ایجاد نقدینگی بدون بانک مرکزی : حذف گواهینامه های وام خانه در سراسیمگی بانکی در سال 1907

We employ a new data set comprised of disaggregate figures on clearing house loan certificate issues in New York City to document how the dominant national banks were crucial providers of temporary liquidity during the Panic of 1907. Clearing house loan certificates were extensions of credit by the New York Clearing House to its members. These certificates were transferable to other clearing house members as a form of final payment for settlement of interbank payments. The certificate issues allowed borrowing banks to maintain (and increase) loans, fulfill cash payment upon depositor withdrawal demands, and enabled gold imports, which took two to three weeks to arrive. The large, New York City national banks acted as private liquidity providers by requesting (and the New York Clearing House issuing) a volume of clearing house loan certificates in excess of their own immediate liquidity needs, in accord with their role as central reserve city banks in the national banking system.

Modern monetary economics associates lender of last resort activities with a central bank. The United States during the National Banking era (1863–1913) had no central bank and lacked a reliable way to increase the stock of high-powered money quickly. Yet during the Panic of 1907 the six largest national banks in New York City collectively and intentionally engaged in lender of last resort activities, without a statutory mandate or formal institutional arrangements to enable them to do so. Through the New York Clearing House, the Big Six national banks borrowed clearing house loan certificates in amounts that appear to have exceeded their own private needs, providing liquidity for the entire New York money market. While interpreting this as evidence of intentional lender of last resort behavior is open to interpretation, it is clear that the private behavior of the Big Six banks was aligned with the collective interest. To that extent they were acting as a lender of last resort. The New York Clearing House by approving the loan requests and the Big Six banks by borrowing the loan certificates provide an example of private provision of liquidity during a financial crisis. The severe crisis in 1907 required a rapid liquidity infusion to quell the turbulence in the financial market. Banks initiated a partial suspension of converting deposits into cash, but that just delayed the liquidation of bank deposits. The issuance of clearing house loan certificates was the only mechanism available to increase quickly the supply of a substitute for specie1 and legal tender in final payments among clearing house members. That substitution would allow the release of cash and specie to the general public. The loan certificates helped prevent the need for costly liquidation of bank assets, like call loans – short-term demandable loans backed by stock or bond collateral – in order to satisfy cash withdrawal demands or unfavorable clearing balances. Clearing house loan certificates were, however, only a temporary provision of credit. For a more durable solution, the financial system required gold inflows (and/or a reduction in deposits) to restore bank reserves to the legal requirements, but there was a time lag between the arrangement for gold import and the arrival of the gold. The clearing house loan certificate issues enabled the borrowing banks to finance the importation of monetary gold, and that role was important for the eventual recovery of the financial market from the panic. The Big Six banks engaged in these liquidity-enhancing actions despite binding restrictions on the powers of the New York Clearing House. For example, the New York Clearing House was legally prohibited from printing currency, and it was unable to sell or buy bonds in quantities comparable to modern open market operations. There was no legal basis for the issuance of clearing house loan certificates and, therefore, they could not serve as legal reserves. These restrictions distinguish the New York Clearing House from modern central banking institutions. Still, the New York City national banks and the clearing house loan certificates were comparable to central bank injections of temporary liquidity as observed today in periods of extreme liquidity demands.2 We focus on the liquidity provided by the Big Six nationally chartered banks – National City, National Bank of Commerce, First National, National Park, Hanover, and Chase National. These banks comprised nearly 60 percent of the total assets of New York City national banks. Table 1 presents additional evidence on the extent of the Big Six bank dominance of New York City financial activity. The six biggest banks in New York City accounted for over 70 percent of the clearing house loan certificates issued by member national banks in 1907, whereas they provided just over half of the loan volume of all New York City national banks. The Big Six banks were crucial for clearing inter-regional payments; they were storehouses for interior bank deposits (correspondent bank deposits in New York City banks) and accounted for nearly 80 percent of the net liabilities to banks (also known as bankers balances) held by New York City national banks.3 In 1907, it was essential that the largest New York City national banks requested clearing house loan certificates from the Clearing House because the aggregate resources of the other, smaller banks were likely insufficient to provide the credit necessary to generate the liquidity to alleviate a crisis. Table 1. Aggregates from national bank balance sheets – report of the comptroller of the currency as of august 22, 1907 (in millions). Balance sheet item Aggregate New York City national banks Big Six New York City national banks Big Six as percentage of all New York City national banks Aggregate of national banks in United States Loans 771.042 417.384 54.13 4678.584 Loans to (due from) banks (deposits by these national banks held at other banks) 188.894 102.954 54.5 614.496 (reserve agents) 334.571 (other NBs) 123.020 (state and other) 1072.087 Total Lawful money 218.786 139.916 63.95 531.108 (specie) 170.516 (legal tender) 801.624 Total Reserve ratio 26.0 26.3 16.52 Individual deposits 532.709 285.408 53.58 4319.035 Due to banks (deposits by other banks held at these National banks) 498.031 349.485 70.17 823.680 (national bank) 38.139 (reserve agent) 337.927 (trust and saving) 395.745 (state bank) 1595.491 Total Net liabilities to banks 309.137 246.531 79.75 523.404 Total resources 1425.704 836.696 (10% US total) 58.7 8390.328 Table options We examine clearing house loan certificates issued during the Panic of 1907 among New York Clearing House member banks by exploiting underutilized data that list the borrowing bank identity, the loan amount, and the issue date. The existing research, to our knowledge, has not examined high frequency data for clearing house loan certificate issues at the borrower level. We emphasize the high frequency time series behavior of the data because the rapid issue of a large quantity of clearing house loan certificates was an important and necessary response to quell the panic. The Panic of 1907 resulted in extreme financial tightness that altered the typical movements of notable high-frequency data, like short-term interest rates and currency premiums. Spikes in these series are interpreted as indicators of financial market distress. We find that the first issues of clearing house loan certificates coincide with spikes in such indicators of financial market distress. Within several weeks of the clearing house loan certificate issues, the only notable moderation among these indicators was in the interest rate on call money loans, stock market loans backed by the collateral of the purchased stock (or bonds). A return to pre-panic conditions among indicators of financial distress took place only after the dollar volume of gold inflows surpassed $100 million, the restrictions or partial suspension of cash payments was lifted, and the vast majority of clearing house loan certificate issues were paid off and cancelled.

During the Panic of 1907, the issues of clearing house loan certificates demonstrate how coalitions of private banks turned illiquid loan portfolios into liquid claims as discussed in Gorton and Huang (2002). Clearing house loan certificate issuance was an intentional but temporary production of a substitute clearing medium used within the New York Clearing House in order to release specie and legal tender from the daily settlement accounts. It was intentional because the members of the New York Clearing House chose to form a clearing house loan committee, whose sole purpose was to evaluate collateral and issue clearing house loan certificates to member borrowers. The dominance of the large national banks in New York City in 1907 offers a contrast to an observation from the issuance of clearing house loan certificates in 1873 in New York City. In 1873, banking assets in New York City were not as highly concentrated and the big national banks required cooperation from a large number of smaller banking organizations to issue a sufficient volume of loan certificates. By 1907, the large, national banks in New York City were the only participants with the resources sufficient to affect aggregate liquidity. The credit expansion in the form of clearing house loan certificates maintained and supported the large-scale intermediation activities of the Big Six New York City banks, those banks that were crucial for the operation of the payments system. Those same banks were also crucial for the operation of the stock market because they were key providers of liquidity for the call loan market. During the Panic of 1907, the Big Six banks faced two crucial risks. The first risk was asset value risk – the Big Six banks held loan portfolios comprised of 30 percent call loans, and thereby faced the risk that the stock market values backing the loans would fall. Given the sharp decline in stock market values, it was possible that the collateral values fell below the outstanding loan value. The second risk was withdrawal risk, the largest component arising from their substantial holdings of banker balances, primarily held for interior banks. Combining these two risks arising on each side of the balance sheet, the Big Six banks faced immense challenges during banking panics to maintain adequate liquidity to support both a functioning capital market and an effective payments system. As a result, the same Big Six banks had the highest likelihood of borrowing clearing house loan certificates from the Clearing House as demonstrated by the positive correlation between bankers’ balances and clearing house loan certificates (both adjusted for bank size). Distress signals from the financial market conveyed through the premium on cash in New York City, the premium on New York City balances within cities in the interior US, and the reserve deficit among New York City national banks suggest that the crisis was not quelled by clearing house loan certificate issues alone. Gold shipments to New York City from overseas were an essential ingredient to fostering a return to calmer financial conditions. Foreign creditors shipped gold to the United States because of the existence of the currency premium and a perception of the credit-worthiness of the New York City banks and of the US financial system more generally. International bankers overseas shipped gold to the United States because market participants overseas believed that the US would remain on the gold standard. The participants in those overseas markets also perceived that the financial system in the United States was in disarray, but essentially solvent. As holders of nearly 80 percent of banker balances held in New York City national banks, the Big Six banks faced the risk of large-scale withdrawal of cash reserves from the depositor banks. The Big Six national banks in New York City borrowed the predominant amount of clearing house loan certificates that enabled them to send cash to the interior and prevent call loan contractions during the panic. However, the volume of clearing house loans certificates issued to the large, New York City national banks exceeded the net contraction in banker balances that they faced, which we interpret as intentional liquidity provision to the financial system. That the Big Six banks were motivated to protect the general welfare of the banking system is not clear. Protecting their private interest, however, was certainly more aligned with the collective interest than in earlier panics. In this way, the New York Clearing House acted as a private liquidity providing institution to release specie and legal tender from the clearing house accounts temporarily during the panic and effectively increase the availability of cash. The substantial provision of clearing house loan certificates as reserve substitutes reflected the credit enhancement and liquidity creation of the private, New York Clearing House coalition, actions that resemble functions normally associated with central banking activity.