Working Paper: NBER ID: w30226
Authors: Charles W. Calomiris; Mark Carlson
Abstract: After an unprecedented number of banks suspended operations during the Panic of 1893, the head regulator of banks chartered by the United States government allowed about 100 banks to reopen after certifying their solvency. We evaluate whether actions by bank owners to change management, contract with depositors to extend liability maturity structure, write off bad assets, and/or inject capital affected bank survival and deposit retention. This historical episode is particularly informative because there was no expectation of government intervention. We find that contracting with depositors provided short-term benefits while dealing with bad assets was key for long-run viability.
Keywords: No keywords provided
JEL Codes: G21; G28; N21; N41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| actions taken by banks, such as writing off bad assets (G21) | increased likelihood of survival (I14) |
| writing off bad assets (G32) | increased probability of survival through at least 1897 (C41) |
| capital injections (O16) | indirectly aid in writing off bad assets (G32) |
| agreements with depositors to extend the maturity of deposits (G21) | greater future deposits (G51) |
| agreements with depositors to extend the maturity of deposits (G21) | resolve coordination problems among depositors to prevent immediate withdrawals (G28) |
| replacing bank management (president) (G21) | affect deposit retention (G21) |
| replacing bank management (president) (G21) | lower deposit retention (if no concerns about president's quality) (G21) |
| replacing cashier (E41) | higher likelihood of bank closure (G21) |