American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Shadowy Banks and Financial Contagion during the Great Depression: A Retrospective on Friedman and Schwartz
American Economic Review
vol. 103,
no. 3, May 2013
(pp. 73–78)
Abstract
This essay assesses whether network linkages within the banking system amplified the real effects of bank failures during the Great Contraction. In 1929, nearly all interbank deposits held by Federal Reserve member banks belonged to "shadowy" nonmember banks which were outside the regulatory reach of federal regulators. Regional banking panics in the early 1930s drained these interbank deposits from central reserve city banks. Money-center banks in Chicago and New York responded to volatile and declining interbank deposits by changing their asset composition. They reduced their lending to businesses and individuals, and increased their holdings of cash and government bonds.Citation
Mitchener, Kris James, and Gary Richardson. 2013. "Shadowy Banks and Financial Contagion during the Great Depression: A Retrospective on Friedman and Schwartz." American Economic Review, 103 (3): 73–78. DOI: 10.1257/aer.103.3.73Additional Materials
JEL Classification
- B31 History of Economic Thought: Individuals
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- E52 Monetary Policy
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- N12 Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: U.S.; Canada: 1913-
- N22 Economic History: Financial Markets and Institutions: U.S.; Canada: 1913-