The History of Partisan Banking

This chapter shows that, from 1799 to 1810, the dominant elite coalition—theParty Federalist Party Federalist Party—created limited access to bankingLimited Access limited access banking by controlling the majorities in both houses of the state legislature in most years as well as the governorship. They refused to charter Democratic-RepublicanRepublican banksDemocratic-Republican Democratic-Republican Bank . Only in 1811, of all the years between 1790 and 1824, the Democratic-Republicans were able to seize control of the House, Senate, and governorship. In that year, they chartered their own banks and refused to renew Federalist bankFederalist Federalist bank charters, allCharter bank charter of which were due for renewal in 1812. After a fiercely contested campaign, the Federalists regained control of the legislature and governorship in 1812 and renewed the charters of their banks. After 1812, Federalists and Democratic-RepublicansRepublican began to alter the institutions that governed entry into banking through the chartering process. The Federalists retained control of the legislature into the mid-1820s, but Federalist elites were willing to share the privilegePrivilege of creating banks in favor of a policy of open entryOpen Access open entry . The Federalists adopted a policy of free entryFree free entry so that if they lost control of the governmentGovernment , they would still receive bank charters. The example of Massachusetts shows that intra-eliteElite intra-elite political competition, rather than elite-citizen competition, promotes the transition from the limited to open access.