(This is the second installment of a three-part essay. The first part is here.) Big Engines that Couldn't Although Hoover's Reconstruction Finance Corporation (RFC) was "more largely a banker's loan bank than anything else" (Ebersole 1933, 477), financial institutions were never the only firms eligible for its…
(In writing this series, I allowed myself to skip over some topics. But now that I'm turning the series into a book, to be published by the University of Chicago Press, I have to close those gaps. The most important gap by far concerns the Reconstruction Finance…
My last post argued that, despite what Diamond and Dybvig's famous theory suggests, bank runs have seldom proven fatal to otherwise sound banks. Instead, when people run on a bank, it's usually because it's already in hot water. In response to that post, a Twitter correspondent wondered…
The 2022 Nobel Prize in Economics is to be shared by Ben S. Bernanke, Douglas W. Diamond, and Philip H. Dybvig, “for research on banks and financial crises.” Diamond and Dybvig are best known for their 1983 article, “Bank Runs, Deposit Insurance, and Liquidity,” in which they…
On October 10th, Douglas Diamond and Philip Dybvig won the Sveriges Riksbank Prize in Economic Sciences, sharing it with Ben Bernanke "for research on banks and financial crises.” According to the prize committee, Diamond and Dybvig's research showed how the combination of borrowing short and lending long…