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Financial Failure and Depositor Quality: Evidence from Building and Loan Associations in California

Published online by Cambridge University Press:  16 March 2023

Todd Messer Open the ORCID record for Todd Messer [Opens in a new window]
Todd Messer*
Affiliation:
Todd Messer is an Economist, Federal Reserve Board, Division of International Finance, Board of Governors of the Federal Reserve System, Constitution Avenue NW, Washington, DC 20551. E-mail: [email protected].
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Abstract

Flightiness, or depositor sensitivity to liquidity needs, can be an important determinant of financial distress. I leverage institutional differences—that attract depositors with varying flightiness—across building and loan associations in California during the Great Depression. A new type of plan, the Dayton plan, involved less restrictive savings plans and lower withdrawal penalties. Dayton plans in California were more likely to close during the Great Depression. Archival evidence on lending rates and returns supports the flightiness mechanism.

Type
Article
Information
The Journal of Economic History , Volume 83 , Issue 1 , March 2023 , pp. 87 - 130
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Economic History Association

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Footnotes

I would like to thank Chaewon Baek, Christopher Campos, Marina Dias, Eric Hilt (editor), Peter McCrory, Martha Olney, Mathieu Pedemonte, Gary Richardson, Christina Romer, David Romer, Jonathan Rose, Kenneth Snowden, and three anonymous referees for their helpful comments and suggestions. I would also like to thank the seminar participants at UC Berkeley. Albina Khatiwoda, Charles McMurry, and Jameson Weiss provided outstanding research assistance. I also acknowledge the All-UC Group in Economic History for providing funds for data collection. Any remaining errors are my own. The views in this paper are the responsibility of the author and do not necessarily represent those of the Federal Reserve Board or the Federal Reserve System.

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