[PEN-L:30339] RE: Re: RE: Re: Re: Re: congress and the banks

["Devine, James" <jdevine@xxxxxxx>]

Title: RE: [PEN-L:30338] Re: RE: Re: Re: Re: congress and the banks

Michael Perelman writes:
> The local monopolies of banking -- especially in rural areas -- also
> tended to make the risks of banking failure more local.  Sort
> of like an electricity grid.  When it is more local, failures are more
> common, but localized.  When a more national system goes down ....

I don't know if this is true or not. Back in the 1930s before the 1933 bank holiday, there was a massive "contagion effect" even though US banking was very localized: if any bank failed, it undermined faith in the entire system, encouraging withdrawal from all banks.

Of course, what happens depends on macroeconomic conditions. In the 1930s, the macro-economy was in really bad shape, encouraging bank failures (which in turn made the macro-situation worse).

Jim