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

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.

Margin practices and requirements during the National Banking Era: An early example of macro‐prudential regulation

“…10, p. 830;Hedges, 1938, p. 77;Dewey & Chaddock 1910, p. 166. 15 For a discussion of the development of the call loan market and the role played by outside lenders see Moen and Tallman (2003) and Moen and Tallman (2019). 16 Michie, 1986, p. 181.…”

“… For a discussion of the development of the call loan market and the role played by outside lenders see Moen and Tallman () and Moen and Tallman (). …”

Trusts in Business Research: A Concise Systematic Literature Review

“…Due to a speculative financial operation, the company went wrong on the share copper market (Rodgers & Payne, 2018), spreading fear in investors and savers, making the crisis more severe. Many studies highlight the role of trust companies in that crisis (Frydman et al, 2018;Moen & Tallman, 1992), also drawing an interesting parallel with the financial crisis in 2008 (Moen & Tallman, 2019). Others investigate the interrelation between trust companies and banks (Tallman & Moen, 2018) and the role of regulation in that crisis (Hansen, 2014).…”