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The Economics and Politics of Unit Banking: Evidence from the McFadden Banking Bill of 1927

In: Public Choice Analyses of American Economic History

Author

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  • Marcus M. Witcher

    (West Virginia University)

Abstract

This chapter recounts the debate over branch banking in the 1920s. It demonstrates that there was intense and overwhelming opposition to branching in any form. This hostility was both materially and ideologically motivated. Tracing the debate of the McFadden Banking bill, this chapter demonstrates that its passage was due to special interests—in particular the American Bankers’ Association—who ultimately realized that while the bill would allow limited branching of national banks, it would also end branching among the state banks and therefore ensure the continuation of a unit-banking system. While most economists agree that branch banking would have prevented the type of widespread bank failures the United States experienced during the Great Depression, this chapter shows that it was politically impossible to enact such a system in the 1920s.

Suggested Citation

  • Marcus M. Witcher, 2018. "The Economics and Politics of Unit Banking: Evidence from the McFadden Banking Bill of 1927," Studies in Public Choice, in: Joshua Hall & Marcus Witcher (ed.), Public Choice Analyses of American Economic History, chapter 0, pages 139-166, Springer.
    • Handle: RePEc:spr:stpchp:978-3-319-95819-4_7
    DOI: 10.1007/978-3-319-95819-4_7
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