Contagion 1855: How the Crimean War Felled San Francisco’s Largest Banks

2019-02-09T14:50:11+00:00

When policymakers analyze banking crises, they often search for diagnostic clues in the specific environment in which they occurred. This paper analyzes the 1855 failures of the largest banks in Gold Rush San Francisco, arguing that the antecedents of those failures — excessive leverage, interlocking ownership, inadequate segregation of assets, and concentration of risk in non- banking enterprises — were independent of the monetary and economic regime in place at the time. Those antecedents exposed Gold Rush bankers to external risks originating in events in which they had no involvement, and over which they had no control. The external events that felled the largest banks in San Francisco emerged from the Crimean War.

Cannon to right of them,
Cannon to left of them,
Cannon in front of them
Volleyed and thundered

—Alfred, Lord Tennyson,
“The Charge of the Light Brigade”, 1854

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The Purpose of Monetary Policy

2018-04-03T14:32:56+00:00

The Federal Open Market Committee is scheduled to have one of its regularly-scheduled meetings with Fed Chair Janet Yellen making an announcement on interest rate policy.  Most observers expect the Fed to leave short-term interest rates unchanged for now, but the FOMC’s likely actions in the near future could be to raise rates.  Dr. Tiemann reviews the purpose of Monetary Policy in the context of the functioning of our banking system, the history, thinking and goals that animate the Fed’s actions.

Why the Debt Ceiling Debate Matters

2018-04-04T12:48:43+00:00

US Congressional hardliners have been threatening not to raise the debt limit again.  They may not understand how central US Treasury securities are to the US and global monetary and banking system.  Dr. Tiemann explains the importance of raising the debt ceiling and the catastrophic consequences that could result from a failure by Congress to act in a timely manner.

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