RE: Re: RE: Re: Re: Re: congress and the banks
Title: RE: [PEN-L:30338] Re: RE: Re: Re: Re: congress and the banks Michael Perelman writes: > The local monopolies of banking -- especially in rural areas -- also > tended to make the risks of banking failure more local. Sort > of like an electricity grid. When it is more local, failures are more > common, but localized. When a more national system goes down I don't know if this is true or not. Back in the 1930s before the 1933 bank holiday, there was a massive "contagion effect" even though US banking was very localized: if any bank failed, it undermined faith in the entire system, encouraging withdrawal from all banks. Of course, what happens depends on macroeconomic conditions. In the 1930s, the macro-economy was in really bad shape, encouraging bank failures (which in turn made the macro-situation worse). Jim
Re: RE: Re: RE: Re: Re: Re: congress and the banks
yes, but the contagion is more likely the more integrated the system. On Wed, Sep 18, 2002 at 08:52:45AM -0700, Devine, James wrote: > Michael Perelman writes: > > The local monopolies of banking -- especially in rural areas -- also > > tended to make the risks of banking failure more local. Sort > > of like an electricity grid. When it is more local, failures are more > > common, but localized. When a more national system goes down > > I don't know if this is true or not. Back in the 1930s before the 1933 bank > holiday, there was a massive "contagion effect" even though US banking was > very localized: if any bank failed, it undermined faith in the entire > system, encouraging withdrawal from all banks. > > Of course, what happens depends on macroeconomic conditions. In the 1930s, > the macro-economy was in really bad shape, encouraging bank failures (which > in turn made the macro-situation worse). > > Jim -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: RE: Re: RE: Re: Re: Re: congress and the banks
Devine, James wrote: >Michael Perelman writes: >> The local monopolies of banking -- especially in rural areas -- also >> tended to make the risks of banking failure more local. Sort >> of like an electricity grid. When it is more local, failures are more >> common, but localized. When a more national system goes down > >I don't know if this is true or not. Back in the 1930s before the >1933 bank holiday, there was a massive "contagion effect" even >though US banking was very localized: if any bank failed, it >undermined faith in the entire system, encouraging withdrawal from >all banks. Small banks in the U.S. these days have no idea what to do with their deposits locally. They lend them to big banks via the fed funds markets. Doug
Re: Re: RE: Re: RE: Re: Re: Re: congress and the banks
In a message dated 9/18/2002 12:27:43 PM Eastern Daylight Time, [EMAIL PROTECTED] writes: yes, but the contagion is more likely the more integrated the system. I agree, though not just viewing contagion as a local vs. national issue, but as a single financial service provider vs. financial conglomerate issue.
