The Development of Opacity in U.S. Banking

Gary Gorton

No 19540, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: An examination of U.S. banking history shows that economically efficient private bank money requires that information-revealing securities markets for bank liabilities be closed. That is, banks are optimally opaque, which is why they are regulated and examined. I show this by examining the transition from private bank notes, the predominant form of money before the U.S. Civil War, to demand deposits and show that markets endogenous closed. The opacity of bank money in the recent financial crisis is also briefly discussed.

JEL-codes: E32 E41 E42 E44 G01 G21 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-ban, nep-his, nep-mac and nep-mon
Note: CF DAE ME
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Citations: View citations in EconPapers (2)

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