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Case 4: Financial crises /2547

>> Download and print the worksheet.

  • Read the primary article below and answer the questions on the worksheet.

Primary reading

Sowerbutts, R et al (2016), The demise of Overend Gurney, Bank of England Quarterly Bulletin, Q2, 94-106

Discussion questions

  1. Explain the role that the Bank of England played in financial markets prior to 1866.
  2. Identify the key causal factors that led to the ‘demise of Overend Gurney’.
  3. Explain the Bank of England’s policy responses to the failure of Overend Gurney (both immediately prior to OG suspending payment and after it had failed).
  4. To what extent does the Bank of England’s current status as Lender of Last Resort match Walter Bagehot’s 1873 principles?

Background reading

The Economist (2014), The slumps that shaped modern finance, The Economist, April 12th

Murphy, AL (2014), The financial revolution and its consequences, in Floud, R, Humphries, J and Johnson, J (eds), The Cambridge Economic History of Modern Britain vol 1 1700-1870, Cambridge: CUP (pp321-343)

Reinhart, CM, and Rogoff, KS (2008), Is the 2007 US subprime financial crisis so different? An international historical comparison, American Economic Review, 98, no. 2: 339-344.

Reflective question [for your w25 Reflective Journals]

To what extent do the Bank of England’s actions in relation to Overend Gurney provide a template for responses to subsequent financial crises?