When Uncle Sam introduced Main Street to Wall Street: Liberty Bonds and the transformation of American finance

Eric Hilt, Matthew Jaremski and Wendy Rahn

Journal of Financial Economics, 2022, vol. 145, issue 1, 194-216

Abstract: We study the effects of the Liberty Bond drives of World War I on financial intermediation in the 1920s and beyond. Using panel data on US counties, and an instrument that captures differences in the approaches used to market the bonds, we find that higher Liberty Bond subscription rates led to an increase in investment banks and a contraction in commercial bank assets. We also find that in the late 1930s, individuals residing in states where Liberty Bond subscription rates had been higher were more likely to report owning stocks or bonds. Although they were conducted to support the American effort in World War I, these bond drives reshaped American finance.

Keywords: Liberty bonds; Financial literacy; Investment banking; Commercial banking; Stockholding; Financialization; Financial intermediation; Financial development; Trust (search for similar items in EconPapers)
JEL-codes: G0 H31 N22 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Working Paper: When Uncle Sam Introduced Main Street to Wall Street: Liberty Bonds and the Transformation of American Finance (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:1:p:194-216

DOI: 10.1016/j.jfineco.2021.06.043

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