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Bank Chartering and Political Corruption in Antebellum New York: Free Banking as Reform

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  • Howard Bodenhorn

Abstract

One traditional and oft-repeated explanation of the political impetus behind free banking connects the rise of Jacksonian populism and a rejection of the privileges associated with corporate chartering. A second views free banking as an ill-informed inflationist, pro business response to the financial panic of 1837. This chapter argues that both explanations are lacking. Free banking was the progeny of the corruption associated with bank chartering and reflected social, political and economic backlashes against corruption dating to the late-1810s. Three strands of political thought -- Antimasonic egalitarianism, Jacksonian pragmatism, and pro-business American Whiggism -- converged in the 1830s and led to economic reform. Equality of treatment was the political watchword of the 1830s and free banking was but one manifestation of this broader impulse.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10479.

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Date of creation: May 2004
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Publication status: published as Howard Bodenhorn, 2006. "Bank Chartering and Political Corruption in Antebellum New York. Free Banking as Reform," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 231-258 National Bureau of Economic Research, Inc.
Handle: RePEc:nbr:nberwo:10479

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Cited by:
  1. Howard Bodenhorn, 2005. "Usury Ceilings, Relationships and Bank Lending Behavior: Evidence from Nineteenth Century," NBER Working Papers 11734, National Bureau of Economic Research, Inc.
  2. Howard Bodenhorn, 2004. "Free Banking and Bank Entry in Nineteenth-Century New York," NBER Working Papers 10654, National Bureau of Economic Research, Inc.
  3. John Joseph Wallis, 2010. "The Other Foundings: Federalism and the Constitutional Structure of American Government," NBER Chapters, in: Founding Choices: American Economic Policy in the 1790s, pages 177-213 National Bureau of Economic Research, Inc.
  4. Hilt, Eric, 2008. "When did Ownership Separate from Control? Corporate Governance in the Early Nineteenth Century," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 68(03), pages 645-685, September.
  5. Bodenhorn, Howard, 2007. "Usury ceilings and bank lending behavior: Evidence from nineteenth century New York," Explorations in Economic History, Elsevier, Elsevier, vol. 44(2), pages 179-202, April.

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