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Liquidity provision during the crisis of 1914: Private and public sources

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  • Jacobson, Margaret M.
  • Tallman, Ellis W.

Abstract

Caught between the end of the National Banking Era and the beginning of the Federal Reserve System, the crisis of 1914 provides an example of a banking panic avoided. We investigate how this outcome was achieved by examining data on the issues of Aldrich-Vreeland emergency currency and clearing house loan certificates to New York City institutions that identify the borrower and the quantity requested for each type of temporary liquidity measure. The extensive provision of temporary credit to a wide array of financial intermediaries was, in our opinion, essential to the successful alleviation of financial distress in 1914. Empirical results indicate an important role for clearing house loan certificates that is distinct from the influence of Aldrich-Vreeland emergency currency issues.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:finsta:v:17:y:2015:i:c:p:22-34
    DOI: 10.1016/j.jfs.2014.07.004
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    Cited by:

    1. Jaremski, Matthew, 2018. "The (dis)advantages of clearinghouses before the Fed," Journal of Financial Economics, Elsevier, vol. 127(3), pages 435-458.
    2. Rockoff, Hugh, 2015. "O.M.W. Sprague (the man who “wrote the book” on financial crises) and the founding of the Federal Reserve," Journal of Financial Stability, Elsevier, vol. 17(C), pages 35-45.
    3. Jaremski, Matthew & Mathy, Gabriel, 2018. "How was the quantitative easing program of the 1930s Unwound?," Explorations in Economic History, Elsevier, vol. 69(C), pages 27-49.
    4. Gary B. Gorton & Andrew Metrick, 2013. "The Federal Reserve and Financial Regulation: The First Hundred Years," NBER Working Papers 19292, National Bureau of Economic Research, Inc.
    5. Christopher Hoag, 2015. "Clearinghouse Loan Certificates as a Lender of Last Resort," Working Papers 1503, Trinity College, Department of Economics, revised Jun 2015.
    6. Jaremski, Matthew, 2015. "Clearinghouses as credit regulators before the fed?," Journal of Financial Stability, Elsevier, vol. 17(C), pages 10-21.
    7. Hoag, Christopher, 2018. "Clearinghouse loan certificates as a lender of last resort," The North American Journal of Economics and Finance, Elsevier, vol. 45(C), pages 215-229.
    8. Christopher Hoag, 2019. "Liquidity and Borrowing from a Lender of Last Resort during the Crisis of 1884," Working Papers 1901, Trinity College, Department of Economics, revised Jul 2019.
    9. Christopher Hoag, 2015. "Clearinghouse Loan Certificates as Interbank Loans," Working Papers 1504, Trinity College, Department of Economics, revised Jun 2015.

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    More about this item

    Keywords

    Liquidity provision; Lender of last resort; Closure of stock exchange; Financial crisis; Clearing houses; Aldrich-Vreeland emergency currency;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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