- Robert WrightRobert WrightAmerican Institute for Economic Research
Between passage of the National Banking Acts near the end of the US Civil War and the outbreak of the Great War and implementation of the Federal Reserve System in 1914, a large, vibrant financial system based on the gold standard and composed of markets and intermediaries supported the rapid growth and development of the American economy. Markets included over-the-counter markets and formal exchanges for financial securities, including bills of exchange (foreign currencies), cash (short-term debt), debt (corporate and government bonds), and equities (ownership shares in corporations), initial issuance of which increasingly fell to investment banks. Intermediaries included various types of insurers (marine, fire, and life, plus myriad specialists like accident and wind insurers) and true depository institutions, which included trust companies, mutual and stock savings banks, and state- and federally-chartered commercial banks. Nominal depository institutions also operated, and included building and loan associations and, eventually, credit unions and Morris Plan and other industrial banks. Non-depository lenders included finance and mortgage companies, provident loan societies, pawn brokers, and sundry other small loan brokers. Each type of “bank,” broadly construed, catered to customers differentiated by their credit characteristics, gender, race/ethnicity, country of birth, religion, and/or socioeconomic class, had distinctive balance sheets and loan application and other operating procedures, and reacted differently to the three major postbellum financial crises in 1873, 1892, and 1907.