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Bank Supervision, Regulation, and Instability During the Great Depression

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  • Kris James Mitchener
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    Abstract

    Even after controlling for local economic conditions, differences in state bank supervision and regulation contribute toward explaining the large variation in state bank suspension rates across U.S. counties during the Great Depression. More stringent capital requirements lowered suspension rates while laws prohibiting branch banking and imposing high reserve requirements had the opposite effect. States that endowed bank supervisors with the authority to 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 that 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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    File URL: http://www.nber.org/papers/w10475.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10475.

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    Date of creation: May 2004
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    Publication status: published as Mitchener, Kris James. "Bank Supervision, Regulation, And Instability During The Great Depression," Journal of Economic History, 2005, v65(1,Mar), 152-185.
    Handle: RePEc:nbr:nberwo:10475

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    Cited by:
    1. Mark Carlson & Kris James Mitchener, 2005. "Branch Banking, Bank Competition, and Financial Stability," NBER Working Papers 11291, National Bureau of Economic Research, Inc.
    2. Gary Richardson, 2006. "Bank Distress During the Great Contraction, 1929 to 1933, New Data from the Archives of the Board of Governors," NBER Working Papers 12590, National Bureau of Economic Research, Inc.
    3. Gary Richardson, 2006. "Bank Distress during the Great Depression: The Illiquidity-Insolvency Debate Revisited," NBER Working Papers 12717, National Bureau of Economic Research, Inc.
    4. Gary Richardson, 2006. "Quarterly Data on the Categories and Causes of Bank Distress During the Great Depression," NBER Working Papers 12715, National Bureau of Economic Research, Inc.

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