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A New World Record — Four Financial Crises in 25 Years

In: The New International Money Game

Author

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  • Robert Z. Aliber

    (University of Chicago)

Abstract

A run on a bank — at least in an advanced industrial country — seems like an event out of the Great Depression of the 1930s. Frenetic depositors line up waiting for the bank to open because they want to be among the first to get their money; they anticipate that the bank soon will close because its money holdings will be exhausted. In September 2007, Northern Rock, the largest mortgage lender in Britain, experienced two runs, one in the wholesale commercial paper market and the other in the retail market. Northern Rock borrowed more than 40 million pounds from the Bank of England to avoid bankruptcy and then was taken over by the British Government. About the same time Countrywide Financial, the largest US mortgage lender, also experienced a run in the wholesale money market and received a capital infusion from Bank of America. Subsequently the US Treasury made a large investment in Bank of America to ensure that it had adequate capital.

Suggested Citation

  • Robert Z. Aliber, 2011. "A New World Record — Four Financial Crises in 25 Years," Palgrave Macmillan Books, in: The New International Money Game, edition 0, chapter 11, pages 157-177, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-24672-0_12
    DOI: 10.1057/9780230246720_12
    as

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