In my remarks this evening I shall touch on the evolution of the American banking system, focusing especially on the pre-Civil War period, when government regulation was less comprehensive and less intrusive and interfered less with the operation of market forces.
A recent growing body of research supports the view that during that period market forces were fairly effective in assuring that individual banks constrained risktaking to prudent endeavors. Nonetheless, the then nascent system as a whole proved quite vulnerable to various macroeconomic shocks essentially unrelated to the degree of banking regulation.