TY  - JOUR
AU  - Meissner,Christopher
TI  - Committee Structure and the Success of Connected Lending in Nineteenth Century New England Banks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9792
PY  - 2003
Y2  - June 2003
UR  - http://www.nber.org/papers/w9792
L1  - http://www.nber.org/papers/w9792.pdf
N1  - Author contact info:
Christopher M. Meissner
Department of Economics
University of California, Davis
One Shields Avenue
Davis, CA 95616
Tel: +1 (530) 752-3108
Fax: +1 (530) 752-9382
E-Mail: cmmeissner@ucdavis.edu
AB  - Early nineteenth century New England banking exhibited high levels of lending to directors and their associates (i.e., connected lending). Today many think this arrangement can lead to inefficiency and financial fragility. This paper explores the decision making processes inside these banks and argues that connected lending was viable when many people were involved in loan decisions. The committees used to vote on the approval of loans are the focus. Banks that required more votes for a given committee size prevented the approval of loans with private gains and social costs. The historical data are consistent with the idea that higher levels of consensus in the loan committees raised the return on assets.
ER  -