Regulation and bank failures: new evidence from the agricultural collapse of the 1920's
This article examines the contribution of government policies to the high number of bank failures in the United States during the l920s. I consider the state of Kansas, which had a system of voluntary deposit insurance and where branch banking was strictly prohibited, and find that bank failure rates were highest in counties suffering the greatest agricultural distress and where deposit insurance system membership was the highest. The evidence for Kansas illustrates how prohibitions on branch banking caused unit banks to be especially susceptible to local economic shocks, and suggests that, despite regulations to limit risktaking, deposit insurance caused more bank failures than would have occurred otherwise.
|Date of creation:||1991|
|Date of revision:|
|Publication status:||Published in Journal of Economic History, v. 52, no. 4 (December 1992) pp. 806-825|
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- White, Eugene Nelson, 1985. "The Merger Movement in Banking, 1919–1933," The Journal of Economic History, Cambridge University Press, vol. 45(02), pages 285-291, June.
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- Wheelock, David C, 1992. "Deposit Insurance and Bank Failures: New Evidence from the 1920s," Economic Inquiry, Western Economic Association International, vol. 30(3), pages 530-43, July.
- Wheelock, David C & Kumbhakar, Subal C, 1995. "Which Banks Choose Deposit Insurance? Evidence of Adverse Selection and Moral Hazard in a Voluntary Insurance System," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 186-201, February.
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