CONTAGION AND BANK FAILURES DURING THE GREAT-DEPRESSION - THE JUNE 1932 CHICAGO BANKING PANIC

We examine the social costs of asymmetric-information-induced bank pan ics in an environment without government deposit insurance. Our case s tudy is the Chicago bank panic of June 1932. We compare the ex ante ch aracteristics of panic failures and panic survivors. Despite temporary confusion about bank asset quality on the part of depositors during t he panic, which was associated with widespread depositor runs and bank stock price declines, the panic did not produce significant social co sts in terms of failures among solvent banks.