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Oh, How the Mighty Have Fallen: The Bank Failures and Near Failures That Started America’s Greatest Financial Panics

Published online by Cambridge University Press:  28 May 2021

Hugh Rockoff*
Hugh Rockoff is Professor, Department of Economics, Rutgers University, 75 Hamilton Street, New BrunswickNJ08901. E-mail:


This paper examines the failures or in some cases near-failures of financial institutions that started the 12 most severe peacetime financial panics in the United States, beginning with the Panic of 1819 and ending with the Panic of 2008. The following generalizations were true in most cases, although not in all. (1) Panics were triggered by a short series of failures or near-failures; (2) many of the failing institutions were what we would now call shadow banks; (3) typically, the source of trouble was an excessive investment in real estate; and (4) typically, they had outstanding reputations for trustworthiness, prudence, and financial acumen—before they failed. It appears that in these respects the Panic of 2008 was an old-school panic.

[a panic] occurs when a succession of unexpected failures has created in the mercantile, and sometimes also in the non-mercantile public a general distrust in each other’s solvency; disposing every one not only to refuse fresh credit, except on very onerous terms, but to call in, if possible all credit which he has already given.

—John Stuart Mill

All of this has happened before, and it will all happen again.

—Peter Pan

© The Economic History Association 2021

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This paper had its origin in a conversation with Albrecht Ritschl, who asked a number of searching questions about the history of U.S. banking panics shortly after the 2008 financial crisis, some of which I finally answer here. I presented a paper covering some of these issues at a conference at Indiana University in October 2014, celebrating the scholarship of Elmus Wicker. I thank the participants in that conference, especially my discussant Richard Sylla, for helpful comments. That paper was also presented at a meeting of the Chicago Friends of Economic History in May 2015. On that occasion, questions raised by Lou Cain were especially helpful. Comments received during and after my presentation at the 2020 meeting of the Economic History Association were valuable. Farley Grubb, Eric Hilt, Jeffrey R. Hummel, and my Rutgers colleagues Michael Bordo and Eugene White also provided insightful comments and encouragement. Mriga Bansal, Andrew Garib, and Jessica Schlossberg provided able research assistance. The remaining errors are mine.



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