Bank Distress during the Great Depression: The Illiquidity-Insolvency Debate Revisited / Gary Richardson.

Format:

Book

Author/Creator:

Richardson, Gary.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12717.

NBER working paper series no. w12717

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Bank Distress during the Great Depression

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

During the contraction from 1929 through 1933, the Federal Reserve System tracked changes in the status of all banks operating in the United States and determined the cause of each bank suspension. This essay analyzes chronological patterns in aggregate series constructed from that data. The analysis demonstrates both illiquidity and insolvency were substantial sources of bank distress. Periods of heightened distress were correlated with periods of increased illiquidity. Contagion via correspondent networks and bank runs propagated the initial banking panics. As the depression deepened and asset values declined, insolvency loomed as the principal threat to depository institutions.

Notes:

Print version record

December 2006.