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Banking Principles, Bank Competition and the Credit Boom of the 1920s

By Tobias F. Rötheli and Jel-classification N


Abstract: The later part of the 1920s is a particularly interesting historical period because we can study how new practices in banking and the competition among banks contributed to the credit boom of the time. The paper describes innovations in scientific credit analysis and documents the hopes voiced at the time for a future with rational and safe credit policies. By studying the course of major New York banks before and after the Wall Street crash we find that the innovations in business methods lead some bankers to opt for aggressive and risky lending policies and with these choices they put pressure on competitors to follow. The paper thus documents a major element in the mechanism of the credit cycle. * For this project I have greatly benefited form the courtesy and the bibliographical resources of Harvard University’s Baker Library and Columbia University’s Thomas J. Watson Library and would like to thank Jim Coen for guidance to resources. I would like to acknowledge feedback from participants of seminars at New York University and Rutgers University and i

Topics: Key Words, Banking Principles, Credit Booms, Competitive Strategies
Year: 2009
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