Thinking about bank runs. Prior to federal deposit insurance, why couldn't banks protect themselves from runs with explicit policies? Like, “if our deposits drop by more than X% in Y timeframe, we will automatically halt withdrawals.” Did any banks ever try this?
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It’s dry and disorganized but has been best meditation on the purpose and operations of deposit-taking institutions and the parallels to shadow banking which I’ve ever read. (Thesis of book is basically 2007 was a banking crisis on the repo market rather than usual diagnosis.)
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Well my whole job right now is basically to read three dry and disorganized books and distill them into one clear and engaging ~4k-word blog post, rinse & repeat…
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Ah, same as the author on this paper! Now I know who the expert on this topic is I guesshttps://twitter.com/jasoncrawford/status/1224893141691457536 …
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Read Selgin & White for the history of banking, also Calomiris. Recent scholarship points to deposit guarantees being bad and (like central banks) having their origins in private interest, not the public good https://corpgov.law.harvard.edu/2016/07/08/deposit-insurance-savior-or-subsidy/ …
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On similar note, Gorton/Calomiris 1991 have neat historical detail on determinants of effective bank coordination in the convertibility suspension episodes referenced in that book; pg. 117 onwards: https://www.nber.org/chapters/c11484.pdf …
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