Chapter

Assessing America's Early Banks

Howard Bodenhorn

in State Banking in Early America

Published in print December 2002 | ISBN: 9780195147766
Published online November 2003 | e-ISBN: 9780199832910 | DOI: http://dx.doi.org/10.1093/0195147766.003.0011
Assessing America's Early Banks

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Early American banking grew in accordance with overall economic growth. The one exception was the early 1830s, when a speculative wave poured over the U.S. and the banking sector grew more rapidly than the aggregate economy. High credit demand drove up profits, which induced entry, induced capital investment, and increased capital leverage ratios. The speculative bubble burst in the late 1830s due to actions by the Bank of England. Banks failed in unprecedented numbers in the early 1840s. After 1843, banking and economic activity moved together. While the National Banking Acts of 1863 and 1864 rationalized the nation's banking system, they eliminated a number of the distinct regional attributes that had appeared under an earlier, more decentralized federalism.

Keywords: Bank of England; banking system; credit demand; federalism; investment; leverage; market entry; National Banking Act; speculation; U.S.A

Chapter.  3826 words.  Illustrated.

Subjects: Economic History

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