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Working Paper

Liquidity Provision during the Crisis of 1914: Private and Public Sources

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Caught between the end of the National Banking Era and the beginning of the Federal Reserve System, the crisis of 1914 provides an example of a banking panic avoided. We investigate how this outcome was achieved by examining data on the issues of Aldrich-Vreeland emergency currency and clearing house loan certificates to New York City institutions that identify the borrower and the quantity requested for each type of temporary liquidity measure. The extensive provision of temporary credit to a wide array of financial intermediaries was, in our opinion, essential to the successful alleviation of financial distress in 1914. Empirical results indicate an important role for clearing house loan certificates that is distinct from the influence of Aldrich-Vreeland emergency currency issues.
Topics
Financial crises
03.01.2014ISSN 2573-7953 WP 13-04ROriginal Paper WP 13-04DOI 10.26509/frbc-wp-201304r
Keywords liquidity provision, lender of last resort, correspondent banking, closure of stock exchange, financial crisis, clearing houses, Aldrich-Vreeland emergency currency
JEL Classification Codes E42, E59, E65, N22

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 Margaret Jacobson. 2014. “Liquidity Provision during the Crisis of 1914: Private and Public Sources.” Federal Reserve Bank of Cleveland, Working Paper No. 13-04R. https://doi.org/10.26509/frbc-wp-201304r