NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Too-Big-To-Fail Before the Fed

Gary Gorton, Ellis W. Tallman

NBER Working Paper No. 22064
Issued in March 2016
NBER Program(s):DAE, EFG, ME

“Too-big-to-fail” is consistent with policies followed by private bank clearing houses during financial crises in the U.S. National Banking Era prior to the existence of the Federal Reserve System. Private bank clearing houses provided emergency lending to member banks during financial crises. This behavior strongly suggests that “too-big-to-fail” is not the problem causing modern crises. Rather it is a reasonable response to the threat posed to large banks by the vulnerability of short-term debt to runs.

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Document Object Identifier (DOI): 10.3386/w22064

Published: Gary Gorton & Ellis W. Tallman, 2016. "Too Big to Fail before the Fed," American Economic Review, American Economic Association, vol. 106(5), pages 528-32, May. citation courtesy of

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