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SUMMARY:The Federal Reserve's 'rate war' and its aftermath: the political 
 consequences of financial instability\, 1966-72. - Dr Arthur Rothier-Bautz
 er (Centre for Financial History and GlobalCapital)
DTSTART:20250217T170000Z
DTEND:20250217T183000Z
UID:TALK225748@talks.cam.ac.uk
CONTACT:Dr Duncan Needham
DESCRIPTION:The 1966 and 1969-70 credit crunches were the first instances 
 of near-panic in American banking since the 1930s.  Unlike later crises\, 
 financial stress was engineered by the Federal Reserve which forced commer
 cial banks to cut lending it deemed inflationary.  In both 1966 and 1970\,
  the Fed abandoned this approach when it appeared to contribute to financi
 al instability outside banks (in 1966 in the municipal securities market\,
  in 1970 in the Commercial Paper market).  These turns and subsequent liqu
 idity injections have rightly been associated with the re-emergence of the
  central bank's lender of last resort function.  This paper argues they we
 re part of a larger shift in the relationship between banks and the state.
   The banks exploited the period's financial instability to lobby successf
 ully for the end of their subsidiary status in the 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 p
 erceived to be selective credit controls in the form of Regulation Q ceili
 ngs.  They then achieved a loosening of restrictions on their activities i
 n the 1970 amendments to the Bank Holding Company Act.  Finally\, through 
 their influence on the 1971 Report of the President’s Commission on Fina
 ncial Structure and Regulation and expanded presence in Washington\, they 
 pushed the legislative agenda towards the elimination of New Deal era bank
 ing regulations.  A careful study of the period's banking politics illumin
 ates later developments in banking practice and regulation.
LOCATION:John Bradfield Room\, Darwin College and Zoom
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