By John A. James
Postbellum financial swap within the usa required a good process wherein capital might be transferred to components the place it was once particularly scarce. In assessing the constitution that developed to fulfill this desire, John James presents a brand new and convincing rationalization of the forces underlying the combination of separate and native cash markets to shape a countrywide market.
to appreciate the function of economic markets through the interval, the writer examines the associations and operations of the banking method intimately. unlike the now-prevailing view between students, Professor James reveals that the banking method used to be relatively adaptable in responding to institutional constraints, and he focuses specifically at the position of the correspondent banking approach. the second one a part of his publication assesses the functionality of the marketplace and the forces selling switch throughout the interval. Drawing on a brand new and extra rigorously derived set of rates of interest, the writer assessments competing hypotheses to give an explanation for integration and advances a extra passable substitute conception. He bargains the 1st sleek research of yankee monetary associations of the interval among the Civil warfare and the institution of the Federal Reserve procedure. In so doing, he provides to our wisdom of the historical position of finance and capital in financial development.
Originally released in 1978.
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Extra info for Money and Capital Markets in Postbellum America
135. INTRODUCTION interregional interest rate differentials do not necessarily in dicate the existence of an imperfect or segmented market. If there were transactions or information costs to the transfer of funds across regions or differentials in the riskiness of local loans, then interest rate differentials would exist even if there were no barriers to capital mobility, a perfect capital market. Could decreases in the riskiness of Southern and Western loans account for the narrowing differentials in the postbellum period, so that a perfect capital market had existed in fact, promoted by existing institutions, for the interregional transfer of funds?
A number of states graduated reserve requirements by city population, with high er requirements in larger cities; different reserve require ments were enforced for different types of deposits, demand and time, in several states. 30 In no state did reserves have to consist entirely of cash in the vault. Balances held in other banks could be counted as onehalf to three-quarters of required reserves, again there being more liberal requirements in most states than those on na tional banks. State and private banks, therefore, in large part developed in response to restrictions imposed on national banks.
P. 92. 46 Krueger, History of Commercial Banking, p. 126. 47 T. H. Hinchman, Banks and Banking in Michigan (Detroit: M. Graham, 1887), p. 159. GROWTH OF THE BANKING SYSTEM also offered competition for chartered banks in larger ones. 48 The existence of high minimum national bank capital re quirements, then, did not mean that small towns were neces sarily without banking services or even that they had no choice of banks. The rapid growth of private banks until 1888 indicates that even in the early part of the period banks of discount were not at an insurmountable disadvantage be cause of the lack of the power of note issue.