Responding to a Shadow Banking Crisis: The Lessons of 1763

Abstract

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The History and Economics of Safe Assets

“…After the failure of a large banking house in August 1763, there were runs on merchant banks that had been financing themselves with short-term debt. Quinn and Roberds (2015) liken the start of this crisis in Amsterdam in 1763 to the Lehman failure of 2008, as it began with the failure of a large banking house. Quinn and Roberds (2015) and Schnabel and Shin (2004) point out the similarities between that crisis and the financial crisis of 2007-2008.…”

Leverage and Beliefs: Personal Experience and Risk-Taking in Margin Lending

“…Temin and Voth (2004) argue that haircuts in lending against stock during the South Sea bubble suggest that investors were "riding" the bubble. Schnabel and Shin (2004) argue that leverage cycles created contagion and falling asset prices in the Amsterdam financial crisis of 1763 (Quinn and Roberds 2012).…”

“…There were no bank notes and the only alternative form of currency was specie (managed by small cashiers, Dehing 2012). To reduce transaction costs, large payments were usually settled through transfers between accounts in the Bank of Exchange(Quinn and Roberds 2014). Most of the Bank's original, handwritten, ledgers still exist.…”

Neapolitan Banks in the Context of Early Modern Public Banks

“…For the Neapolitan banks it was a sizeable activity, and pawns represented liquid assets that could be sold off during runs (Tortora 1890, 246-49). Conversely, lending against collateral (like bullion or foreign coins) that was safe in having high intrinsic value, but illiquid in not being legal tender, was an important crisis management tool (Quinn and William Roberds 2015).…”