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The National Banking Acts and the Transformation of New York City Banking During the Civil War Era

Published online by Cambridge University Press:  06 June 2011

John A. James  and
David F. Weiman
John A. James*
Affiliation:
Professor of Economics, Department of Economics, University of Virginia, PO Box 400182, Charlottesville, VA 22904. E-mail: [email protected].
David F. Weiman*
Affiliation:
Professor of Economics, Department of Economics, Barnard College, Columbia University, 3009 Broadway, New York, NY 10027. E-mail: [email protected].
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Abstract

Focusing on the New York banking sector, we analyze a neglected, but profound impact of the National Banking Acts. By resisting federal banking legislation and “boycotting” newly chartered national banks, the New York Clearing House Association members created market opportunities for the new entrants to dominate the correspondent banking market. The new entrants’ aggressive tactics including interest payments on deposits increased their vulnerability to panicky withdrawals by country banks. They also magnified conflicts of interest within the clearinghouse, which weakened its central banking functions and further destabilized the macroeconomy.

Type
ARTICLES
Information
The Journal of Economic History , Volume 71 , Issue 2 , 06 June 2011 , pp. 338 - 362
Copyright
Copyright © The Economic History Association 2011

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