Opening Access: Banks and Politics in New York from the Revolution to the Civil War

Howard Bodenhorn

NBER Working Paper No. 23560
Issued in June 2017
NBER Program(s):Development of the American Economy

Before 1838 commercial banks in New York, as elsewhere, were incorporated by special legislative charter. In 1838 New York adopted free banking, which transformed bank formation from legislative prerogative to administrative procedure. This paper places this transition within the context of the North, Wallis, and Weingast (2009) model of social transitions from natural states to open access orders, and shows that the transition was more process than discrete event. A confluence of events, including the expansion of the franchise under the 1821 constitution, the emergence of party machine politics under the direction of Martin Van Buren, and the rise of the opposition Antimasonic Party, brought patronage-based politics and the political disbursement of economic privileges under attack. Pre-1838 attempts to open access to finance were turned back by natural state politicians, who used the chartering process to reward party operatives. By the mid-1830s, public distaste for spoils-driven patronage generated pressure to expand access to bank finance, especially among entrepreneurs in southern and western New York frustrated by their limited access to transportation and financial networks. New York’s adoption of free banking then was not an ill-advised response to the panic of 1837, but rather a manifestation of a longer-term process toward a more open polity and economy.

download in pdf format
   (384 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23560

Users who downloaded this paper also downloaded* these:
Rodrik w23559 Populism and the Economics of Globalization
Avdjiev, Gambacorta, Goldberg, and Schiaffi w23565 The Shifting Drivers of Global Liquidity
Clarida w23562 The Global Factor in Neutral Policy Rates: Some Implications for Exchange Rates, Monetary Policy, and Policy Coordination
Hou, Mo, Xue, and Zhang w23563 The Economics of Value Investing
Chernozhukov, Chetverikov, Demirer, Duflo, Hansen, Newey, and Robins w23564 Double/Debiased Machine Learning for Treatment and Structural Parameters
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us