Introduction

Banks in the market-centred financial system of the US remain, paradoxically, exception and paradigm. Like past cycles of financial speculation and crisis, bank changes in the US since the 1980s have marginalized alternative banks and traditional banking (that of accepting deposits and making loans). Instead, liberalization and deregulation have increased disintermediation. Private banks in the US tend to place household savings and pensions directly in a variety of products and services based on securities and derivatives. In historical perspective, the exceptional structure of US banking is ‘largely due to a different political history’. Alexander Hamilton looked to the Bank of England as a model. However, opposition from federalists and democrats led to ‘bank war’ and the veto of the Second Bank of the United States charter by President Jackson in 1832. Thereafter, ‘aversion to powerful institutions of any kind’, especially big banks, is widely cited as causing financial instability through the early twentieth century. Political events also reinforced capital market-based banking. Histories of US banking place the Civil War and World War I at the centre of explanations for the emergence of money centre banks and capital market deepening in New York.

US banking history turns on crises caused by commercial banks and financial market bubbles (1837, 1857, 1873, 1884, 1893, 1907, 1929).