IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/1992-007.html
   My bibliography  Save this paper

Government policy and banking instability: "overbanking" in the 1920s

Author

Listed:
  • David C. Wheelock

Abstract

Excess capacity, or “overbanking,” was cited by contemporaries as leading cause of bank failure during the 1920s. Many states that had high numbers of banks per capita in 1920 had high bank failure rates subsequently. This article finds that the number of banks per capita was highest in states that provided deposit insurance, set low minimum capital requirements, and restricted branching. Banks per capita declined the most over the 1920s in states where branching expanded, and in those suffering high failure rates because of falling incomes or instability caused by deposit insurance. Deposit insurance and the relative dominance of agriculture also explain the composition of state banking systems between state and federally chartered institutions.

Suggested Citation

  • David C. Wheelock, 1992. "Government policy and banking instability: "overbanking" in the 1920s," Working Papers 1992-007, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:1992-007
    as

    Download full text from publisher

    File URL: http://research.stlouisfed.org/wp/more/1992-007/
    Download Restriction: no

    File URL: http://research.stlouisfed.org/wp/1992/92-007.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Mark D. Flood, 1992. "The great deposit insurance debate," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 51-77.
    2. Carl M. Gambs, 1977. "Bank failures -- an historical perspective," Economic Review, Federal Reserve Bank of Kansas City, issue Jun, pages 10-20.
    3. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
    4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    5. Gary Gorton & Richard J. Rosen, 1991. "Overcapacity and exit from banking," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    6. Alston, Lee J., 1983. "Farm Foreclosures in the United States During the Interwar Period," The Journal of Economic History, Cambridge University Press, vol. 43(04), pages 885-903, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Bank failures ; Deposit insurance;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:1992-007. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kathy Cosgrove). General contact details of provider: http://edirc.repec.org/data/frbslus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.