Alternatives for distressed banks and the panics of the Great Depression

No 2008-07, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Several studies have explored whether the banking panics of the Great Depression caused some institutions to fail that might otherwise have survived. This paper adopts a different approach and investigates whether the panics resulted in the failure and liquidation of banks that might otherwise have been able to pursue a less disruptive resolution strategies such as merging with another institution or suspending operations and recapitalizing. Using data on individual state-chartered banks, I find that many of the banks that failed during the panics appear to have been at least as financially sound as banks that were able to use alternative resolution strategies. This result supports the idea that the disruptions caused by the banking panics may have exacerbated the economic downturn.

Keywords: Bank failures; Banks and banking - United States (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-ban and nep-his
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Citations: View citations in EconPapers (1)

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