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The Evolution of Bank Supervision: Evidence from U.S. States

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  • Mitchener, Kris James

    (University of Warwick)

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    Abstract

    We use a novel data set spanning 1820-1910 to examine the origins of bank supervision and assess factors leading to the creation of formal bank supervisory institutions across U.S. states. We show that it took more than a century for the widespread adoption of independent supervisory institutions tasked with maintaining the safety and soundness of banks. State legislatures initially pursued cheaper regulatory alternatives, such as double liability laws; however, banking distress at the state level as well as the structural shift from note-issuing to deposit-taking commercial banks propelled policymakers to adopt costly and permanent supervisory institutions.

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    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/research/wpfeed/181-2014_mitchener.pdf
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    Bibliographic Info

    Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 181.

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    Date of creation: 2014
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    Handle: RePEc:cge:wacage:181

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    Keywords: bank supervision; U.S. States;

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    1. Meh, Césaire A. & Moran, Kevin, 2010. "The role of bank capital in the propagation of shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 555-576, March.
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    7. Peltzman, Sam, 1984. "Constituent Interest and Congressional Voting," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 181-210, April.
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    9. Richard A. Posner, 1971. "Taxation by Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 22-50, Spring.
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    12. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    13. Sumit Agarwal & David Lucca & Amit Seru & Francesco Trebbi, 2012. "Inconsistent Regulators: Evidence From Banking," NBER Working Papers 17736, National Bureau of Economic Research, Inc.
    14. Eugene N. White, 2011. "“To Establish a More Effective Supervision of Banking”: How the Birth of the Fed Altered Bank Supervision," NBER Working Papers 16825, National Bureau of Economic Research, Inc.
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