Free banking: a reassessment using bank-level data

Abstract

Through a unique collection of compositional (e.g. balance sheets and note discounts) and environmental (e.g. bond portfolio values and passenger travel costs) data for most of the antebellum banks, this dissertation provides the first bank-level view of the U.S. Free Banking System. The data not only augments previous descriptive studies, but also enables an econometric reassessment of free banking’s most controversial topics. The dissertation finds that free banking was flawed by construction, but that many individuals and banks were flexible enough to adjust to the risk. While the specific problems of free banking have been mitigated over time, the lessons learned from the period transcend the historical context, shedding light on many continuing problems in finance.