The reluctant Central Bankers

"The big New York banks were in a position to serve as a private lender of last resort for the United States during the National Banking Era. As a lender of last resort the big New York banks could aid illiquid banks by increasing the volume of reserves available to the banking system. But that they had the incentives to behave so is less clear, for the interests of these private bankers were not necessarily aligned with the collective banking interests in New York, much less in the rest of the nation for that matter. The historical record reveals that the large New York banks indeed behaved in ways that approached those of a central bank, as in the Panics of 1873, 1884, and 1890. On other occasions, however, they missed the mark. Intermediaries that were not members of the Clearing House were not likely to be aided in a timely way, nor were banks far removed from New York City likely candidates for assistance, as in 1893. The Panic of 1907 seems to be an instance in which the Big Six hesitatingly provided central bank services to a constituency broader than the Clearing House banks only after the dangers to the big banks had become clear. In general, the New York banks still had to put their own, private reserves at risk during a panic, making them reluctant to help non-Clearing House interests unless their own interest was also threatened."