, Cambridge University Press, vol. 19(4), pages 836-882, June.
    3. John A. James & David F. Weiman, 2010. "From Drafts to Checks: The Evolution of Correspondent Banking Networks and the Formation of the Modern U.S. Payments System, 1850–1914," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2‐3), pages 237-265, March.
    4. A. Piatt Andrew, 1908. "Substitutes for Cash in the Panic of 1907," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 22(4), pages 497-516.
    5. Jacobson, Margaret M. & Tallman, Ellis W., 2015. "Liquidity provision during the crisis of 1914: Private and public sources," Journal of Financial Stability, Elsevier, vol. 17(C), pages 22-34.
    6. Christopher Hoag, 2012. "Aldrich-Vreeland Emergency Currency as a Lender of Last Resort," Journal of Economic Insight, Missouri Valley Economic Association, vol. 38(1), pages 73-88.
    7. Richardson, Gary, 2007. "The Check is in the Mail: Correspondent Clearing and the Collapse of the Banking System, 1930 to 1933," The Journal of Economic History, Cambridge University Press, vol. 67(3), pages 643-671, September.
    8. William Walker Swanson, 1908. "The Crisis of 1860 and the First Issue of Clearing-House Certificates: II," Journal of Political Economy, University of Chicago Press, vol. 16(4), pages 212-212.
    9. Timberlake, Richard H, Jr, 1984. "The Central Banking Role of Clearinghouse Associations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(1), pages 1-15, February.
    10. Gorton, Gary & Mullineaux, Donald J, 1987. "The Joint Production of Confidence: Endogenous Regulation and Nineteenth Century Commercial-Bank Clearinghouses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(4), pages 457-468, November.
    11. Christopher Hoag, 2015. "Clearinghouse Loan Certificates as a Lender of Last Resort," Working Papers 1503, Trinity College, Department of Economics, revised Jun 2015.
    12. Tallman, Ellis W. & Moen, Jon R., 2012. "Liquidity creation without a central bank: Clearing house loan certificates in the banking panic of 1907," Journal of Financial Stability, Elsevier, vol. 8(4), pages 277-291.
    13. Jon R. Moen & Ellis W. Tallman, 2003. "The call loan market in the U.S. financial system prior to the Federal Reserve System," FRB Atlanta Working Paper 2003-43, Federal Reserve Bank of Atlanta.
    14. Jaremski, Matthew, 2015. "Clearinghouses as credit regulators before the fed?," Journal of Financial Stability, Elsevier, vol. 17(C), pages 10-21.
    15. Gorton, Gary, 1985. "Clearinghouses and the Origin of Central Banking in the United States," The Journal of Economic History, Cambridge University Press, vol. 45(2), pages 277-283, June.
    16. Christopher Hoag, 2011. "Clearinghouse membership and deposit contraction during the Panic of 1893," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(2), pages 187-203, June.
    17. Jon R. Moen & Ellis W. Tallman, 2007. "Liquidity creation without a lender of last resort: clearinghouse loan certificates in the Banking Panic of 1907," FRB Atlanta Working Paper 2006-23, Federal Reserve Bank of Atlanta.
    18. Jon R. Moen & Ellis W. Tallman, 2013. "Close but not a central bank: The New York Clearing House and issues of clearing house loan certificates," Working Papers (Old Series) 1308, Federal Reserve Bank of Cleveland.
    19. Wicker,Elmus, 2000. "Banking Panics of the Gilded Age," Cambridge Books, Cambridge University Press, number 9780521770231.
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    Cited by:

    1. Ellis W. Tallman & Jon R. Moen, 2018. "The transmission of the financial crisis in 1907: an empirical investigation," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 12(2), pages 277-312, May.

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    More about this item

    Keywords

    bank; lender of last resort; clearinghouse; loan certificates;
    All these keywords.

    JEL classification:

    • 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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