Bank Supervision, Regulation, and Instability During the Great Depression

Mitchener, Kris James

doi:10.3386/w10475

Cited by 22 publications

(20 citation statements)

References 54 publications

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“…The coefficients on the capital and reserve requirement variables are significant and indicate that an increase in capital requirements reduces bank suspension rates, but that an increase in reserve requirements increases bank suspension rates. The direction of these effects is the same as those found inMitchener (2005). Thus, these results along the Atlanta Fed border corroborate his findings.…”

supporting

confidence: 92%

“…Most importantly, these results indicate that even after controlling for differences in capital and reserve requirements, the Atlanta Fed fixed effects are strongly significant during the early stages of the Depression-evidence that monetary intervention mattered. For a detailed discussion of the role of capital and reserve requirements in bank stability during the Depression, seeMitchener (2005).…”

mentioning

confidence: 99%

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Monetary Intervention Really Did Mitigate Banking Panics During the Great Depression: Evidence Along the Atlanta Federal Reserve District Border

Jalil

2014

J. Econ. Hist.

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supporting

confidence: 92%

mentioning

confidence: 99%

Monetary Intervention Really Did Mitigate Banking Panics During the Great Depression: Evidence Along the Atlanta Federal Reserve District Border

Jalil

2014

J. Econ. Hist.

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“…During this period state governors appointed state bank commissioners, and politics often shaped chartering and regulatory decisions (Mitchener (2005)). 18 To the extent that state power was important, one might expect that at this time -when physical distance mattered greatly --that powerful landowners in counties that were physically closer to the state capital might have had greater influence on bank structure than landowners who were further away.…”

Section: Distance From State Capitalmentioning

confidence: 99%

Land and Credit: A Study of the Political Economy of Banking in the United States in the Early 20th Century

Rajan

Ramcharan

2009

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2A recent literature emphasizes the political economy underpinnings of economic underdevelopment. It notes that powerful constituencies, which arise for example from the pattern of land holdings in a country, can drive the development of economic institutions, and growth more generally (see, for example, Engermann and Sokoloff (2002)). Banks are clearly important economic institutions. While historians have argued that political forces have shaped banking systems (see, for example, Haber (2005a)), there has been little systematic examination of the evidence. In this paper we examine more systematically whether the constituencies or interest groups that emerge in a country as a result of the distribution of land holdings -often the earliest and most important form of wealth --can shape the development of the banking system. 1The precise channel through which constituencies or interest groups operate is also a matter of some debate. Some (see, for example, Acemoglu, Johnson, and Robinson (2005)) argue that the mediating channel is political institutions, as elite interest groups create coercive political institutions that give them the power to hold back the development of economic institutions, and hence economic growth.Others (see, for example, Engerman and Sokoloff (2003), Rajan and Zingales (2003a, chapter 6) or Rajan (2009)) argue that a divided society may be sufficient to hold back the development of economic institutions, even if political institutions are broadly egalitarian.One way to make progress on both questions (whether landed interest groups affect financial development and whether this can happen even in broadly democratic societies) is to examine patterns within broad political units such as countries or states, where political institutions are held relatively constant. To this end, we explore how the structure of banking across counties in the United States in the early part of the 20 th century was driven by the distribution of land within the county. We focus on banks because they were, and in many areas still are, the most important source of local finance, and thus are important economic institutions. Likewise, we focus on the distribution of land because it represents the distribution of agricultural wealth and interests at a time when agriculture was still a key sector in the U.S. economy.3 Why Did Landlords Restrict Credit?Clearly, large landowners may have had the money and power to influence county politics even in a flourishing democracy. But why would they want to restrict access to credit for others, especially small farmers and tenants, by limiting the spread of banks? The contemporary literature suggests a number of reasons. First, large landowners generated loanable surpluses. Formal credit institutions could be competition for their business of lending to tenants and small farmers.Second, tenants and small farmers needed credit to buy supplies from the local store. By limiting credit from alternative sources -for instance, by keeping banks out --the local merchant could lock the ...

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“…Thus, interest lies in how a bank's probability of failure changes if the RFC never approved any loans. The mean of the predictive distribution {Pr(y i4 = (Mitchener, 2005). Generally speaking, without the RFC, thousands of additional banks could have suspended operations.…”

Section: Covariate and Treatment Effectsmentioning

confidence: 99%

Sample Selection and Treatment Effect Estimation of Lender of Last Resort Policies

Vossmeyer

2016

Journal of Business & Economic Statistics

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This article develops a framework for estimating multivariate treatment effect models in the presence of sample selection. The methodology deals with several important issues prevalent in policy and program evaluation, including application and approval stages, non-random treatment assignment, endogeneity, and discrete outcomes. This paper presents a computationally efficient estimation algorithm and techniques for model comparison and treatment effects. The framework is applied to evaluate the effectiveness of bank recapitalization programs and their ability to resuscitate the financial system. The analysis of lender of last resort (LOLR) policies is not only complicated due to econometric challenges, but also because regulator data are not easily obtainable. Motivated by these difficulties, this paper constructs a novel bank-level data set and employs the new methodology to jointly model a bank's decision to apply for assistance, the LOLR's decision to approve or decline the assistance, and the bank's performance following the disbursements. The paper offers practical estimation tools to unveil new answers to important regulatory and policy questions.

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Bank Supervision, Regulation, and Instability During the Great Depression

Cited by 22 publications

References 54 publications

Monetary Intervention Really Did Mitigate Banking Panics During the Great Depression: Evidence Along the Atlanta Federal Reserve District Border

Monetary Intervention Really Did Mitigate Banking Panics During the Great Depression: Evidence Along the Atlanta Federal Reserve District Border

Land and Credit: A Study of the Political Economy of Banking in the United States in the Early 20th Century

Sample Selection and Treatment Effect Estimation of Lender of Last Resort Policies

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