It is Always the Shadow Banks: The Regulatory Status of the Banks that Failed and Ignited America’s Greatest Financial Panics

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This paper surveys the failures that ignited major financial panics in the United States. It starts with the Panic of 1819 and covers 11 others through the Panic of 2008. This sample covers all of the “great” panics to judge from the consensus of financial historians. Several generalizations about the regulatory status of these banks stand out. (1) Panics typically were ignited by a sequence of failures. (2) Typically, the sequence included institutions from different parts of the country and different parts of the financial system, contributing to the fear that the entire financial system was at risk. (3) Typically, shadow banks (unregulated or lightly regulated banks) were an important component of the sequence, and often were the culminating failure in the sequence that triggered the panic. Big trouble following the failure of shadow banks is not a new problem that emerged in the twenty-first century, but rather a persistent problem that began in the nineteenth century.

Original languageEnglish (US)
Title of host publicationStudies in Economic History
Number of pages30
StatePublished - Jan 1 2018

Publication series

NameStudies in Economic History
ISSN (Print)2364-1797
ISSN (Electronic)2364-1800


All Science Journal Classification (ASJC) codes

  • History
  • Economics, Econometrics and Finance(all)


  • Bank of united states
  • Federal reserve
  • Lender of last resort
  • Panics
  • Shadow banks
  • Walter bagehot

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