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The Founding of the Federal Reserve, the Great Depression, and the Evolution of the U.S. Interbank Network

Published online by Cambridge University Press:  27 December 2019

Matthew Jaremski
Associate Professor, Department of Economics and Finance, Utah State University, 3565 Old Main Hill, Logan, UT 84322-3565. E-mail:
David C. Wheelock
Group Vice President and Deputy Director of Research, Research Division, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, MO 63166. E-mail:


Financial network structure is an important determinant of systemic risk. This article examines how the U.S. interbank network evolved over a long and important period that included two key events: the founding of the Federal Reserve and the Great Depression. Banks established connections to correspondents that joined the Federal Reserve in cities with Fed offices, initially reducing overall network concentration. The network became even more focused on Fed cities during the Depression, as survival rates were higher for banks with more existing connections to Fed cities, and as survivors established new connections to those cities over time.

© The Economic History Association 2019

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The views expressed in this paper are those of the authors and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis or Federal Reserve System. The authors thank Dan Bogart, Charles Calomiris, and two anonymous referees for comments on a previous version of this paper, as well as conference participants at the Federal Reserve Bank of Cleveland’s 2018 Financial and Monetary History Workshop and the 2018 World Economic History Conference. The paper greatly benefited from a grant from the Yale Economic Growth Center.



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