Banks, Politics, and Political Parties: From Partisan Banking to Open Access in Early Massachusetts

Qian Lu, John Joseph Wallis

Chapter in NBER book Organizations, Civil Society, and the Roots of Development (2017), Naomi R. Lamoreaux and John Joseph Wallis, editors (p. 109 - 145)
Conference held October 24-25, 2014
Published in November 2017 by University of Chicago Press
© 2017 by the National Bureau of Economic Research

The United States was the first nation to allow open access to the corporate form to its citizens. The state of Massachusetts was not only one of the first states to provide its members with legally sanctioned tools to create organizations and enable open access but, on a per capita basis, had many more banks and other corporations than other states as early as the 1820s. Nonetheless, Massachusetts did not open access easily. This paper documents that until 1812, bank charters were only available to members of the Federalist Party in Massachusetts. When the Democratic-Republicans gained control of the state legislature and governor’s mansion in 1811-12, they chartered two new Democratic-Republican banks and threatened to eliminate most of the Federalist bank. The paper documents the close association of politicians and bankers. Before 1811, close to three-quarters of all the bankers we can identify had been or would eventually become a state legislator. The evolving relationships between politics and banking, the eventual opening of banking, and the wealth of bankers are tracked into the 1850s.

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This chapter first appeared as NBER working paper w21572, Banks, Politics, and Political Parties: From Partisan Banking to Open Access in Early Massachusetts, Qian Lu, John Joseph Wallis
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