5
Information Production and Suppression and Emergency Liquidity
Managing the information environment during a crisis means not only suppressing bank-specific information but also producing some bank-specific information of a different sort. The bank-specific information that was produced during nineteenth-century crises came from special examinations of a few specific banks during the suspension period. The specifics were never released, but the banks were certified as solvent. Related to this bank-specific production were special clearinghouse loans that in retrospect appear to be essentially bailouts of banks. In this chapter we detail these clearinghouse responses to crisis. The bank examination procedures during normal times laid the groundwork for special examinations during periods of information suppression. All five panics of the National Banking Era had periods of time during which the New York Clearing House suspended its normal weekly publication of key balance sheet aggregate measures (in the New York Times, as was required by the New York State superintendent of banking). While bank-specific information was cut off, the clearinghouse still engaged in some highly public special bank examinations. The clearinghouse examined some banks that were subject to unfavorable rumors, and they jointly aided and bailed out some other members. In the case of a special examination during information-suppression periods, the results of the examination were publicized with only a certificate of health issued by the Clearing House Committee. The certificate gave no details of the examination but just stated that the bank was deemed solvent. In fact, the detailed results of clearinghouse examinations were never made public, even in normal times, although active lending to a distressed member bank (effectively bailouts) could be made public.
