Hostname: page-component-76fb5796d-skm99 Total loading time: 0 Render date: 2024-04-25T20:13:03.468Z Has data issue: false hasContentIssue false
  • English
  • Français

Varieties of Banking and Regional Economic Development in the United States, 1840–1860

Published online by Cambridge University Press:  11 May 2010

Hugh T. Rockoff
Hugh T. Rockoff
Affiliation:
Rutgers, The State University
Get access Rights & Permissions [Opens in a new window]

Extract

It is sometimes asserted that a laissez-faire policy toward financial intermediaries tends to deepen financial development and accelerate economic growth. The two decades preceding the American Civil War provide a challenging case for this proposition because they witnessed something approaching a natural experiment. During those years the Federal government withdrew from the regulation of banking, a policy that was the final outcome of Andrew Jackson's war with the Second Bank of the United States. A wide range of experiments concerning entry into commercial banking were tried, from “free” banking to “socialized” banking. Moreover, other kinds of legislation affecting banking varied from state to state as well. While the regions of the United States differed in terms of economic structure, a common language, a common legal tradition, and, to some extent, a common culture permeated all regions. Thus, the period provides excellent conditions for observing the effects of financial legislation on the extent of financial intermediation. In this paper I will assess the impact on financial development of the three most important forms of regulation: the commercial banking laws, the usury laws, and the mutual savings banking laws.

Type
Papers Presented at the Thirty-fourth Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 35 , Issue 1 , March 1975 , pp. 160 - 181
Copyright
Copyright © The Economic History Association 1975

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

I would like to thank Claudia D. Goldin, Roger Hinderliter, Eileen Mauskopf and Maury Rabinowitz for helpful comments on a preliminary draft. Of course they are not responsible for any errors that remain. I would also Wee to thank the Rutgers University Research Council for financial assistance.

1 Two recent books with this theme are: McKinnon's, Ronald I.Money and Capital in Economic Development (Washington, D.C.: The Brookings Institution, 1973Google Scholar) and Shaw's, EdwardFinancial Deepening in Economic Development (New York: Oxford University Press, 1973).Google Scholar

2 A. Hepburn, BartonA History of Currency in the United States (New York: the Macmillan Company, 1915), pp. 158Google Scholar, 174.

3 Cameron, Rondo and collaborators, Banking in the Early Stages of Industrialization: A Study in Comparative Economic History(New York: Oxford University Press, 1967), pp. 300–305.Google ScholarGoldsmith, Raymond W.Financial Structure and Development (New Haven: Yale University Press, 1969), pp. 26–30.Google Scholar

4 Hammond, BrayBanks and Politics in America from the Revolution to the Civil War (Princeton: Princeton University Press, 1957), pp. 573Google Scholar, 574.

5 Conant, Charles A.A History of Modem Banks of Issue, fifth edition (New York: G. P. Putnam's Sons, 1915), p. 393.Google Scholar

6 On bank failures in New York see Root, L. Carroll“New York Bank Currency,” Sound Currency, II (February 1895), 285–308.Google Scholar

7 For the history of banking in Tennessee see Campbell, Claude Arthurthe Development of Banking in Tennessee (Nashville: Vanderbilt University, 1932).Google Scholar

8 For the history of banking in Louisiana see Green, George D.Finance and Economic Development in the Old South: Louisiana Banking, 1804–1861 (Stanford: Stanford University Press, 1972).Google Scholar

9 Cable, John RayThe Bank of the State of Missouri (New York: Columbia University Press, 1923), pp. 241–248.Google Scholar

10 For the history of banking in Minnesota see Patchin, Sidney“The Development of Banking in Minnesota,” Minnesota History Bulletin, II (August 1917), 111–168.Google Scholar

11 The classic presentation of this approach is Friedman, Milton ‘The Quantity Theory of Money—A Restatement,” in Studies in the Quantity Theory of Money, ed. by Friedman, Muton (Chicago: The University of Chicago Press, 1946), pp. 3–21.Google Scholar

12 Peterson, Richard E.“A Cross Section Study of the Demand for Money: the United States, 1960–62,” The Journal of Finance, XXIX (March 1974), 77.Google Scholar

13 Rockoff, Hugh‘The Free Banking Era: A Reexamination,” Journal of Money, Credit and Banking (May 1974), 154.Google Scholar

14 Peterson, “Cross Section,” p. 88.

15 Feige, Edgar L.The Demand for Liquid Assets: A Temporal Cross-Section Analysis (Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1964).Google Scholar

16 Robinson, Louis N. and Nugent, RolfRegulation of the Small Loan Business (New York: Russell Sage Foundation, 1935), p. 30.Google Scholar

17 Davis, Lance E.‘*The New England Textile Mills and the Capital Markets: A Study of Industrial Borrowing, 1840–1860,” The Journal of Economic History, XX (March 1960), 3Google Scholar, 4.

18 Berry, Thomas SeniorWestern Prices Before 1861 (Cambridge, Mass.: Harvard University Press, 1943), p. 497.Google Scholar

19 This section is based on the discussion in Keyes, Emerson W., A History of Savings Banks in the United States; two volumes (New York: Bradford Rhodes, 1876).Google Scholar

20 The case of Pennsylvania might be explained by the early appearance there of building and loan associations of a mutual sort. Bodfish, H. Morton editor, History of Building and Loan in the United States (Chicago: United States Building and Loan League, 1931), p. 32.Google Scholar

21 Keyes, History Vol. 1, pp. 270–271 and Teck, AlanMutual Savings Banks and Savings and Loan Associations: Aspects of Growth (New York: Columbia University Press, 1968), p. 17.Google Scholar

22 Welfling, WeldonMutual Savings Banks (Cleveland: The Press of Case Western Reserve University, 1968), pp. 23–24.Google Scholar

23 Some doubt is cast on the extent of working class participation by Fishlow's study of the British savings banks which were similar to the American mutuals. Fishlow, Albert“The Trustee Savings Banks, 1817–1861,” Journal of Economic History, XXI (March 1961), 26–40.CrossRefGoogle Scholar However, the American case may have been different. Payne and Davis, for example, found that the Savings Bank of Baltimore tried to restrict its depositors to this class. Payne, Peter Lester and Davis, Lance EdwinThe Savings Bank of Baltimore 1818–1866: A Historical and Analytical Study (Baltimore: The Johns Hopkins Press, 1954), pp. 32–36..Google Scholar

24 Keyes, History, Vol. 1, p. 73.

25 U.S. Comptroller of the Currency, Annual Report of the Comptroller of the Currency, 1876 (Washington: Government Printing Office, 1876).Google Scholar

26 Van Court's, Counterfeit Detector and Bank Note List, Philadelphia, Nov. 1840, Nov. 1850 and Nov. 1858.Google Scholar

27 U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, D.C.: U.S.G.P.O., 1960), pp. 16–18.Google Scholar

28 Easterlin, Richard A. “Interregional Differences in per Capita Income, Population and Total Income, 1840–1950,” in Conference on Research in Income and Wealth, Trends in the American Economy in the Nineteenth Century, Studies in Income and Wealth, Vol. 24 (Princeton: Princeton University Press, 1960), pp. 97, 98.Google ScholarEasterlin, Richard “Regional Income Trends, 1840–1950” in American Economic History, edited by Harris, Seymour (New York: McGraw Hill, 1961), p. 528.Google ScholarGallman, Robert E. “Gross National Product in the United States, 1834–1909” in Conference on Research in Income and Wealth, Output, Employment and Productivity in the United States After 1800, Studies in Income and Wealth, Vol. 30 (New York: Columbia University Press, 1966), p. 27.Google Scholar

29 Fogel, Robert William and Engerman, Stanley L.Time on the Cross: The Economics of American Negro Slavery (Boston: Little, Brown and Company, 1974), Vol. 2, p. 162.Google Scholar

30 For 1860: U.S. Bureau of the Census, Eighth Census, 1860: Mortality and Miscellaneous Statistics, p. 319.Google Scholar For 1850: U.S. Bureau of the Census, Seventh Census, 1850: Abstract of the Seventh Census, p. 48.Google Scholar

31 U.S. Bureau of the Census, Eighteenth Census of the United States, 1960. Vol. pp. (1–30) - (1–37).Google Scholar

32 Keyes, History, Vol. 2, The table facing p. 532.