The collapse of a major discount house sent a shock well beyond one firm. Overend, Gurney & Co. failed in 1866 after concerns about its assets and attempts to reorganize its business.
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The collapse unsettled confidence in London's financial markets and became a landmark in discussions of crisis management. London's reaction revealed how quickly confidence can evaporate.
The failure must be read against the firm's business choices and the wider structure of discount-market liquidity. The trouble was not only panic; the firm's own assets mattered.
Crisis doctrine always looks clearer when written after the disaster. Treating lender-of-last-resort doctrine as fully settled before this panic misreads its later evolution.
When should authorities lend, and when must an institution be allowed to fail?