Sometimes Bad Things Happen to Good Trust Companies: A Reexamination of the Trust Company Panic of 1907

Economic Effects of Runs on Early “Shadow Banks”: Trust Companies and the Impact of the Panic of 1907

“…The available balance sheet information does not capture differences in the depositor clienteles of the trust companies. Hansen (2011) argues that New York's trust companies located in the vicinity of Wall Street received larger deposits from corporations and institutions, whereas those located in uptown Manhattan solicited deposits more aggressively from individuals. He proposes that the uptown firms experienced greater deposit losses because small individual depositors were more likely to participate in runs.…”

“…The causes and macroeconomic context of the Panic of 1907 received considerable attention in the years following the crisis (Sprague, 1910;Barnett, 1910) and more recently (Moen andTallman, 1992, 2000;Odell and Weidenmier, 2004;Hansen 2011;and Rogers and Wilson, 2011).…”

The Panic of 1907

“…The trust companies never fully recovered from the contraction in deposits arising from the panic (see Moen and Tallman 1992). Hansen (2011) shows further that "uptown" trust companiesthose that competed with national banks for retail depositorslost a relatively larger share of the deposit market to national banks.…”

“…Hansen (2011) provides a comprehensive discussion of the change in banking law that motivated National Bank of Commerce to relinquish its clearing agent responsibilities for Knickerbocker Trust.…”

Economic Effects of Runs on Early 'Shadow Banks': Trust Companies and the Impact of the Panic of 1907

“…We also contribute to the extensive literature on historical banking crises in the United States. 9 The causes and macroeconomic context of the Panic of 1907 in particular have received considerable attention, both in the years that immediately followed its onset (Sprague 1910;Barnett 1910) and more recently (Moen and Tallman 2000;Odell and Weidenmier 2004;Hansen 2011;and Rogers and Wilson 2011). We provide new insights into this crisis by documenting the central role of trust companies in the contraction of credit intermediation, as suggested by Moen and Tallman (1992), and by quantifying the resulting impacts on economic activity.…”