美联储-1924年新墨西哥州的银行业恐慌和美联储的回应（英）-2025.8_17页_389kb

Summary of the 1924 New Mexico Banking Panic and Federal Reserve Response

Introduction

This paper examines a regional banking panic in New Mexico in early 1924, where about one-fourth of the banks closed temporarily or permanently due to widespread runs and declining confidence. The Federal Reserve responded with both high-profile and inconspicuous measures to stabilize the financial system and restore stability. The analysis highlights how observable and unobservable actions contributed to confidence-building during the crisis.

Background

The panic was rooted in economic challenges in New Mexico, including a severe drought that exacerbated agricultural difficulties. Cattle prices dropped significantly after World War I, from over $16 per hundred pounds in 1919 to around $7 in 1922, leaving ranchers and farmers struggling to repay debts. The banking system in New Mexico had grown rapidly, with 126 banks by 1921, but this expansion increased leverage, making institutions vulnerable to shocks. About half of the banks were Federal Reserve members, limiting direct access to liquidity support.

Banking Panic Unfolded

The panic began in late 1923 and escalated in January 1924. Between October 1923 and February 1924, approximately 25% of New Mexico's banks closed, with outbreaks across the state, including cities like Albuquerque, Silver City, and Carlsbad. Evidence from balance sheets showed that banks needing support were not necessarily in worse condition overall, indicating that confidence played a critical role in triggering runs.

Federal Reserve Response

The Federal Reserve employed a dual approach:

• High-profile actions, such as an airlift of $500,000 in cash to Albuquerque during a run to halt withdrawals and reassure depositors, along with media statements about ongoing support.
• Inconspicuous behind-the-scenes operations, including discreet discount window loans totaling about 50% increases in outstanding debt for some banks, which helped avoid contagion without public alarm and provided breathing room for institutions to resolve issues.

Conclusion

The panic subsided after Federal Reserve intervention, with fewer closures and some banks reopening after reorganization. The episode demonstrates the importance of balancing public support to build trust with confidential liquidity provision to mitigate financial instability, offering lessons on lender-of-last-resort policies.