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Free banking and bank entry in nineteenth-century New York

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Listed author(s):
  • Bodenhorn, Howard

Abstract

Previous studies of entry under New York's free banking law of 1838 have generated conflicting results. This article shows that different measures of entry lead to different conclusions about the competitive effects of the law. Measured by the entry of new banks, New York's free banking law led to increased rates of entry relative to other states. Free banking did not, however, lead to significant increases in capital accumulation in the industry. This paradoxical outcome resulted from the regulatory features of free banking, especially the bond security feature, which reduced profitability and incentives to invest in banking.

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Article provided by Cambridge University Press in its journal Financial History Review.

Volume (Year): 15 (2008)
Issue (Month): 02 (October)
Pages: 175-201

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Handle: RePEc:cup:fihrev:v:15:y:2008:i:02:p:175-201_00
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Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK

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Find related papers by JEL classification:
  • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
  • N41 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: Pre-1913

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  1. Sokoloff, Kenneth L., 1988. "Inventive Activity in Early Industrial America: Evidence From Patent Records, 1790–1846," The Journal of Economic History, Cambridge University Press, vol. 48(04), pages 813-850, December.
  2. 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.
  3. Arthur J. Rolnick & Warren E. Weber, 1982. "Free banking, wildcat banking, and shinplasters," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  4. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
  5. Bodenhorn, Howard & Haupert, Michael, 1996. "The Note Issue Paradox in the Free Banking Era," The Journal of Economic History, Cambridge University Press, vol. 56(03), pages 687-693, September.
  6. Anna J. Schwartz, 1987. "The Beginning of Competitive Banking in Philadelphia, 1782–1809," NBER Chapters,in: Money in Historical Perspective, pages 3-23 National Bureau of Economic Research, Inc.
  7. Bodenhorn, Howard & Haupert, Michael, 1995. "Was There a Note Issue Conundrum in the Free Banking Era?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 702-712, August.
  8. Charles W. Calomiris, 1989. "Deposit insurance: lessons from the record," Economic Perspectives, Federal Reserve Bank of Chicago, issue May, pages 10-30.
  9. Bodenhorn, Howard, 1999. "An Engine of Growth: Real Bills and Schumpeterian Banking in Antebellum New York," Explorations in Economic History, Elsevier, vol. 36(3), pages 278-302, July.
  10. Robert B. Litterman, 1982. "Optimal control of the money supply," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  11. Howard Bodenhorn, 1998. "Quis Custodiet Ipsos Custodes?," Eastern Economic Journal, Eastern Economic Association, vol. 24(1), pages 7-24, Winter.
  12. Bodenhorn, Howard, 1993. "The Business Cycle and Entry into Early American Banking," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 531-535, August.
  13. Bodenhorn, Howard, 1997. "Private Banking in Antebellum Virginia: Thomas Branch & Sons of Petersburg," Business History Review, Cambridge University Press, vol. 71(04), pages 513-542, December.
  14. Bodenhorn, Howard, 1990. "Entry, Rivalry and Free Banking in Antebellum America," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 682-686, November.
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Cited by:

  1. Hilt, Eric & Valentine, Jacqueline, 2012. "Democratic Dividends: Stockholding, Wealth, and Politics in New York, 1791–1826," The Journal of Economic History, Cambridge University Press, vol. 72(02), pages 332-363, June.
  2. Eric Hilt, 2016. "Corporation Law and the Shift toward Open Access in the Antebellum United States," NBER Chapters,in: Organizations, Civil Society, and the Roots of Development National Bureau of Economic Research, Inc.
  3. Alberto Basso & David Cuberes, 2013. "Fertility and Financial Development: Evidence from U.S. Counties in the 19th Century," Working Papers 2013011, The University of Sheffield, Department of Economics.
  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, vol. 68(03), pages 645-685, September.
  5. Howard Bodenhorn & David Cuberes, 2010. "Financial Development and City Growth: Evidence from Northeastern American Cities, 1790-1870," NBER Working Papers 15997, National Bureau of Economic Research, Inc.

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