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Why was America's First Bank Aborted?

Published online by Cambridge University Press:  02 March 2011

Dror Goldberg
Dror Goldberg*
Affiliation:
Lecturer, Department of Economics, Bar-Ilan University, Ramat Gan 52900, Israel. E-mail: [email protected].
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Abstract

In 1686 the leadership of Massachusetts became involved in the first operational bank scheme in America. In 1688 this note-issuing bank was mysteriously aborted at an advanced stage. I suggest a new, simple explanation for the bank's demise. The bank's notes were supposed to be backed mostly by private land in Massachusetts, but a new royal governor invalidated all the land titles. This episode demonstrates the importance of clearly defined and enforced property rights for the development of financial institutions.

“After showing him an Indian deed for land, he said that their hand was no more worth than a scratch with a bear's paw, undervaluing all my titles, though everyway legal under our former charter government.”1

Joseph Lynde

Type
ARTICLES
Information
The Journal of Economic History , Volume 71 , Issue 1 , March 2011 , pp. 211 - 222
Copyright
Copyright © The Economic History Association 2011

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