Dr Sabine Schneider examines the Politics of Crisis Lending in the Nineteenth Century

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Image: Daniel Havell, after Thomas Hosmer Shepherd, A view of the Bank of England (Gezicht op de Bank of England, Londen), 1816, Rijksmuseum, Netherlands, Public Domain (image cropped). Source here.

Dr Sabine Schneider (New College) unearths new insights into the Bank of England’s crisis management during the financial panic of 1866, and its institutional development as a lender of last resort. In her article in the Economic History Review, Dr Schneider revisits the panic triggered by the collapse of Overend, Gurney, & Company on 10 May 1866, which became one of Britain’s most tumultuous modern crises. Her article investigates the politics of the Bank’s liquidity provision during the panic and in the ensuing months of financial stringency. By assessing the correspondence, speeches, and publications of Governors, City figures, and financial journalists, the article finds that the Bank’s evolving approach to crisis lending was decisively shaped by its commercial objectives and a prolonged struggle to preserve its autonomy. When confronted with the 1866 crisis, the Bank adopted a pragmatic stance towards the market, which accommodated the credit needs of the City without sacrificing either its privileged legal status or its shareholders’ interests. Her research argues that the Bank employed a policy of ‘constructive ambiguity’ during the post-crisis months, which succeeded in both limiting moral hazard and consolidating the Bank’s discretionary powers.

Parts of this news item draw on Dr Schneider’s article, ‘The Politics of Last Resort Lending and the Overend & Gurney Crisis of 1866’, The Economic History Review (2021), available now via Open Access here.