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CATEGORIES:Financial History Seminar
SUMMARY:The Federal Reserve's 'rate war' and its aftermath
 : the political consequences of financial instabil
 ity\, 1966-72. - Dr Arthur Rothier-Bautzer (Centre
  for Financial History and GlobalCapital)
DTSTART;TZID=Europe/London:20250217T170000
DTEND;TZID=Europe/London:20250217T183000
UID:TALK225748AThttp://talks.cam.ac.uk
URL:http://talks.cam.ac.uk/talk/index/225748
DESCRIPTION:The 1966 and 1969-70 credit crunches were the firs
 t instances of near-panic in American banking sinc
 e the 1930s.  Unlike later crises\, financial stre
 ss was engineered by the Federal Reserve which for
 ced commercial banks to cut lending it deemed infl
 ationary.  In both 1966 and 1970\, the Fed abandon
 ed this approach when it appeared to contribute to
  financial instability outside banks (in 1966 in t
 he municipal securities market\, in 1970 in the Co
 mmercial Paper market).  These turns and subsequen
 t liquidity injections have rightly been associate
 d with the re-emergence of the central bank's lend
 er of last resort function.  This paper argues the
 y were part of a larger shift in the relationship 
 between banks and the state.  The banks exploited 
 the period's financial instability to lobby succes
 sfully for the end of their subsidiary status in t
 he nation's credit policy system.  In the words of
  a contemporary banker\, they sought 'to re-enter 
 the mainstream of private enterprise'.  They first
  fought back what they perceived to be selective c
 redit controls in the form of Regulation Q ceiling
 s.  They then achieved a loosening of restrictions
  on their activities in the 1970 amendments to the
  Bank Holding Company Act.  Finally\, through thei
 r influence on the 1971 Report of the President’s 
 Commission on Financial Structure and Regulation a
 nd expanded presence in Washington\, they pushed t
 he legislative agenda towards the elimination of N
 ew Deal era banking regulations.  A careful study 
 of the period's banking politics illuminates later
  developments in banking practice and regulation.
LOCATION:John Bradfield Room\, Darwin College and Zoom
CONTACT:Dr Duncan Needham
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