Charles Calomiris

“Fundamentals, Panics, and Bank Distress During the Depression”

Coauthor(s): Joseph Mason.

Editors: Franklin Allen and Douglas Gale


We assemble bank-level and other data for Fed member banks to model determinants of bank failure. Fundamentals explain bank failure risk well. The first two Friedman-Schwartz crises are not associated with positive unexplained residual failure risk, or increased importance of bank illiquidity for forecasting failure. The third Friedman-Schwartz crisis is more ambiguous, but increased residual failure risk is small in the aggregate. The final crisis (early 1933) saw a large unexplained increase in bank failure risk. Local contagion and illiquidity may have played a role in pre-1933 bank failures, even though those effects were not large in their aggregate impact.

Source: Financial Crises
Exact Citation:
Calomiris, Charles, and Joseph Mason. "Fundamentals, Panics, and Bank Distress During the Depression." In Financial Crises. Ed. Franklin Allen and Douglas Gale. Cheltenham: Edward Elgar, 2008.
Place: Cheltenham
Date: 2008