How should public policy evolve in light of the recent series of financial crises worldwide? In this article, the author argues that market discipline must play an essential role in any future policy reforms.

How costly were the banking panics of the National Banking Era (1861-1913)? I combine two hand-collected data sets - the weekly statements of the New York Clearing House banks and the monthly holding period return of every stock listed on the NYSE - to estimate the cost of banking panics in an...