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Are branch banks better survivors? Evidence from the Depression era

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Listed author(s):
  • Mark A. Carlson

Abstract

It is widely argued in the literature on the Great Depression that the prevalence of unit banks aggravated the problem of financial instability that afflicted the country. This paper tests the theory that more widespread branch banking would have reduced financial turbulence in the United States by examining the survival of individual branch and unit banks. Results indicate that instead of being more likely to survive, branch banks were more likely to fail. Further investigation suggests that this higher failure rate occurred because branch banks systematically held riskier portfolios than unit banks.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2001-51.

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Date of creation: 2001
Handle: RePEc:fip:fedgfe:2001-51
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Keywords: Branch banks ; Financial crises;

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Find related papers by JEL classification:
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
  • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
  • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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  1. Rebecca Demsetz & Philip E. Strahan, 1995. "Historical patterns and recent changes in the relationship between bank holding company size and risk," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 13-26.
  2. Wicker,Elmus, 1996. "The Banking Panics of the Great Depression," Cambridge Books, Cambridge University Press, number 9780521562614.
  3. Coe, Patrick J, 2002. "Financial Crisis and the Great Depression: A Regime Switching Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 76-93, February.
  4. Miron, Jeffrey A, 1986. "Financial Panics, the Seasonality of the Nominal Interest Rate, and theFounding of the Fed," American Economic Review, American Economic Association, vol. 76(1), pages 125-140, March.
  5. Joseph P. Hughes & William W. Lang & Loretta J. Mester & Choon-Geol Moon, 1996. "Efficient banking under interstate branching," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 1045-1075.
  6. Grossman, Richard S., 1994. "The Shoe That Didn't Drop: Explaining Banking Stability During the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 54(03), pages 654-682, September.
  7. David C. Wheelock, 1995. "Regulation, market structure and the bank failures of the Great Depression," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 27-38.
  8. Charles W. Calomiris & Joseph R. Mason, 2000. "Causes of U.S. Bank Distress During the Depression," NBER Working Papers 7919, National Bureau of Economic Research, Inc.
  9. John Philip Wernette, 1932. "Branch Banking in California and Bank Failures," The Quarterly Journal of Economics, Oxford University Press, vol. 46(2), pages 362-375.
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