This article traces the origin of too-big-to-fail policy in modern US banking to the bailout of the $1.2b Bank of the Commonwealth in 1972. It describes this bailout and those of subsequent banks through that of Continental Illinois in 1984. During this period, market concentration due to interstate banking restrictions is a factor in most of the bailouts and systemic risk concerns were raised to justify the bailouts of surprisingly small banks. Finally, most of the bailouts in this period relied on the Federal Deposit Insurance Corporation's use of the Essentiality Doctrine and Federal Reserve lending. A discussion of this doctrine is used to illustrate how legal constraints on regulators may become less constraining over time.

This special issue celebrates the career of Youssef Cassis. The introduction will outline his major contributions from his initial work on social characteristics of the financiers of the City of London, and their relationship with landed aristocrats and industry, through his analysis of a succession of financial centres, the comparative study of big business, the relationship between finance and politics, to his new project on the memory of financial crises. Then, we will draw on Youssef's mode of analysis to consider some of the more pressing issues in the era since the global financial crisis and the impact of Covid-19. We will consider the role of central banks, the challenge of fintech, the impact of low interest rates on inequality, savings and debt, and the potential shift in financial centres and reserve currencies with the rise of China. We will conclude by arguing that the mode of analysis developed by Cassis over his long and productive career has never been more pertinent.

The article considers crises of globalization: the 1840s, the 1870s, the Great War, the Great Depression, the Great Inflation (1970s), the Global Financial Crisis (2008) and the Great Lockdown (2020). Each led to a reshaping of the institutions that supervised or regulated economic development globally but also nationally. In each case, a series of questions are answered: what were the origins of the crisis, what were the monetary and fiscal policy responses, how did the crisis affect the drivers of globalization, trade, migration and capital flows? And how did these different challenges affect governance and views of politics? The article concludes that supply shocks are most easily dealt with by inflationary mechanisms, allowing groups to gain some apparent compensation for their losses through the supply shock. But the resulting mobilization into groups also strains social cohesion.

This article examines the geo-economic consequences of the financial panic of October 1907. The vulnerability of the United States, but also of Germany, contrasted with the absence of a crisis in Great Britain. The experience showed the fast-growing industrial powers the desirability of mobilizing financial power, and the article examines the contributions of two influential brothers, Max and Paul Warburg, on different sides of the Atlantic. The discussion led to the establishment of a central bank in the United States and institutional improvements in German central banking: in both cases security as well as economic considerations played a substantial role.

Since the publication of Cagan's seminal contribution in 1956 and its further development by Sargent (1982) there has been a growing literature that seeks to explain German hyperinflation in terms of the monetary hypothesis. However, this article shows that the origins of this hyperinflation can be traced back to a sudden stop that occurred in the summer of 1922 at a time when expectations that the German economy would stabilise began to subside. The reversal of capital flows that took place in those months led in the short term to a dramatic depreciation of the mark, a significant increase in prices and a decline in output. This decline sparked bitter social conflict that fuelled a wage and price spiral. This spiral was accommodated by monetary authorities, leading in turn to explosive inflation.

Offshore financial centres have attracted considerable critical attention over the past few decades as havens for lightly taxed funds that circulate outside the regulatory oversight of major financial centres. This article addresses the emergence of an offshore market in US dollars in Singapore from the late 1960s using a range of archival sources to identify the motivations of the host, participant banks and regional rivals. The development of the Asia dollar market is particularly striking because Singapore was not the most likely venue for an Asian offshore financial centre. The main regional financial centre was Hong Kong, but the Hong Kong authorities made a deliberate choice not to host an offshore market in Hong Kong, a decision that was initially supported both by the state and by incumbent banks, although the banks later changed their view as the Singapore market grew. This case thus opens up discussion of the influence market actors exert over regulators when they are engaged in regulatory arbitrage as well as regulatory competition between states. Evidence is also presented about the efforts of the Bank for International Settlements to encourage greater transparency in offshore financial centres in the 1980s.

This article analyses the reasons why most Latin American governments frequently defaulted on their debts during the nineteenth century. Contrary to previous works, which focused on domestic factors, I argue that supply-side factors were equally important. The regulatory framework at the London Stock Exchange prevented defaulting governments from having access to the capital market. Therefore, the implicit incentive for underwriting banks and governments was to accelerate negotiations with bondholders, particularly during periods of high liquidity. Frequently, however, settlements were short-lived. In contrast, certain merchant banks opted to delay or refuse a settlement if they judged that the risk of a renewed default was too high. In such cases, even if negotiations were extended, the final agreements were more often respected, allowing governments to improve their repayment record.

Recent contributions on ‘financial repression’ and ‘money illusion’ have referred to Maynard Keynes's How to Pay for the War as a supporting document. This article discusses whether Keynes prescribed policies of ‘financial repression’ that were implemented in the United Kingdom, and other countries, following World War II. It seems reasonable that Keynes's writings were instrumental in translating British monetary experiences of the 1920s and 1930s into expectations of policymakers during and after World War II, including a belief in ‘money illusion’ that suggested the use of inflation for driving down real interest rates of public bonds. If this was the case, How to Pay for the War could indeed provide an important explanation for the why and when of ‘financial repression’. This article argues that How to Pay for the War only partly provided support for a policy of ‘financial repression’, and none for using inflation as a ‘tax gatherer’ to the detriment of domestic savers in general. Crediting Keynes as a source for widespread ‘money illusion’ is also out of line with the historical record.

The economic advisers of the 1924 Dawes Committee enacted currency and banking reforms as a means of resolving financial and geopolitical problems. Although the committee members stated that they had no plans to resolve the Ruhr occupation, evidence from the technical advisers demonstrated the opposite. Economists Edwin Kemmerer, Joseph Davis and Arthur Young sought to appease Franco-Belgian demands for a resolution to the reparations debate by balancing the German budget and reorganising the banking system, thereby also addressing the question of military occupation. This research delves into the advisers’ reports on public finance, currency stabilisation and the gold standard, arguing that their attempts to assuage reparation-related concerns rested on major reforms to German central banking.

While the International Debt Crisis of the early 1980s was the most severe financial crisis since World War II and while national and international banking supervision was developing at that time, little is known about the response of supervisors to the deteriorating financial environment in the years preceding the crisis. Complementing the political and business history of the international debt situation, this article aims to unravel the international banking supervision side of the question. Based on archival material from the Bank for International Settlements (BIS) and various central banks, the article examines how the Basel Committee on Banking Supervision (BCBS), then emerging as the leading forum on international banking supervision, anticipated the International Debt Crisis through the prism of ‘country risk’. The article shows that the Committee refused to recommend strict regulations in this area. It argues that members adopted this position because of the lack of good information and the difficult position of banking supervision between macroeconomic issues and individual banks’ own responsibilities, but also because of somewhat excessive faith in market mechanisms. Their discussions on country risk shed light on critical challenges of banking supervision and, thereby, on the history of banking regulation and prudential thinking.

In spite of considerable attention granted to sovereign debt failures, we still have limited knowledge of the incentives which induced creditors to lend at unsustainable levels. This article looks at the French government’s policy towards Poland from 1958, when economic cooperation between the two countries started, until Poland's announcement in 1981 that it could not service its debt. Export credit guarantees supported France's financial involvement, and this implied the government's strong influence on the decision to lend. This article brings out the tension between economic and political priorities in French policymaking during the cold war. Archival evidence reveals that as early as 1975 the French finance ministry warned that French risks were excessive; that Poland’s growing economic difficulties would render the country unable to repay its debts; and recommended limiting France's financial commitments. The French government, however, decided not only to carry on but also to increase lending, in order to support its political objective of using economic and financial means to relax East–West tensions. This article illustrates how creditors play a part in sovereign debt crises by voluntarily turning a blind eye to a country’s growing inability to repay its debts, and thus reinforce a vicious circle of indebtedness.

After Southern Italy became part of a new, national state in 1860, its financial sector was radically transformed under Piedmontese influence. This article challenges the conventional wisdom that the aggressive penetration of a Northern credit institution, the future Bank of Italy, into the South following unification harmed the local banking system and highlights instead its transformative role in modernising and deepening regional credit markets. On the basis of new statistics, banking and political records, this contribution shows that the introduction of ‘foreign’ banking from Northern Italy under the auspices of a national, constitutional government resulted in a financial revolution and a democratisation of credit supply to the advantage of the whole South. Public banking under the Bourbons had privileged the needs of an absolute government over those of the private economy and of the capital city over those of the rest of the country, retarding financial development. Credit undersupply and regional fragmentation could only be overcome through the integration of the South within a larger Italian market, in which, however, the lion's share went to a predominantly Northern institution.

A century ago the US commercial banking system was exceptional in two ways. It was by good measure the largest commercial banking system of any country. And it was different from the commercial banking systems of other leading countries in having tens of thousands of independent banks with very few branches rather than the more typical pattern of a far smaller number of banks with many branches. Today, a century later, the US system is more normal than exceptional, dominated by a small number of very large banks with extensive branch systems. This article describes the US banking-structure transition from exceptional to normal. It closes with an interesting contrast of US and European banking developments.

Interest in the growth of tradeable securities in early modern Britain, especially its relationship to economic development and the funding of government debt, has centered mainly on the borrower – whether it be trading company, industrial enterprise, or the state. This article directs attention to the investor, using Charity Commission Reports for England and Wales that document a dramatic mid-eighteenth-century shift by donors and trustees from investments in real estate and rent charges to perpetual government annuities, mainly 3 percent Consols. The heavy investment in this public debt product is what ultimately prompted the creation of the London Stock Exchange in 1801.

In analyzing this shift, which occurred among the propertied in all regions of the nation, not just the metropolis or among corporate entities and the mercantile community, I consider both what made the annuities increasingly attractive for charitable trusts and the alternatives – real estate and private loans secured by mortgage or other means – more problematic. Legal changes, I argue, played a role in the transformation, especially the Charitable Uses Act of 1736, which made charitable devises of real estate very difficult and probably resulted in reduced investment in human capital and less wealth redistribution. Regions varied, however, in the degree to which they switched from real estate in the latter part of the eighteenth century; they also differed in the extent to which the switch resulted in more gifts of interest-bearing loans as well.

Admittedly, the changes documented in this article concern only one type of depository for assets, charitable trusts. The appeal of these annuities, however, could extend to investments needed for other purposes such as postmortem payments to dependents. Moreover, the fall-off in demand for real estate in trusts correlates with GDP estimates showing a steady decline in income from real assets after 1755 and what some have noted in this period as a puzzle – the lack of an increased rate of return on rents and private loans at a time of robust investment in government debt. Most importantly, though, the transition demonstrates the ability of the government to induce a broad spectrum of the propertied population to invest in securities, if the vehicle they offered had the right characteristics, which were not necessarily highest yield or liquidity without loss in value.

This study explores parliamentary reforms related to the financial accountability of banks following the 1825–6 and 1836–7 financial crises in England. An appraisal of nineteenth-century parliamentary Hansard transcripts reveals early banking legislative pursuits. The study observes the laissez-faire and interventionist approaches towards the banking enactments of 1826, 1833 and 1844 that underpin the transformation of financial accountability during this era. The Bank Notes Act 1826 imposed financial accountability on the Bank of England by requiring the mandatory disclosure of notes issued. The Bank Notes Act 1833 extended this requirement to all other banks. The Bank Charter Act 1833 increased the financial accountability of the Bank of England by requiring it to provide an account of bullion and securities belonging to the governor and company, as well as deposits held by the bank. Thereafter, the Joint Stock Banks Act 1844 pioneered the regular publication of assets and liabilities and communication of the balance sheet and profit and loss account to shareholders. State intervention in the financial accountability of banks during the period from 1825 to 1845 appears to have been cumulative.

Pre-industrial money supply typically consisted of multiple, often foreign currencies. Standard economic theory implies that this entails welfare loss due to transaction costs imposed by currency exchange. Through a study of novel data on Finnish nineteenth-century parish-level currency conditions, we show that individual currencies had principal areas of circulation, with extensive co-circulation restricted to the boundary regions in between. We show that trade networks, defined here through the regional co-movement of grain prices, proved crucial in determining the currency used. Market institutions and standard price mechanisms had an apparent role in the spread of different currencies and in determining the dominant currency in a given region. Our findings provide a caveat for the widely held assumption that associates multi-currency systems with negative trade externalities.

From 1716 to 1718, Sweden experienced a shock of liquidity when the absolutist regime of Charles XII issued large amounts of fiat coins (mynttecken) in order to finance the Great Northern War. After the death of the king in November 1718, the new parliamentary regime decided to partially default on the coins. In international literature, this episode is largely unknown, and in Swedish historiography, scholars have often claimed that the country's currency collapsed in hyperinflation. We assess the performance of the new coins by studying how prices of commodities in various geographic locations developed. We also study bookkeeping practices in order to see how accountants treated the new coins. Our results show that there was a complex relationship between prices and liquidity. Prices of products in high demand by the military increased more than other prices. Accountants did not treat mynttecken and other currencies differently in 1718. It was only after the death of the king that accountants started to differentiate between different types of coins. The value of the fiat coins was linked to the actions and the legitimacy of the royal regime, which is in line with the State theory of money.

The City of London has long attracted much academic and popular attention. However, little research has been done on the relationship between the City and the European Economic Community in the 1970s and 1980s, despite the accession of the United Kingdom in 1973. Based on archival material from central and commercial banks in the UK and France, this article explores the relationship between the City and the EEC, from the accession of the UK to the EEC in 1973 to the Maastricht Treaty in 1992, which was meant to be the year of the completion of the single financial market. The article explores two areas: the influence of the City on EEC financial regulation, and how this influence was exerted. It pays particular attention to two committees chaired by the Bank of England, the City Liaison Committee and the City EEC Liaison Committee, and to British banks. The article argues that if the EEC played a part in the formalisation of British banking regulation, the City also played a key role in shaping EEC plans for financial regulation.