The Evolution of Bank Supervision: Evidence from U.S. States

NBER Working Paper No. 20603

Issued in October 2014

NBER Program(s):Development of the American Economy



We use a novel data set spanning 1820-1910 to examine the origins of bank supervision and assess factors leading to the creation of formal bank supervision across U.S. states. We show that it took more than a century for the widespread adoption of independent supervisory institutions tasked with maintaining the safety and soundness of banks. State legislatures initially pursued cheaper regulatory alternatives, such as double liability laws; however, banking distress at the state level as well as the structural shift from note-issuing to deposit-taking commercial banks and competition with national banks propelled policymakers to adopt costly and permanent supervisory institutions.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w20603

Published: Mitchener, K., & Jaremski, M. (2015). The Evolution of Bank Supervisory Institutions: Evidence from American States. The Journal of Economic History, 75(3), 819-859. doi:10.1017/S0022050715001126

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