According to Gary Gorton and Ellis W. Tallman, in their recently released NBER Working Paper, some were.
For several decades prior to the Fed’s establishment, Gorton and Tallman note, “private bank clearinghouses provided lending facilities and assisted member banks when they needed help.” The pattern of such assistance, they say, reflected a privately-adopted TBTF policy that “was a reasonable response to the vulnerability of short-term debt to runs that could threaten large banks and thereby the entire banking system.”
These clearinghouse bailouts appear, furthermore, to have succeeded in averting more serious crises. Since, according to Gorton and Tallman’s understanding, “[t]he logic of modern bailouts is the same” as that adopted by 19th-century clearinghouses, they conclude that TBTF remains a reasonable policy today, and not, as many suppose, an invitation to excessive bank risk taking.
But there’s a flaw in Gorton and Tallman’s reasoning, and I’m afraid it’s a lulu. The flaw consists of their failure to understand what “Too Big to Fail” means. That meaning has been clear from the time Congressman Stewart McKinney first popularized the notion during a hearing concerning the Continental Illinois bailout. “Mr. Chairman,” McKinney said, “Let us not bandy words. We have a new kind of bank. It’s called too big to fail. TBTF, and it’s a wonderful bank.”