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Splendid Associations of Favored Individuals: Federal and State Commercial Banking Policy in the Federalist Era

  • Howard Bodenhorn

Early American firms were shaped by contemporary social conceptions of appropriate horizontal power relations inside the firm and the Federalist era bank was shaped by these conceptions. The Federalist era debate on the corporation was much broader than how shareholders would treat with one another. Contemporary Americans who had no direct stake in the business corporation took great interest in its internal governance because rules for how the elite shared power within the corporation spoke to their attitudes toward sharing power in the wider civic polity. Was governance to be plutocratic or democratic? It was within this debate that the first banks were established. This debate influenced how banks were governed, which ultimately influenced how banks did their business. The political debates surrounding the establishment of the Bank of North America (1782) and the Bank of the United States (1791) defined these banks and nearly every bank chartered thereafter up to the mid-1830s and beyond. Specifically, the liberal Bank of North American charter that imposed few meaningful restrictions on the bank's operation, accountability or governance gave way to the Bank of the United States's more restrictive charter that sharply limited its operations, made it accountable to government, and defined many of its internal governance procedures. Subsequent state charters were more closely modeled on the Bank of the United States model than the Bank of North America charter.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15135.

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Date of creation: Jul 2009
Date of revision:
Publication status: published as Federal and State Commercial Banking Policy in the Federalist Era and Beyond , Howard Bodenhorn. in Founding Choices: American Economic Policy in the 1790s , Irwin and Sylla. 2011
Handle: RePEc:nbr:nberwo:15135
Note: DAE
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  1. Bodenhorn, Howard, 1992. "Capital Mobility and Financial Integration in Antebellum America," The Journal of Economic History, Cambridge University Press, vol. 52(03), pages 585-610, September.
  2. 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.
  3. Sylla, Richard & Legler, John B. & Wallis, John J., 1987. "Banks and State Public Finance in the New Republic: The United States, 1790–1860," The Journal of Economic History, Cambridge University Press, vol. 47(02), pages 391-403, June.
  4. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-88, June.
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