lessons from the panic of 1907 - federal reserve bank of.pdfVIP

Lessons from the Panic of 1907 Ellis W. Tallman an d Jon R. Moen The Bank Panic of 1907 was so serious that it became a catalyst for the creation of Americas central bank. This study, which examines the circumstances leading to and the inter- vention measures taken during the panic, particularly focuses on trust companies function as a financial intermediary. Unequal regulation among financial organizations, the authors find, led to a concentration of riskier assets in less regulated intermediaries, primarily trusts. Trusts riskier asset portfolios made them the focal point from which the crisis spread to other segments of the financial market. Allowing various types of insti- tutions comparable access to all assets and investment opportunities, the authors conclude, might reduce the risk that the collapse of one type of asset would threaten the solvency of an entire class of financial intermediary. or the past two centurie s recurrent What follows is a case study of an individu- crises have shaken the banking sys- al financial crisis, a record detailing events Ftem an d financial market s in th e that led up to, and the maneuvers that took United States . One sever e crisis, th e Bank place during, the Panic of 1907. The focus is Panic of 1907, disrupted financial markets