Stephen Quinn and William Roberds
Working Paper 2012-8
June 2012
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In August 1763, northern Europe experienced a financial crisis with numerous parallels to the 2008 Lehman Brothers episode. The 1763 crisis was sparked by the failure of a major provider of acceptance loans, a form of securitized credit resembling modern asset-backed commercial paper. The central bank at the hub of the crisis, the Bank of Amsterdam, responded by broadening the range of acceptable collateral for its repo transactions. Analysis of archival data shows that this emergency source of liquidity helped to contain the effects of the crisis, by preventing the collapse of at least two other major securitizers. While the underlying themes seem to have changed little in 250 years, the modest scope of the 1763 liquidity intervention, together with the lightly regulated nature of the eighteenth century financial landscape, provide some informative contrasts with events of late 2008.
JEL classification: E58, G01, G21, N21
Key words: shadow banks, central banks, liquidity
The authors thank Christiaan van Bochove for making them aware of the Malinowski (2011) dataset. Helpful comments on earlier drafts were provided by Roger Farmer, Rod Garratt, Peter Koudijs, Rob Reed, Ellis Tallman, François Velde, Larry Wall, and participants in seminars at the Atlanta Fed, De Nederlandsche Bank, and the University of Utrecht. Christina Hartlage provided research assistance. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.
Please address questions regarding content to Stephen Quinn, Department of Economics, Texas Christian University, Box 298510, 2855 Main Drive, Fort Worth, Texas 76129, 817.257.6234, s.quinn@tcu.edu, or William Roberds, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309-4470, 404-498-8970, william.roberds@atl.frb.org.
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