Arbeitspapier
Connected Lending of Last Resort
Because of secrecy, little is known about the political economy of central bank lending. Utilizing a novel, hand-collected historical daily dataset on loans to commercial banks, we analyze how personal connections matter for lending of last resort, highlighting the importance of governance for this core function of central banks. We show that, when faced with a banking panic in November 1930, the Banque de France (BdF) lent selectively rather than broadly, providing substantially more liquidity to connected banks – those whose board members were BdF shareholders. The BdF's selective lending policy failed to internalize a negative externality – that lending would be insufficient to arrest the panic and that distress via contagion would spillover to connected banks. Connected lending of last resort fueled the worst banking crisis in French history, caused an unprecedented government bailout of the central bank, and resulted in loss of shareholder control over the central bank.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 10226
- Klassifikation
-
Wirtschaft
Financial Markets and the Macroeconomy
Central Banks and Their Policies
Financial Crises
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Bankruptcy; Liquidation
Corporate Finance and Governance: Government Policy and Regulation
Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: Europe: 1913-
Economic History: Financial Markets and Institutions: Europe: 1913-
- Thema
-
lender of last resort
fiscal backing
central-bank solvency
central-bank design
banking crises
central bank independence
Banque de France
Great Depression
Weltwirtschaftskrise
Bankenkrise
Bankenliquidität
Zentralbank
Lender of Last Resort
Zentralbankunabhängigkeit
Geldpolitik
Geschichte
Frankreich
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Mitchener, Kris James
Monnet, Eric
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2023
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:46 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Mitchener, Kris James
- Monnet, Eric
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2023
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