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Working Paper

Liquidity Creation without a Lender of Last Resort: Clearing House Loan Certificates in the Banking Panic of 1907

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We employ a new data set comprised of disaggregate figures on clearing house loan certificate issues in New York City to document how the dominant national banks were crucial providers of temporary liquidity during the Panic of 1907. Clearing house loan certificates were essentially “bridge loans” arranged between clearing house members. They enabled and were issued in anticipation of gold imports, which took a few weeks to arrive. The large, New York City national banks acted as private liquidity providers by requesting (and the New York Clearing House issuing) a volume of clearing house loan certificates beyond their own immediate liquidity needs, in accord with their role as central reserve city banks in the national banking system.
07.29.2010ISSN 2573-7953 WP 10-10DOI 10.26509/frbc-wp-201010
Keywords financial crises, banking panic of 1907, currency premium, liquidity provision
JEL Classification Codes N21, E44

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Tallman, Ellis W., and Jon Moen. 2010. “Liquidity Creation without a Lender of Last Resort: Clearing House Loan Certificates in the Banking Panic of 1907.” Federal Reserve Bank of Cleveland, Working Paper No. 10-10. https://doi.org/10.26509/frbc-wp-201010