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Outside lending in the New York City call loan market: evidence from the Panic of 1907

Published online by Cambridge University Press:  29 March 2019

Jon Moen  and
Ellis Tallman
Jon Moen*
Affiliation:
University of Mississippi
Ellis Tallman
Affiliation:
Federal Reserve Bank of Cleveland
*
J. Moen (corresponding author), Department of Economics, University of Mississippi, University MS 38677, USA; email: jmoen@olemiss.edu.
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Abstract

Before the Panic of 1907 the large New York City banks were able to maintain the call loan market's liquidity during panics, but the rise in outside lending by trust companies and interior banks in the decade leading up the panic weakened the influence of the large banks. Creating a reliable source of liquidity and reserves external to the financial market like a central bank became obvious after the panic. In the call loan market, like the REPO market in 2008, lack of information on the identity of lenders and volume of the market hindered attempts to stop panic-related depositor withdrawals. Our new estimates of who was participating in the call loan market reveal that it did not contract after 1907; while the trust companies became less important, the New York national banks and outside lenders more than made up the difference.

Keywords

clearing housecall loanbank panicPanic of 1907

JEL classification

N2: Financial Markets and Institutions
Type
Articles
Information
Financial History Review , Volume 26 , Issue 1 , April 2019 , pp. 43 - 62
Copyright
Copyright © European Association for Banking and Financial History e.V. 2019 

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Footnotes

The authors gratefully acknowledge William Roberds, Steve Smith, Larry Wall, the referees and the editor for helpful comments. The department staff of the Rare Books and Manuscripts Library at Columbia University provided valuable help in locating information on the personal writings of Frank Vanderlip and James Stillman. The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Cleveland or the Federal Reserve System. Any remaining errors are the authors’ responsibility.

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