Document Type

Case Study

Case Series

Broad-Based Emergency Liquidity

JEL Codes

G01, G28


The New York Clearing House Association (NYCH), whose membership included most banks in New York, acted as a lender of last resort during the National Banking Era (1863–1913). In the Panic of 1884, following idiosyncratic deposit runs that forced three NYCH member banks to close, the NYCH membership unanimously agreed to issue clearinghouse loan certificates (CLCs) that banks could use as a temporary substitute for currency in the payment of interbank clearinghouse balances. The NYCH required the borrowing bank to post sufficient collateral to secure the loan, subject to a minimum 25% haircut (excluding US government bonds secured at par) and to pay 6% interest. In aggregate, the NYCH issued $24.9 million in CLCs between May 15 and June 6. Outstanding CLCs peaked at $21.9 million on May 24. By July 1, all banks retired their CLCs, except for Metropolitan National Bank. Metropolitan National entered liquidation later that year with more than $5 million in uncanceled CLCs; the NYCH canceled these final CLCs in September 1886. With the exception of Metropolitan National Bank, the NYCH’s issuance of CLCs coincided with a short and contained panic in New York City. Unlike in the Panic of 1873, New York banks did not temporarily suspend payments to depositors or pool their cash reserves to meet their liquidity needs. The US Treasury did not intervene by purchasing government bonds but did offer to repay $10 million in debt a month early to provide some relief to the market.

Date Revised