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Interstate Banking And Antitrust Laws: History Of Public Policies To Promote Banking Competition

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  • BERNARD SHULL

Abstract

Over the past several years, antitrust laws' significance as a public policy to promote competition in banking has diminished. Deregulation has intensified competition so much that it has made antitrust laws nonbinding constraints, even during a merger movement of extraordinary proportions. Deregulation and attenuating antitrust raise a question as to whether a distinctive competitive policy for commercial banks should exist as it has in the past. Two earlier policies are identified and reviewed in this paper: (1) free banking, which in several forms existed from the 1830s to the early 1930s, and (2) antitrust, which became relevant during the early 1960s. Experience under both policies illuminates the interaction between competition and regulation in banking. Such experience indicates that the effects of current competitive policy must be evaluated within the developing regulatory environment. Partially evaluating current policy within this context suggests that new charter requirements should be reformulated and that large bank mergers should be limited. So long as a distinctive regulatory system exists, a distinctive competitive policy for banks is needed.

Suggested Citation

  • Bernard Shull, 1988. "Interstate Banking And Antitrust Laws: History Of Public Policies To Promote Banking Competition," Contemporary Economic Policy, Western Economic Association International, vol. 6(2), pages 24-40, April.
  • Handle: RePEc:bla:coecpo:v:6:y:1988:i:2:p:24-40
    DOI: 10.1111/j.1465-7287.1988.tb00284.x
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    1. Edwards, Linda N & Edwards, Franklin R, 1974. "Measuring the Effectiveness of Regulation: The Case of Bank Entry Regulation," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 445-460, October.
    2. Sylla, Richard, 1969. "Federal Policy, Banking Market Structure, and Capital Mobilization in the United States, 1863–1913," The Journal of Economic History, Cambridge University Press, vol. 29(4), pages 657-686, December.
    3. Lester V. Chandler, 1938. "Monopolistic Elements in Commercial Banking," Journal of Political Economy, University of Chicago Press, vol. 46(1), pages 1-1.
    4. Timberlake, Richard H, Jr, 1984. "The Central Banking Role of Clearinghouse Associations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(1), pages 1-15, February.
    5. George G. Kaufman, 1987. "The truth about bank runs," Staff Memoranda 87-3, Federal Reserve Bank of Chicago.
    6. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, vol. 73(5), pages 1080-1091, December.
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    Cited by:

    1. Robert Tokle & Joanne Tokle, 2000. "The Influence of Credit Union and Savings and Loan Competition on Bank Deposit Rates in Idaho and Montana," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(4), pages 427-439, December.

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