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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
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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

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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.

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