Too Big to Fail: the Panic of 1927∗

The purpose of this paper is to explore whether the Bank of Japan provided the special loans for insolvent banks against the panic of 1927. This paper uses a cross-sectional data set consisting of observations on 1364 ordinary banks. The logit model regression at this paper provides each bank’s estimated propensity to close. And the results of the tobit model regressions imply that supported banks had higher closure risk or occupied key positions in the local loan-markets and that the bank bailouts may have reflected political factors to some extent. JEL Classification：G21, G28, N25. Keywords：lender of last resort; too big to fail; bank bailouts; bank closure risk; the panic of 1927. ∗ This paper is a revised version of Yokoyama (2007). The authour thanks to Kazumi Asako