Document Type

Case Study

Case Series

Broad-Based Emergency Liquidity

JEL Codes

G01, G28


The Panic of 1893 was one of the deepest economic depressions before the Great Depression of 1931. As a precautionary measure to stem the fall in reserves caused by country bank withdrawals, the New York Clearing House (NYCH), a private clearinghouse that operated as a de facto lender of last resort for its members, issued clearinghouse loan certificates (CLCs), as had been done in the prior crises of 1873, 1884, and 1890. CLCs functioned as a means of settlement between NYCH member banks and freed up coin and currency at a time of high demand. Member banks were required to accept CLCs in daily settlement, as a condition for membership in the association. The first CLCs were issued on June 17, 1893. CLCs bore an interest rate of 6%, paid to the accepting bank, and the NHCH accepted collateral of stocks, bonds, and bills receivable. The final round of CLCs was issued on September 6, 1893, and all certificates had been redeemed by November 1, 1893. Issuance in 1893 far outstripped issuance in prior crises; outstanding CLCs peaked at $38.3 million in August 1893. At peak, outstanding CLCs constituted 10.2% of NYCH banks’ deposits. The 1893 crisis contrasted with earlier crises in that: (1) stress emanated from interior, country banks; (2) the NYCH acted early in the crisis; (3) the NYCH suspended cash payments as in 1873, though did so later in the crisis; and (4) the NYCH did not pool cash reserves as had been done in 1873. The issuance of CLCs enabled banks to maintain credit even as the volume of deposits sharply contracted.

Date Revised