Richard Sylla

Federal Policy, Banking Market Structure, and Capital Mobilization in the United States, 1863–1913

The success with which capital funds are mobilized and transferred to industrial and related activities is widely regarded as a critical determinant of both the timing and the pace of industrialization in the modern era. Gerschenkron, for example, has suggested that institutional developments which increased this type of capital mobility played an important role in the varying degrees of industrial progress of nineteenth-century European countries. A functionally similar development, resulting from government intervention at the time of the Civil War, occurred in American banking and provided a powerful capital-supply stimulus for the United Statess postbellum industrialization. This study deals with the origins of this banking development, presents an analysis of its potential effects on patterns of capital movement, and tests the hypotheses arrived at in the theoretical analysis using banking data derived primarily from the Reports of the Comptroller of the Currency.

An Historical Primer on the Business of Credit Rating

In capital market history, credit rating agencies were relatively late to appear, being less than a century old. John Moody founded the first rating agency in 1909, in the United States, which in comparison with other countries had a large private bond market and an investing class clamoring for better information. Extensive research by W.B. Hickman and others established that credit rating agencies were able to provide investors with good information on bond quality and the probability of default, but that the agencies’ record was not appreciably different from implicit ratings of public regulatory authorities and the bond market’s own ratings indicated by interest rate spreads. The paper concludes with a discussion of various rationales that have been given for the success of credit rating agencies as businesses in the United States and, increasingly, the world.

FINANCIAL SYSTEMS AND ECONOMIC MODERNIZATION

The most successful economies of modern, and perhaps earlier, economic history appear to have had “financial revolutions†that created innovative financial systems before they became leading economies. This suggests that good financial systems may have played a causal role in economic modernization. I identify the key institutional components of such financial systems. Using the United States and Japan as examples, I discuss how two financial revolutions occurred. Effective leadership on the part of strong-willed individuals was crucial in each case.

Banks and State Public Finance in the New Republic: The United States, 1790–1860

The U.S. Constitution, by taking away the power of the states to issue paper money, removed a major source of flexibility in state public finance. In their search for new sources of revenue and fiscal flexibility, the states discovered that the banks they chartered could fill the gap. Investment earnings and tax revenues derived from banks soon became major elements of state public finance. We discuss the nature of these early business-government relationships and provide the first systematic assessment of their relative importance in state finance.

The State, the Financial System and Economic Modernization

Through an examination of a wide variety of financial systems in Europe, and North and South America over approximately 150 years of change, this book demonstrates the key role that finance has played in economic change, and in the development of diverse financial systems. Insights into the primacy of the states role in the financial development of the pre-industrial era have not been carried over into the historiography of the industrial era itself, so the discoveries detailed in this book have never been brought together in a systematic manner. This book therefore aims to demonstrate through comparative historical analysis, the richness of the history of modern financial systems, and to restore the state to its primary role in the shaping of those systems. This book makes an interesting contribution to financial historiography, thus will be of interest to economists and financial, economic and world historians.

Monetary Innovation in America

Monetary innovation, the development of new forms of money, has not received much systematic study from economic historians. This essay presents a framework for analyzing the determinants of monetary innovation and illustrates the argument by means of a sketch of monetary innovation in America from colonial times to the present.

Forgotten Men of Money: Private Bankers in Early U.S. History

Historical accounts of banking developments in the pre-1860 period of U.S. history focus almost exclusively on banking institutions chartered by state and federal governments. Private, unincorporated banks, although known to have existed, are generally ignored as either unimportant numerically or not truly commercial banks in terms of their functions. This paper draws on a variety of literary and quantitative evidence to infer that such views are perhaps in error. Some potential implications of the findings for antebellum banking and monetary history are essayed.

Alexander Hamilton, Central Banker: Crisis Management During the U.S. Financial Panic of 1792

Most scholars know little about the Panic of 1792, Americas first financial market crash, during which securities prices dropped nearly 25 percent in two weeks. Treasury Secretary Alexander Hamilton adroitly intervened to stem the crisis, minimizing its effect on the nascent nations fragile economic and political systems. U.S. policymakers soon forgot the crisis management techniques Hamilton invented but failed to codify. Many of them were later rediscovered, and became theoretical and practical standards of modern central bank crisis management. Hamilton, for example, formulated and implemented Bagehots rules for central bank crisis management eight decades before Walter Bagehot wrote about them in Lombard Street.

Slow train to paradise : how Dutch investment helped build American railroads

Railroad historians have long been aware of Dutch investment in the building of American railroads, but how extensive was that investment? This book reveals for the first time that, because of the frequent failure of railroad companies to meet their debt obligations, several railroads were for a time completely in Dutch control. Though Dutch capitalists initially believed they had discovered a shortcut to El Dorado by buying American railroad securities, it turned out that only long-term investment brought financial paradise within their reach. This book is a complete history of Dutch investment in American railroads up to World War I, telling in detail not only why the Dutch invested in US railroads, but also in which companies and how much they invested. Introductory chapters survey the Dutch capital market from the late eighteenth century until World War I and extensive appendices provide detailed information on individual Dutch brokers and their financial activities.

Emerging Markets in History:the United States,Japan,and Argentina

What are “emerging markets”? And why are some more successful than others? As ours is an era in which barriers to international trade and capital flows are falling, and as a consequence more and more nations are “vemerging” as players in the world economy, these are important questions. This essay attempts to answer them as an economic historian might, that is, by studying and comparing several emerging markets of the past. The economic historian’s comparative method may not provide conclusive answers to the two questions, but it can offer suggestions worth pursuing and at least tentative answers.