econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 11 September 2016

The Free-Banking Era: A Lesson For Today?

from the Philadelphia Fed

What would happen if anyone could open a bank at will? What if you or I could hang a sign in a storefront or create a website and start attracting borrowers and depositors with competitive interest rates? What if any sort of firm, big or small, could venture into the banking business in the U.S. with no official charter required? For a time in U.S. history, entry into banking in some states was thrown wide open.

The so-called free-banking era from 1837 to 1864 was also a time of numerous bank failures in those states. But exactly what lesson does this colorful yet costly period hold for us today? At a time when too-big-to-fail banks remain a concern and technology seems to point toward a freewheeling future of "cloud" lending and private electronic currency, insight into how to foster stability in the financial system is especially relevant. But as I will show, the main lesson of the free-banking era may not be the one you would think.

WHAT IS FREE BANKING?

A brief history of free banking in the U.S. After the charter of the Bank of the United States was allowed to expire in 1836, several states adopted free-banking laws. The widespread adoption of free-banking laws was part of a political movement led by Jacksonian Democrats to reduce the economic and political power of large banks in the financial centers. In the 1830s, Michigan, Georgia, and New York adopted free banking. By 1860, 15 other states had adopted free banking.1 Economic historians largely agree that Michigan's early experience was a complete failure and that New York's overall experience was a solid success. In Michigan, bank liability holders suffered large losses in 1837 - 1838 as a result of unsound banking practices. In contrast, losses were negligible in New York over the whole free-banking period in that state. The available historical data for the other free-banking states show various degrees of success when it comes to the stability of the banking system.

Free banking ended in 1864 when Congress passed legislation that provided bankers with strong incentives to obtain a national charter. During the debates over the National Banking Act, proponents cited the large number of failures of banks with state charters in the free-banking states and the need to establish a uniform, nationwide currency system.

[click on image below to continue reading]

Source: https://t.e2ma.net/click/k1gjn/gugril/szoypd

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
A New Era of Central Banking?
Is Free Trade Harming the Economy?
News Blog
01 February 2017 FOMC Meeting Minutes: Little Seems to Have Changed Since the Previous Meeting
An Inside Look At Doomsday Bunker Homes With A Price Tag Of 2 Million
January 2017 Headline Existing Home Sales Surprisingly Good
China Moves To Put North Korea In Its Place
Trucking Data Improves In January 2017
February 2017 Chemical Activity Barometer Has Strong Gain
Infographic Of The Day: 2017's Top New Year's Resolutions
Early Headlines: Asia Stocks And Dollar Up, Oil And Gold Steady, Nat Gas Plunges, Fed's Williams Says Low Rates Will Last, Steep UK Brexit Bill, Greek Poverty, China Stocks Look Up? And More
Climate of the Southwest
Did the Romans Create both Christianity and Islam?
The Psychology Behind Trump's Awkward Handshake ... And How To Beat Him At His Own Game
Most Lawsuits Against Trump Related To Travel Ban
Average Gasoline Prices for Week Ending 20 February 2017 Statistically Unchanged
Investing Blog
The Real 401k Plan Manager 20 February 2017
Investing.com Technical Summary 21 February 2017
Opinion Blog
The Blame Game
Fascism Defined And Described By Oswald Mosley
Precious Metals Blog
Deflation And Gold: A Contrarian View
Live Markets
22Feb2017 Market Update: DOW Rises To New High, Are Investors Betting That Nothing Will Go Wrong In Next Few Months, Crude Prices Slip Further, Investors Are Way Too Optimistic
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government





























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved