Bank Regulation, Network Topology, and Systemic Risk: Evidence from the Great Depression

We study how bank regulation interacts with network topology to influence systemic stability. Employing unique hand-collected data on the correspondent for all U.S. banks prior Great Depression and a methodology that captures credit risk position, we demonstrate pyramid-shaped was inherently fragile systemically risky. measure its contribution banking distress, show bank's position as well neighbors' are strong predictors of survivorship. Institutional alternatives, such branch banking, alternative topologies deliver networks more stable than 1929.