David Moss: there’s a reason for deposit insuranceHistorians in the News
tags: historians, economics, New York Times, David Moss, Joshua Forman, bank insurance
...If the nation has a father of bank insurance, it is Joshua Forman, one of the promoters of the Erie Canal. Early in the 19th century, New York State had a string of bank failures, and Martin Van Buren, then governor, asked him to restructure the banking industry. Forman’s insight was that banks were vulnerable to chain-reaction panics. As he put it — in a line unearthed by the Harvard Business School historian David Moss — “banks constitute a system, being peculiarly sensitive to one another’s operations, and not a mere aggregate of free agents.”
In 1829, Forman proposed an insurance fund capitalized by mandatory contributions from the state’s banks. Debate in the State Assembly was heated. Critics said failures could overwhelm the fund; they also argued that its very existence would reduce the “public scrutiny and watchfulness” that restrained bankers from reckless lending. This remains the intellectual argument against insurance today. But Forman’s plan was enacted, and subsequently five other states adopted plans.
All did not go smoothly. In the 1840s, during a national depression, 11 banks in New York State failed and the insurance fund — as prophesied — was threatened with insolvency. The state sold bonds to bail it out....
comments powered by Disqus
- Trump just promised the biggest tax cut in history
- An African Diaspora group at Columbia University draped a KKK hood over Thomas Jefferson
- Documents show how CIA connived with Chilean publisher to overthrow Allende
- Is Trump right that he's signed more executive orders than FDR in his first 100 days?
- 500 Years After Expulsion, Sicily’s Jews Reclaim a Lost History
- Nathaniel Philbrick wins the $50,000 2017 George Washington Prize
- In an interview Jill Lepore explains how she writes and the writers she admires most
- Trump is no Hitler – he’s a Mussolini, says Oxford historian
- Rick Perlstein’s still drawing brickbats for his confession in the NYT that historians (like him) have misinterpreted modern conservatism
- “Historians are shockingly dismissive of people in ‘flyover country,’ ” says Pulitzer-winning historian T. J. Stiles