« OLA and Too Big to Fail | Main | Do We Have a Fraud Problem? The Case of the Mysteriously Appearing Allonge »

Why I Was the Skunk at the Party

posted by Stephen Lubben

Yesterday's hearing -- my Dealbook on it here -- was clearly all about political posturing: the Democrats are defensive about Dodd-Frank, rightly afraid that any change to it becomes a chance to repeal or gut, while the Republicans too often veer off into some free market rhetoric that really makes no sense when you are talking about financial institutions. Since when have banks been subject to the free market? Even pre-Fed they were (at least theoretically) under State oversight.

So basically neither side wanted to hear what I had to say.

But as is so often the case, Alan Sloan comes through with some clear thinking on the matter here.


A bit of history. Before the War of 1812, anybody could avoid all banking regulation by avoiding a corporate charter. The Bank of New York did so for awhile. A lot of backwoods banks did it for a long time. Around the time of the war, many states enacted "restraining acts" that prohibited unincorporated businesses from issuing notes. These acts became progressively ineffective, as the system shifted from bank notes to bank deposits, with the balance having shifted by about the time of the Civil War.

Not that corporate charters were all that well-regulated. Before 1838 (or maybe 1836), banks were only subject to "oversight" through a quo warranto proceeding for charter violations. I recall only one quo warranto proceeding that actually worked. New York then invented the free bank and with it, bank examination.

The comments to this entry are closed.


Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed



  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.