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Bank Supervision, Regulation, and Instability During the Great Depression

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  • MITCHENER, KRIS JAMES
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    Abstract

    Even after controlling for local economic conditions, differences in supervision and regulation help explain the large variation in state bank suspension rates across U.S. counties during the Great Depression. More stringent capital requirements lowered suspension rates whereas laws prohibiting branch banking and imposing high reserve requirements raised them. States whose bank supervisors could liquidate banks minimized contagion and credit-channel dislocations and experienced lower suspension rates. Those that gave their supervisors sole authority to issue bank charters and granted their supervisors long terms strengthened the incentives for bank lobbyists to influence supervisory decisions and consequently experienced higher rates of suspension.

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    Bibliographic Info

    Article provided by Cambridge University Press in its journal The Journal of Economic History.

    Volume (Year): 65 (2005)
    Issue (Month): 01 (March)
    Pages: 152-185

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    Handle: RePEc:cup:jechis:v:65:y:2005:i:01:p:152-185_05

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    Cited by:
    1. Mark Carlson, 2008. "Alternatives for distressed banks and the panics of the Great Depression," Finance and Economics Discussion Series 2008-07, Board of Governors of the Federal Reserve System (U.S.).
    2. Eichengreen, Barry, 2008. "Sui Generis EMU," CEPR Discussion Papers 6642, C.E.P.R. Discussion Papers.
    3. Florian Buck & Eva Schliephake, 2012. "The Regulator's Trade-off: Bank Supervision vs. Minimum Capital," CESifo Working Paper Series 3923, CESifo Group Munich.
    4. repec:cge:warwcg:146 is not listed on IDEAS
    5. Charles Calomiris, 2009. "Banking Crises and the Rules of the Game," NBER Working Papers 15403, National Bureau of Economic Research, Inc.
    6. Klein, Alexander & Otsuy, Keisuke, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," CAGE Online Working Paper Series 147, Competitive Advantage in the Global Economy (CAGE).
    7. Alex Klein & Keisuke Otsu, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," Studies in Economics 1317, Department of Economics, University of Kent.
    8. Raghuram G. Rajan & Rodney Ramcharan, 2009. "Land and Credit: A Study of the Political Economy of Banking in the United States in the Early 20th Century," NBER Working Papers 15083, National Bureau of Economic Research, Inc.
    9. Mark Carlson & Kris James Mitchener, 2007. "Branch Banking as a Device for Discipline: Competition and Bank Survivorship During the Great Depression," NBER Working Papers 12938, National Bureau of Economic Research, Inc.
    10. Natacha Postel-Vinay, 2011. "From a “normal recession” to the “Great Depression”: finding the turning point in Chicago bank portfolios, 1923-1933," Economic History Working Papers 35518, London School of Economics and Political Science, Department of Economic History.
    11. Kris James Mitchener & Gary Richardson, 2013. "Does “Skin in the Game” Reduce Risk Taking? Leverage, Liability and the Long-Run Consequences of New Deal Banking Reforms," NBER Working Papers 18895, National Bureau of Economic Research, Inc.
    12. Eugene N. White, 2009. "Lessons from the Great American Real Estate Boom and Bust of the 1920s," NBER Working Papers 15573, National Bureau of Economic Research, Inc.
    13. Mark A. Carlson & Jonathan D. Rose, 2011. "Credit availability and the collapse of the banking sector in the 1930s," Finance and Economics Discussion Series 2011-38, Board of Governors of the Federal Reserve System (U.S.).
    14. Masami Imai & Seitaro Takarabe, 2009. "Bank Integration and Local Credit Cycle:Evidence from Japan," Wesleyan Economics Working Papers 2009-002, Wesleyan University, Department of Economics.
    15. Tetsuji Okazaki & Michiru Sawada, 2006. "Effects of a bank consolidation promotion policy: Evaluating Bank Law in 1927 Japan," CIRJE F-Series CIRJE-F-400, CIRJE, Faculty of Economics, University of Tokyo.
    16. Tetsuji Okazaki & Michiru Sawada, 2006. ""Effects of a bank consolidation promotion policy: Evaluating Bank Law in 1927 Japan" ;forthcoming in Financial History Review (Published in "Financial History Review", April 2007,," CARF F-Series CARF-F-058, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    17. Buck, Florian & Schliephake, Eva, 2012. "Political Economy of Banking Regulation," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62018, Verein für Socialpolitik / German Economic Association.

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