TY - JOUR AU - Bordo,Michael D. AU - Redish,Angela AU - Rockoff,Hugh TI - Why didn’t Canada have a banking crisis in 2008
(or in 1930, or 1907, or ...)? JF - National Bureau of Economic Research Working Paper Series VL - No. 17312 PY - 2011 Y2 - August 2011 UR - http://www.nber.org/papers/w17312 L1 - http://www.nber.org/papers/w17312.pdf N1 - Author contact info: Michael D. Bordo Department of Economics Rutgers University New Jersey Hall 75 Hamilton Street New Brunswick, NJ 08901 Tel: 732/822-7152 Fax: 732/932-7416 E-Mail: bordo@econ.rutgers.edu Angela Redish Dept. of Economics University of British Columbia #997 1873 East Mall Vancouver BC V6T 1Z1 CANADA E-Mail: anji@econ.ubc.ca Hugh Rockoff Department of Economics 75 Hamilton Street Rutgers University College Avenue Campus New Brunswick, NJ 08901-1248 Tel: 609/897-0117 Fax: 732/932-7416 E-Mail: rockoff@fas-econ.rutgers.edu AB - The financial crisis of 2008 engulfed the banking system of the United States and many large European countries. Canada was a notable exception. In this paper we argue that the structure of financial systems is path dependent. The relative stability of the Canadian banks in the recent crisis compared to the United States in our view reflected the original institutional foundations laid in place in the early 19th century in the two countries. The Canadian concentrated banking system that had evolved by the end of the twentieth century had absorbed the key sources of systemic risk -- the mortgage market and investment banking -- and was tightly regulated by one overarching regulator. In contrast the relatively weak, fragmented, and crisis prone U.S. banking system that had evolved since the early nineteenth century, led to the rise of securities markets, investment banks and money market mutual funds (the shadow banking system) combined with multiple competing regulatory authorities. The consequence was that the systemic risk that led to the crisis of 2007-2008 was not contained. ER -