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
Click the image to download “Contagion” by Dr. Tiemann
In “Government Credit and Money,” Dr. Tiemann takes a deep look at the historical antecedents, including Ely’s Rebellion and the writings of Joseph Hawley, to show why our monetary system relies on the soundness of government credit. Dr. Tiemann maintains that keeping the public credit in good standing is of paramount importance.