ABSTRACT 
 
 
 
 
Title of Document: FROM PARTISAN BANKING TO OPEN 
ACCESS: A STUDY ON THE EMERGENCE 
OF FREE BANKING IN EARLY 
NINETEENTH CENTURY 
MASSACHUSETTS 
  
 Qian Lu, Doctor of Philosophy, 2014 
  
Directed By: Professor John Wallis, Department of Economics 
 
 
My dissertation examines how the financial sector, specifically banks, achieved 
open entry in early nineteenth-century Massachusetts. The first chapter introduces 
this question and provides the historical background and conceptual framework 
necessary for unpacking this question. The second chapter provides new evidence 
showing how the majority political party, the Federalists, held a monopoly on banks 
by dominating the state legislature in charge of issuing charters for new banks, 
effectively prohibiting members of the opposing political party, the Democratic-
Republicans, from opening banks. Political turnover in the period between 1810 and 
1812 destroyed the Federalist monopoly and allowed for the possibility of open entry 
in the banking sector. The third chapter provides a new measurement of an elite 
coalition by collecting original data about bank directors and state legislators in an 
effort to identify their relationship. The empirical results show how the political 
composition of the banking sector changed during the Federalist and the Democratic-
  
Republican eras and how the banking sector became less connected to political elites 
(i.e. the legislators) in the 1830s – 1850s. The fourth chapter shows that for people 
who were ever legislators at some point in their life, they were more likely to be 
legislators and bankers at the same time in the late 1790s and early 1800s than 
afterwards. The fifth chapter collects data on private accumulation of wealth from 
Boston tax rolls and data on bank balance sheets to show that bankers were always 
richer than other wealthy citizens in the 1830s and 1840s, but their relative wealth 
inequality remained stable.  New banks chartered in the 1840s and 1850s were 
smaller banks. The sixth chapter provides an explanation of the transition from 
limited to open access banking based on the idea of intra-elite competition. Taken 
together, these chapters show that the banking sector moved toward free banking by 
solving the problem of exclusive party politics. Although intra-elite conflicts did not 
eliminate elites’ banking privileges— political elites and banks were still connected 
and bankers remained the wealthy class, they nevertheless led to de facto free banking. 
 
 
 
 
  
  
 
 
 
 
 
 
 
FROM PARTISAN BANKING TO OPEN ACCESS: A STUDY ON THE 
EMERGENCE OF FREE BANKING IN EARLY NINETEENTH CENTURY 
MASSACHUSETTS 
 
 
 
By 
 
 
Qian Lu 
 
 
 
 
 
Dissertation submitted to the Faculty of the Graduate School of the  
University of Maryland, College Park, in partial fulfillment 
of the requirements for the degree of 
Doctor of Philosophy 
2014 
 
 
 
 
 
 
 
 
 
 
Advisory Committee: 
Professor John Wallis, Chair 
Peter Murrell 
Ethan Kaplan 
David Sicilia 
John Shea 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
© Copyright by 
Qian Lu 
2014 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 Dedication 
To My Parents, My Forever Love 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ii 
 
 Acknowledgements 
I would never have considered studying economic history without 
encouragement from Prof. John Wallis. John led me to read great historical works and 
inspired me to answer important questions in history. With a great patience, he taught 
me how to study economic history from both the institutional and empirical 
perspectives. Studying economic history, in my understanding, is more than simply 
collecting a set of data, carrying out regressions, and then constructing a model to fit 
the data. Rather, it is looking at the detailed institutional and sociological structure of 
a society at a specific point in time to discover new clues for understanding both well-
known and little-known histories. He also taught me how to write a cliometrics paper, 
and how to look at data from various perspectives and to discover the pattern of the 
data. All of these skills, I believe, are important for me to know how to become a 
great historian, and to help me know what I should keep learning and practicing in the 
future. John is a great person with a big heart. I really enjoy the learning and reading. 
I am also grateful for Prof. Peter Murrell’s help in my learning. Prof. Murrell 
organized a workshop of institutional economics, which taught me many interesting 
lessons in cultural evolution, institutional economics, and Chinese history. His 
interests in Chinese reform history often inspired my reading on this subject and ideas 
on possible future research. Peter also taught me how to carry out empirical research 
step-by-step, which was very helpful in my dissertation writing.  
I also thank Prof. Ethan Kaplan for his help in preparing me for my job market. 
Ethan has great knowledge in implementing empirical research and is also very nice 
in preparing graduate students to go through the research and job market process. 
Without his help, I would not prepare myself well for the job market interviews.  
I also thank Prof. David Sicilia and Prof. John Shea for kindly offering me 
valuable suggestions on my dissertation and agreeing to sit in my dissertation 
committee. Prof. Allan Drazen, Prof. Razvan Vlaicu, Prof. Ginger Jin, Prof. Luminita 
Stevens, Prof. Judy Hellerstein and many other professors also have helped me in my 
research and improvement. I am indebted to the help provided by my fellow school 
mates, Alvaro La Parra Perez, Ron Chan, Ben Zou, Daisy Weijia Dai, Martin Schmidt, 
 iii 
 
 Haishan Yuan, Martija Janced, Nona Karalashvili, Wei Li, Ling Zhu, John Liao, 
Jianzhi Zhao and many others for their help and suggestions at various points of time. 
I also appreciate Vickie Fletcher, Davis Terry, Fox Kelly, Wilkerson, Mark, and 
Heather Nalley for their backing. I also appreciate Heather Blain Vorhies, Anthony 
Melchiorri, Eric Herrmann, Thomas McCloskey, Aaron Tobiason, Sarah England, 
and other staff at the UMD writing center for their valuable suggestions in writing 
papers and dissertation. I thank Howard Bodenhorn, Eric Hilt, Ethan Kaplan, Naomi 
Lamoreaux, James Snyder, Richard Sylla, Robert Wright, and seminar participants at 
the University of Maryland for their suggestions. I thank Yiqing Xu’s help in 
providing accommodations while I was digging out archives in Boston, the winter of 
2013. I appreciate staff at the Massachusetts State Library and Massachusetts State 
Archives for their kindly help in advising me the materials and archive information. 
Special thanks to Alix Quan of Massachusetts State Library for providing valuable 
data on state legislators.  
In the past five years, I began to appreciate many things that I ignored but 
actually already possessed. I became less worried about what I do not own. I know 
more now about the complexity of the world, both in history and present-day life. I 
know there are more challenges and happiness awaiting me in my future, but I have 
no ideas about what they will look like. However, I am glad that I have made a step 
further.   
Last, I want to express my love for my parents. I began to study away from 
home since the age of 16 and only occasionally met my parents after that. I never told 
them I loved them. I never knew that they were so precious to me. They supported me 
even when they were in great difficulties. I will love you forever, forever more.  
“Wait and Hope.” – Alexandre Dumas, The Count of Monte Cristo 
 
 
 
 
 iv 
 
  
Table of Contents 
 
 
Dedication ..................................................................................................................... ii 
 
Acknowledgements ...................................................................................................... iii 
 
Table of Contents .......................................................................................................... v 
 
List of Tables .............................................................................................................. vii 
 
List of Figures .............................................................................................................. ix 
 
Chapter 1: Introduction ................................................................................................. 1 
Section 1 Question .................................................................................................... 1 
Section 2 Literature ................................................................................................... 4 
Section 3 Preview of Results .................................................................................... 9 
 
Chapter 2: History of Partisan Banking ...................................................................... 13 
Section 1 Banking History 1780 - 1810 .................................................................. 13 
Section 2 From Deferential Politics to Partisan Politics ......................................... 17 
Section 3 Partisan Banking, 1799-1810 .................................................................. 20 
Section 4 Democratic-Republicans, Elbridge Gerry, and Political Reform of 1811
................................................................................................................................. 23 
Section 5 Banking Reform of 1811 ........................................................................ 28 
Section 6 Parties, Banks, and Laws, 1820s-1850s .................................................. 35 
Section 7 Conclusion .............................................................................................. 41 
 
Chapter 3: Empirical Studies on Bankers, Legislators, and Political Parties, 1790-
1859............................................................................................................................. 42 
Section 1 Introduction ............................................................................................. 42 
Section 2 Data ......................................................................................................... 43 
Section 3 Regimes of Party Competition ................................................................ 60 
Section 4 Regression Studies on Parties and Legislators, 1797-1824 .................... 75 
Section 5 Bank Level Analysis ............................................................................... 79 
Section 6 Conclusion .............................................................................................. 83 
 
Chapter 4: Empirical Studies on Political Connection of Suffolk Legislators, 1790-
1859............................................................................................................................. 84 
Section 1 Introduction ............................................................................................. 84 
Section 2 Data and Empirical Tests ........................................................................ 84 
Section 3 Conclusion .............................................................................................. 87 
 v 
 
  
Chapter 5: Empirical Studies on Bankers’ Wealth and Bank Balance Sheets ............ 89 
Section 1 Introduction ............................................................................................. 89 
Section 2 Bankers’ Wealth, 1829-1859 .................................................................. 89 
5.2.1 Introduction ................................................................................................ 89 
5.2.2 Data ............................................................................................................ 92 
5.2.3 The Basic Results ....................................................................................... 94 
5.2.4 Robustness Checks..................................................................................... 98 
Section 3 Bank Balance Sheet .............................................................................. 110 
5.3.1 Introduction .............................................................................................. 110 
5.3.2 Data .......................................................................................................... 112 
5.3.3 Empirical Results ..................................................................................... 112 
Section 4 Conclusion ............................................................................................ 122 
 
Chapter 6: An Intra-Elite Explanation of Open Access ............................................ 123 
 
Chapter 7: Conclusion............................................................................................... 129 
 
Appendices ................................................................................................................ 134 
 
Bibliography ............................................................................................................. 193 
 
 
 
 
   
 
 vi 
 
 List of Tables 
 
Table 3.1 Bankers and Legislators, 1790-1859 
 
Table 3.2 New Bankers and Legislators 
 
Table 3.3 All New Bankers, By Legislator or not, and By Party or not 
 
Table 3.4 The OLS, Logit and Probit Tests on the Probability that a New Banker had 
been a Party Legislator 
 
Table 4.1: Individual and Time Fixed Effects of Legislators’ Probability of Being a 
Bank Director at the Same Year 
 
Table 5.1 Representation of the Tax Lists and Sample 
 
Table 5.2 Sample Size of Taxpayers and Boston Bankers, 1826-1859  
 
Table 5.3 Average Wealth for Taxpayers and Bankers,1826-1859 
 
Table 5.4 Growth Rates of Wealth of Taxpayers and Bankers 
 
Table 5.5 Summary Statistics: Mean, sd, and Number of Deflated Wealth of 
Taxpayers and Bankers by Year 
 
Table 5.6 Wealth of Taxpayers and Bankers whose Family Names Starting with 
Letter “P” 
 
Table 5.7 Average Wealth of Existing Taxpayers and Bankers and Linked Growth 
Rates 
 
Table 5.8 Estimated Counter-Factual Wealth from the Growth Rates of the Entry 
Sample and Linked Growth Rates 
 
Table 5.9 Average Wealth for Entering Taxpayers and Bankers 
 
Table 5.10 Counter-Factual Estimates of the Average Wealth, Entering People and 
Linked Growth Rates 
 
Table 5.11 Average Wealth of the Entire Sample, Counter-Factual Wealth of the 
Entering New People and Linked Growth, and Counter-Factual Wealth of the Linked 
Growth Only 
 
Table 5.12 Beginning and Ending Year of Boston Banks from Bank Balance Sheet 
 
 vii 
 
 Table 5.13 Beginning and Ending Year of Boston Banks from Massachusetts 
Registers 
 
Table 5.14 The Mean, the Standard Deviation, and the Number of Bank Assets, 1803-
1861. 
 
Table 5.15 Average Asset for Entering Banks 
 
Table 5.16 Average Assets for Banks Opened and Closed in Different Periods 
 
Table 5.17 Average Bank Assets for Banks Chartered in Different Periods and Within 
Different Categories 
 
Table A.1 Number of Legislators and Legislators with Party IDs, 1780-1859  
 
Table A.2 Number of Bankers, Legislators, and Party IDs. 
 viii 
 
 List of Figures 
 
Figure 2.1 Number of New Charters excluding Renewals, 1780-1860 
 
Figure 2.2 Annual Proportion of Federalists and Democratic-Republicans in the 
Massachusetts Senate, 1797-1824 
 
Figure 2.3 Annual Proportion of Federalist and Democratic-Republicans in the 
Massachusetts House of Representatives, 1797-1822 
 
Figure 2.4 Senate Composition, 1825-1859 
 
Figure 2.5 House Composition, 1825-1859.  
 
Figure 3.1 Number of Banks in the Registers and Weber’s data, 1790-1862 
 
Figure 3.2: Number of New Charters excluding Renewals, 1780-1860 
 
Figure 3.3 Share of all Legislators (not just bankers) who have a Party ID in the 
Legislative Biographies. 
 
Figure 3.4 Number of Legislators, 1790-1859 
 
Figure 3.5 Number of Bank Directors and Presidents in the Registers (1790-1859) 
 
Figure 3.6 Proportions of Bankers that were Legislators, All Banks in the Registers, 
1790-1859 
 
Figure 3.7 Proportion of Bankers that had been Legislators before they became 
bankers, and Proportions of Bankers that would become Legislators after they became 
bankers. All Banks in the Massachustts Register, 1790-1859 
 
Figure 3.8: Number of Boston Bank Directors and Presidents in the Registers, 1790-
1859 
 
Figure 3.9 Proportions of Boston Bank Directors and Presidents who had been or 
would become Legislators, and Local Polynomial Smooth Plot, 1790-1859 
 
Figure 3.10 Proportions of Boston Bank Directors and Presidents who had been 
Legislators, and Proportions of Boston Bank Directors and Presidents who would be 
Legislators, 1790-1859. 
 
Figure 3.11 Proportions of Boston Bankers that had been Federalist or Democratic-
Republican Legislators before they became Bank Directors and Presidents, 1790-
1827 
 ix 
 
  
Figure 3.12 Annual Proportion of Federalist and Democratic-Republicans in 
Massachusetts House, 1797-1822 
 
Figure 3.13 Proportions of Boston Bankers who became Federalist or Republican 
Legislators after they became bankers, 1790-1827 
 
Figure 3.14 Annual Number of New Bankers, Boston Banks, 1790-1859 
 
Figure 3.15 Proportions of New Bankers that had been Federalist and Democratic-
Republican Legislators, Boston Banks, 1790-1859 
 
Figure 3.16 Proportions of New Bankers that would become Federalist and 
Democratic-Republican Legislators, Boston Banks, 1790-1830 
 
Figure 3.17 The Number of Banks with No Legislators as President or a Director, All 
Banks (whether they have Directors or not), 1790 to 1859. 
 
Figure 3.18 Number of Banks with Directors who have No Legislators, 1790-1859.  
This sample excludes banks with only Presidents in the Registers. 
 
Figure 3.19 Annual Average Tenure of State Legislators, 1780-1900. 
 
Figure 4.1 Regression Coefficients, Time Fixed Effect Only. 
 
Figure 5.1: Average Wealth of Taxpayers and Bankers, 1829-1859. 
 
Figure 5.2 Average Wealth of Bankers to Taxpayers 
 
Figure 5.3 Growth Rates of the Wealth of Taxpayers and Bankers, 1829-1859. 
 
Figure 5.4 Difference in Growth Rates of the Wealth of Bankers and Taxpayers, 
1826-1859  
 
Figure 5.5 Taxpayers and Bankers’ Deflated Average Wealth, 1829-1859 
 
Figure 5.6 Average Wealth of Taxpayers and Bankers whose Family Names Starting 
with Letter “P, ”excluding the year 1859. 
 
Figure 5.7 Ratios of Average Wealth of Taxpayers to Bankers whose Family Names 
Starting with Letter “P.” 
 
Figure 5.8 Average Wealth of Existing Taxpayers and Bankers, 1829-1859 
 
Figure 5.9 Linked Growth Rates of the Wealth of Taxpayers and Bankers, 1830-1859.  
 
 x 
 
 Figure 5.10 Differences in Linked Growth Rates of Taxpayers and Bankers, 1830-
1859. 
 
Figure 5.11 Counter-Factual Wealth, Estimated by Linked Growth Rate 
 
Figure 5.12 Average Wealth for Entering Taxpayers and Bankers, 1829-1859. 
 
Figure 5.13 The Ratios of Avg. Wealth of Entering New Bankers to Avg. Wealth of 
Entering New Taxpayers 
 
Figure 5.14 Counter-Factual Wealth of Taxpayers and Bankers with Linked Growth 
Rates and Entrance of New People, and Wealth of Linked Growth Only 
 
Figure 5.15 Average Asset for All Banks in Boston, 1804-1861 
 
Figure 5.16 Average Asset, All Banks in Boston, 1826-1861 
 
Figure 5.17 Average Asset for Entering New Banks, 1803-1861 
 
Figure 5.18 Average Assets for Banks Opened before 1837 and Closed during Crisis, 
Banks Opened before 1837 and Operated after 1843, and Banks Opened after 1843. 
Period 1826-1861. 
 
Figure 5.19 Average Assets for Banks Opened before 1837 and Closed during Crisis, 
Banks Opened before 1837 and Operated after 1843, and Banks Opened after 1843. 
Period 1826-1861. 
 
Figure 5.20 The Average of the Legislators’ Proportion Across Banks, 1790-1859 
 
Figure 5.21 Proportions of Boston Bank Directors and Presidents who had been or 
would become Legislators, and Local Polynomial Smooth Plot, 1790-1859 
 
Figure 5.22 Average Bank Assets for Banks with Different Proportion of Bank 
Directors as State Legislators: Proportion of Legislators<=0.33, 
0.33<Proportion<=0.66, and 0.66<Proportion.
 xi 
 
 Chapter 1: Introduction 
Section 1 Question 
Since Alexis de Tocqueville wrote Democracy in America in 1835, the 
American political system has been praised for the ubiquity of organizations that 
affect virtually every aspect of American life. The United States has always ranked at 
or near the top in ease of forming new economic, political, and social organizations.1 
Since 1800, the U.S. has led the U.K., France, and Germany in the historical race for 
the number of corporations (Hannah, 2013; Sylla and Wright, 2013).  American 
scholars have, to a large extent, accepted Tocqueville's argument that a combination 
of culture and democracy formed historically unique preconditions for the emergence 
of a rich civil society. As a result, the American fondness for organizations grew 
without much struggle. This dissertation challenges the idea that civil society or open 
entry for organizations was a natural outcome of democracy; it further studies how 
America struggled to achieve open entry for organizations in the early nineteenth 
century. 
The emergence of a civil society requires a society to transform from a limited 
access social order to an open access social order. In a limited access social order, 
access to organizational forms such as corporations is limited to elites, whereas in an 
open access social order, access is open to almost all groups of people (North, Wallis, 
and Weingast, 2009). For instance, by the 1850s, most U.S. states had passed general 
incorporation laws to allow virtually any group of people to register as a corporation. 
1 For instance, the current Doing Business report (World Bank, 2013, p. 3) ranks the U.S. 
fourth in world on “the ease of doing business.”   
1 
 
                                                 
 Over the last three centuries, however, only a few societies have transitioned from 
limited to open access social orders and created a prosperous civil society. Seeking to 
explore these dynamics, I ask whether early nineteenth-century America was an open 
access society, and if not, how did it achieve open access?  
The dissertation answers these questions in the context of a particular time, 
place, and activity: Massachusetts banking in the early nineteenth century.  
Massachusetts’ economic and political history provides an ideal case to study the 
emergence of open access to the banking sector. New England in general, and 
Massachusetts in particular, represented a strain of American history and culture 
closely identified with the paradoxical combination of existing elites, strong beliefs 
that elite privilege corrupts democracy, and a long history of participatory democracy.  
Massachusetts is often lauded as an exemplar of open entry. The Oscar and Mary Flug 
Handlin’s classic history of the corporation in Massachusetts – Commonwealth (1969) 
– is a celebration of how democratic forces inexorably led to extension of the 
corporate form to everyone. Massachusetts was also the first state to incorporate a 
large number of banks. It had more banks per capita than other states as early as the 
1820s: “After 1820, Massachusetts had essentially free banking in the general sense 
of that term, and the state remained a leader in terms of numbers of incorporated 
banks and capital invested in banking enterprises for several decades” (Sylla, 1985). 
By 1830, while Massachusetts had only 4.7 % of the nation’s population, it contained 
20% of the nation’s banks and 18.5% of the nation’s banking capital (Wallis, Sylla, 
and Legler 1994, taken from Gilbart, [1837] 1967). Early nineteenth-century 
2 
 
 Massachusetts is a natural place to examine the social processes that create open 
access banking.  
Despite these views, before 1812, banking in Massachusetts was essentially 
limited to merchants and entrepreneurs who were connected with the Federalist Party.  
As the Federalist Party grew better organized, banking became a Federalist preserve. 
A bank charter was a valuable privilege authorized by the legislature. By controlling 
the legislature and governorship in the state’s early history, the Federalists were 
explicitly able to exclude their political opponents, the Democratic-Republicans, from 
obtaining bank charters. The Federalists in Massachusetts organized around a core of 
legislator/bankers that created rents in the banking sector in order to coordinate a 
political coalition that controlled the Massachusetts government. Federalist 
domination of Massachusetts politics was broken for only one session of the 
legislature in 1811 under Governor Elbridge Gerry (famous for gerrymandering). In 
control of the state government only once, the Republicans mirrored the policies of 
the Federalists, chartered their own banks, and denied the rechartering of existing 
Federalist banks. When Federalists regained control of government in 1812, they 
began to charter both more Federalist banks and Democratic-Republican banks. As a 
result of the political war over banking, Federalists and Democratic-Republicans 
formed a consensus that moved Massachusetts banking toward open entry. 
None of this was inevitable in early 19th century America.  The movement 
toward free entry in Massachusetts depended on unique circumstances, which moved 
political and economic elites to voluntarily give up their valuable privileges. The 
following chapters lay out the history of Massachusetts banking and politics and test 
3 
 
 the idea that a political coalition manipulated access to banking by providing both 
quantitative and historical evidence. The key to limited access is the close association 
in Massachusetts between bankers, legislators, and parties. After 1811, this close 
association began to weaken and by the time of the 1830s and 1840s, the association 
was not eliminated but significantly reduced. The transition to open access banking, 
to a large extent, was due to intra-elite competition. Unlike a revolution, intra-elite 
competition did not eliminate elites from banking: by the 1830s and 1840s, banks 
were still connected to politics, and bankers remained wealthy elites. However, intra-
elite competition did move banking towards de facto free entry.  
 
Section 2 Literature 
Much of the historical literature simply describes what happened in 
Massachusetts, while a smaller set explains why it happened. At the most general 
level, the democratic revolution supplies an answer to why Massachusetts allowed 
many citizens to form corporations. Historians such as Oscar and Mary Flug Handlin 
(1969) and Pauline Maier (1992, 1993) found that Massachusetts corporations 
multiplied from the earliest days after the revolution. Pauline Maier’s article offers an 
answer to the why question: political events in the revolution created conditions under 
which the emergence of modern corporations and open access to those corporate 
forms was almost inevitable. While many people in the United States opposed 
corporations on principle, many became “supporters of an agenda for the design of 
corporate charters who drew on the Revolution's fascination with the construction of 
constitutions to adapt the corporation to American circumstances. In doing so, they 
4 
 
 made the corporation a part of the Revolutionary heritage with far-reaching 
implications for American government and society” (Maier, 1993, p. 53). The 
Handlins’ Commonwealth: A Study of the Role of Government in the American 
Economy, 1771-1861 (1969) has much the same tone and analysis. The state found 
itself confronted with such a large political and revolutionary demand for corporate 
charters from a wide variety of citizens that it simply could not refuse to authorize 
incorporations.2  
Economic historians have similar explanations. Richard Sylla’s essay on early 
American banking notes the significant opposition to open entry (free) banking by 
opponents of corporations, but attributes the opposition to a general revolutionary 
aversion to privilege (Sylla, 1985). Americans opposed privilege for deep historical 
and cultural reasons. The relatively equal distribution of landed wealth (Sokoloff and 
Engerman, 2002) gave Americans a particularly strong aversion to government 
created privileges. This cultural bias eventually led Americans towards prohibition of 
government created privileges in the Jacksonian Era. The founding generation, who 
upheld the banner of American Revolution, feared that organized economic and 
political interests, specifically economic corporations and political parties, would 
undermine the accomplishments of the Revolution. A significant amount of American 
economic and political success in the following 200 years can be attributed to open 
2 According to Handlin and Handlin (1969), “The public purpose which justifies extension of 
government powers to a bank, to a bridge, and to a factory soon comprehended a wide and 
ever widening circle of enterprises. The Commonwealth’s concern with the entire productive 
system, its solicitude for the welfare of many diverse activities, all interdependent and all 
adding to the strength of Massachusetts, quickly put the corporate form to the use of many 
new ventures. The political balance deflated any notion of keeping the device exclusive; the 
expansive thinking, the excited spirits of the young state, brooked no casual denial. Charters 
in steadily mounting volume clothed with living tissues the skeletal hopes for an economy to 
serve the common interest” (p. 106). 
5 
 
                                                 
 entry of corporations and political parties. Economic historians have struggled to find 
what was embedded in democratic culture and revolutionary history that explains 
both the aversion and open access to corporations. 
Viewed from a narrow perspective, explanations adopted by the Handlins, Maier, 
Sylla, and many others that Americans adopted open access for organizations because 
the political, cultural, and economic dynamics moved the society towards revolution 
and democracy in the colonial experience, is certainly correct. However, the 
Massachusetts literature lacks a critical element: intra-elite competition. In a broader 
perspective, revolutions and similar adoption of democratic political institutions in 
other societies have not led to open organizational access, for example, in Latin 
America after independence. These societies tried revolution and democracy 
repeatedly, but elites persistently frustrated attempts to open access. If the revolution 
and democracy was the key to open access, we should observe that in open access 
America, elites’ political and economic privileges were largely eliminated, banks 
were not significantly connected to political elites, and bankers were just ordinary 
rich people. Was this idealistic, revolutionary view of open access the historical fact 
or an ideological social construction? By looking at the transition to open access from 
both political and economic perspectives, I show that the naïve revolutionary story of 
democratic transition is simply wrong. 
Revolution and democracy were not the keys to open access. Revolutionary, 
intellectual, and cultural predispositions were not enough to prevent early American 
elites from forming coalitions of organized political and economic interests to 
compete for government control, or to use that control to promote their own ends at 
6 
 
 the expense of the larger society. By ignoring intra-elite conflicts and asserting the 
inevitability of open access in post-Revolutionary America, standard explanations 
emphasizing that revolution, democracy and American culture led to open access 
cannot tell us why elites allowed open access to emerge and why elites did not 
disappear from American society.  
North, Wallis, and Weingast (2009) argue that, in most societies, intra-elite 
competition and violence is limited by the creation of elite economic rents which 
sustain coordination within the elite coalition. Their understanding of the transition to 
open access is that competition within and between elites can, under the right 
conditions, lead elites to move towards rules that allow all elites to form organizations. 
The society moves toward a new pattern of open political and economic access in 
which a competitive economy sustains competitive politics.  
In contrast, Acemoglu and Robinson (2005, 2012) suggest that human societies 
have two types of institutions – “extractive institutions” and “inclusive institutions.” 
“Extractive institutions” allow elite groups to extract wealth from citizens, and 
inclusive institutions “allow and encourage participation by the great mass of people 
in economic activities… and must permit the entry of new businesses and allow 
people to choose their careers.”3   The transition to “inclusive institutions” requires 
elites be restrained or overthrown by non-elite citizens. Acemoglu and Robinson 
(2012) argue that the colonial experience and the American Revolution established 
inclusive institutions. 
3 Acemoglu and Robinson (2012), p. 74-75 
 
7 
 
                                                 
 The key difference between North, Wallis, and Weingast (NWW) and Acemoglu 
and Robinson (AR) is the role of elites in the transition to open access or inclusive 
institutions. NWW emphasize competition between elites, while AR emphasize 
competition between elites and non-elite citizens. NWW suggests that it is possible to 
transition to open access through reconfiguration of elite groups, while AR argue that 
the threat of revolution by citizens may force elites to extend their privileges and 
allow inclusive institutions to emerge. This dissertation looks at early nineteenth-
century banking history on an attempt to answer whether intra-elite conflicts or 
revolution by citizens led early nineteenth-century Massachusetts banking to open 
access.  
This dissertation includes both historical and empirical studies. Historically, I 
dig into archives and uncover a forgotten history by showing that the first parties— 
Federalists and Democratic-Republicans— competed to control banks by dominating 
the legislature and excluding others from the banking sector. This winner-take-all 
game forced both parties to accommodate banks of the other party and moved the 
banking sector towards de facto free entry. Empirically, I provide a concrete measure 
of an elite coalition by defining elites as bank directors who had been or would 
become state legislators at some point in their life. Both NWW and AR construct 
their theories based on concepts of elites, but neither proposes a way to measure elites 
in the historical context. I collect original data on bank directors and state legislators 
and show that in the early 1800s, 70% of bank directors had been or would become 
state legislators. However, this elite association began to weaken over the next several 
decades. By the 1850s, the proportion had dropped to 30%. I then provide a second 
8 
 
 measure of elite coalitions by defining elites as legislators who were bank directors in 
the same year. For people who were ever legislators, I show that a being legislator in 
a given year has 50% larger chance than not being a legislator to be a 
contemporaneous bank director around 1800, but this probability dropped to zero in 
the 1840s. Furthermore, I collect wealth data on wealthy taxpayers in Boston and 
show that in the free banking era, bank directors were always richer than non-bankers. 
The intra-elite party competition did not eliminate elites from banking, but it did 
move the banking sector towards free entry.  
 
Section 3 Preview of Results 
The second chapter will show that, from 1799 to 1810, the dominant elite 
coalition— the Federalist Party— created limited access to 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-Republican banks. Only in 1811, 
of all the years between 1790 and 1824, were the Democratic-Republicans were able 
to seize control of the House, Senate, and governorship in the same year. In that year 
they chartered their own banks, and refused to renew Federalist bank charters, all 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-Republicans 
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 privilege of creating banks in favor of a 
9 
 
 policy of open entry. The Federalists adopted a policy of free entry so that if they lost 
control of government, they would still receive bank charters. The example of 
Massachusetts shows that intra-elite political competition, rather than elite-citizen 
competition, promoted the transition from the limited to open access. 
Chapter 3 provides the major empirical contribution of this dissertation. I define 
elites as bankers who had been or would become state legislators at some point of 
their life. I collect data on bank directors and state legislators from 1790 to 1860 to 
identify the affiliation between bankers, political parties, and state legislators. Over 
70 percent of the bank presidents and bank directors before 1812 had been or would 
become state legislators. Moreover, most of those banker/legislators were associated 
with the Federalist Party, and very few were Democratic-Republicans. The stock of 
directors shows that from 1797 to 1811, many directors remained Federalist, despite 
the fact that Democratic-Republicans strength in the legislature kept rising. However, 
in 1812 the proportion of bank directors that had been Democratic-Republican 
legislators jumped from almost zero to 24%. Ordinary Least Squares, Logit, and 
Probit regressions show that the probability of a bank director being a Democratic-
Republican legislator increased by more than 20% after 1811, with no significant 
change in the probability of being a Federalist legislator. These results reveal a shift 
in strategy by Federalists, who extended banking privileges to their political rivals, as 
a direct result of the threat of charter revocation in 1811. 
In addition, Chapter 3 shows that while the connection between legislators and 
bankers dropped after 1812, legislators and bankers nevertheless continued to be 
closely connected: even in the 1850s forty to fifty percent of all bank presidents and 
10 
 
 bank directors served in the state legislature at some point in time. Despite the 
continuing connection, limited partisan access to banking never returned in the 
second party system. After 1820, banking was still dominated by elites, but access to 
banking was no longer limited by political affiliation. Bankers were still much 
wealthier than the average citizen, and were much more likely to become state 
legislators, but were no longer connected with a particular party. 
Chapter 4 complements Chapter 3 by examining the contemporaneous 
relationship between bank directors and state legislators. The results show that people 
who were ever state legislator at some point in their life had a significantly larger 
chance of being a bank director at the same time in the 1790s and the first decade of 
the 19th century.  Over time the chance that a person would be both a legislator and a 
banker at the same time declined to almost zero. These results provide another 
perspective of looking at the connection between banking and political elites, and 
they suggest that the banking sector were less politically connected in the second 
party regime. 
Chapter 5 studies the transition to open access from the economic perspective. It 
collects wealth data from Boston tax rolls between 1827 and 1859 and data on bank 
balance sheets from 1804 to 1861. The results show that in the era of de facto free 
banking, bankers remained richer than other wealthy citizens, although the wealth 
inequality did not widen. Banks chartered in the free banking era were still politically 
connected, although their sizes were small. These results suggest that from the 
economic perspective, many bankers were still wealthy elites, and the banking sector 
was not owned by grass-roots citizens. 
11 
 
 Chapter 6 provides an explanation of open access based on the conceptual 
framework of intra-elite competition developed by North, Wallis, and Weingast 
(2009). This framework suggests that intra-elite conflicts, rather than revolution led 
by citizens, was a more likely explanation for the transition to open access. If the 
transition to open access banking was caused by revolution, as the Handlins, Maier, 
Sylla, and many political and economic historians have suggested, we should observe 
that the banking sector was largely democratized by the 1790s, with political elites 
eliminated from the banks and ordinary citizens becoming bankers. However, the 
evidence suggests that the elites were not eliminated from the banking sector, and 
bankers were still politically connected and remained wealthy. Intra-elite conflicts 
moved the banking sector toward de facto free entry. 
Chapter 7 concludes.  
 
 
 
 
 
 
 
 
 
12 
 
  
Chapter 2: History of Partisan Banking 
 
This chapter presents the history of partisan banking in early Massachusetts, 
which has been largely forgotten by American economic historians. To understand 
how political parties controlled banks and manipulated the banking sector for their 
purposes, we need to understand both political history and banking history in early 
nineteenth-century Massachusetts.  
 
Section 1 Banking History 1780 - 1810 
After the American Revolution, Massachusetts established a new government 
and wrote a new State Constitution. The Constitution prohibited the state from 
recognizing any association that did not serve the common good: 
Article VI. No man, nor corporation, or association of men, have any other 
title to obtain advantages, or particular and exclusive privileges, distinct 
from those of the community, than what arises from the consideration of 
services rendered to the public; and this title being in nature neither 
hereditary, nor transmissible to children, or descendants, or relations by 
blood, the idea of a man born a magistrate, lawgiver, or judge, is absurd and 
unnatural. 
Article VII. Government is instituted for the common good; for the protection, 
safety, prosperity and happiness of the people; and not for the profit, honor, 
or private interest of any one man, family, or class of men: Therefore the 
13 
 
 people alone have an incontestable, unalienable, and indefeasible right to 
institute government; and to reform, alter, or totally change the same, when 
their protection, safety, prosperity and happiness require it.4 
       Article VI specifies that no corporation or association could obtain exclusive 
privileges except for those established for public services, and Article VII specifies 
that the government should not serve the private interests of any factions. Articles VI 
and VII together required the government to provide corporate privileges only for 
public services rather than private interests of certain elite factions.  
All corporations— manufacturing firms, banks, churches, schools, colleges, 
learned academies, and fraternal organizations— were required to serve the public 
good. The state chartered corporations by special laws and tightly controlled them 
(Neem, 2009; Handlin and Handlin, 1969). It also specified corporate privileges 
including perpetual lives, the rights of suing and being sued, limited liability, and the 
power of issuing notes as banks. These corporate privileges could be used to provide 
public goods and promote economic development, but they could also be used to 
advance private interests of privileged elites. The question is how the state could 
prevent elites from using corporate privileges to corrupt government and benefit 
private elite interests, while allowing corporations to promote public welfare and 
development at the same time.  
Banks were also corporations chartered by the state. As Figure 2.1 shows, few 
banks were chartered before 1812. On average, 1.2 bank charters were granted each 
year between 1792 and 1811. The pattern changed after 1811. An average of 4.7 
4 Emphasis mine. The Massachusetts Constitution of 1780 (Handlin & Handlin, 1966). 
14 
 
                                                 
 banks was chartered every year between 1812 and 1860. By the 1820s, Massachusetts 
had entered the era of “de facto free banking” (Sylla, 1985).  
 
 
Figure 2.1: Number of New Charters excluding Renewals, 1780-1860 
                 Source: Sylla and Wright (2012) 
 
In the banking sector, the concern that a few elites would use corporate 
privileges to benefit their private interests instead of public welfare also prevailed. In 
the Antebellum era, all banks could issue their own bank notes, which were private 
monies circulated in the economy. States authorized certain banks to issue bank notes 
to facilitate circulation in the economy. However, elites, by controlling the 
government, exclusively received bank charters and limited access to banking. As a 
result, people worried that elites corrupted government to receive exclusive bank 
charters for the exclusive issuance of monies to benefit their private interests.  
Since the Massachusetts Bank received the first charter, people feared that a few 
elite citizens dominated the bank and abused power to issue bank notes for private 
15 
 
 benefit. In 1804, the legislature chartered the bank to provide public currency. 
However, nine of the twelve members of the first board of directors came from 
wealthy families and were directly connected through birth or marriage. The 
remaining three were themselves wealthy merchants and two were important political 
figures. These powerful directors were unable to provide enough supply of species. 
People complained that the “few men of great influence” controlled the issue and 
asked for the repeal of the Bank’s charter to eliminate its privilege.5 
In 1792, the state legislature chartered the Union Bank as the state’s depository. 
The Union Bank also failed to satisfy demands for credit and received complaints 
about its private privileges. To meet the demand for currencies, eight more banks 
were created between 1795 and 1803, but each town was allowed only one bank, and 
petitions for competing banks were rejected.6 In 1799, an act was passed to restrict 
banking privilege to corporations.7 1803 and 1804 were the most active years before 
1812 for chartering banks, with seven and four banks chartered respectively. 
However, the lack of currencies and the difficulty of redeeming country bank notes 
led Democratic-Republican Governor James Sullivan to propose a single monopoly 
of a state bank.8 No banks were incorporated between 1806 and 1811. 
The following section demonstrates how, as Massachusetts chartered banks to 
promote economic development in the late 1790s and early 1800s, it also provided 
5 Handlin and Handlin (1969), p. 121-122. James Sullivan (1792), “Paths to Riches,” p. 54, p. 
56, and p. 60. Gras (1976), p. 530-32; Hall (1984), “Organization of American Culture,” p. 
294; Jaher (1982), p. 24-25; Redlich (1968), 2vols, 1: p. 33-36, p. 42, and 2: p. 67-87; 
Whitney (1878), “The Suffolk bank,” p. 7-15, p. 19-20; Hammond (1991), “Banks and 
Politics in America,” p. 549-56. 
6 Handlin and Handlin (1969), p. 122-123; Dodd, p. 202-203. 
7 Dodd (1954), p. 205-206. 
8 Handlin and Handlin (1969), p. 128. Also see its note 60. 
16 
 
                                                 
 privileges only to a certain political faction, the Federalists, who controlled all banks 
and refused to charter banks for other political factions. It was only in 1811 that 
Democratic-Republicans implemented a series of reforms extending banking 
privileges to a larger population. 
 
Section 2 From Deferential Politics to Partisan Politics 
Scholars such as Pole (1966), Formisano (1974, 1983), and Keller (2007) have 
claimed that eighteenth and early nineteenth-century America can be characterized as 
a deferential society in which elites maintained leadership in the community and 
occupied political offices through intermarried families. There were steep property 
qualifications for the state legislature and the governorship, effectively excluding 
most people from political power.9 As John Adams noted in the late 1780s, “in every 
village of New England…the office of justice of the peace or even the representative, 
which has ever depended only on the freest election of the people, have generally 
descended, from generation to generation, in three or four families at most.”10 As 
these scholars have shown, the late eighteenth and early nineteenth centuries 
represented a time of elite political interests. 
The Federalist and Democratic-Republican parties emerged in the 1790s as elite 
coalitions (Formisano, 1974, 1983). As voting was either oral or in person at the poll, 
it was possible for political parties to monitor the polls to assure the election of elite 
9 Pole (1962), p. 640-641.  
10 John Adams, Defense of the Constitutions of the United States … (3 vols. Philadelphia, 
1797), I, p. 110-111. Pole (1966), p. 218. The pattern persisted from the colonial times. For 
example, Snell (1986) has shown that between 1731 and 1760, almost three-quarters of the 
officials in Hampshire County of Massachusetts were associated with one of a half dozen 
elite River God families. 
17 
 
                                                 
 candidates. By dominating the political parties that controlled government, elites 
extended their influence over various organizations such as churches, universities 
(such as Harvard College), and academic societies (such as the Massachusetts 
Medical Society).11 
Figures 2.2 and 2.3 show the proportion of Federalists and Democratic-
Republicans in each annual Massachusetts legislature. Federalists dominated both 
houses of the legislature in most years, ceding control to the Democratic-Republicans 
only in 1806, 1807, and 1811. Federalists also dominated the executive branch, as the 
Democratic-Republicans held the governorship in just four years between 1797 and 
1823. It was only in 1811 that the Democratic-Republicans were able to 
simultaneously control the governorship and the two houses of the legislature, when 
Elbridge Gerry served as governor (June 1810 – March 1812). This political history 
of Massachusetts influenced the banking sector through political parties. 
0
.2
.4
.6
.8
1795 1800 1805 1810 1815 1820 1825
Year
Federalists/Total Republicans/Total oth/Total
 
Figure 2.2: Annual Proportion of Federalists and Democratic-Republicans in the 
Massachusetts Senate, 1797-1824 
11 Formisano (1983), Goodman (1964). 
18 
 
                                                 
  
 
 
 
 
 
 
 
 
Figure 2.3: Annual Proportion of Federalist and Democratic-Republicans in the 
Massachusetts House of Representatives, 1797-1822 
 
Note: Figures 2.2 and 2.3 plot the annual proportion of Federalists and 
Democratic-Republicans in Massachusetts’ Senate and House, respectively, from 
1797 to 1824. The dotted line plots the Federalist proportion and the hollow squares 
plot the Democratic-Republican proportion. Years are labeled on the horizontal axis. 
The data are from Dubin (2007). 
 
Formisano (1983) shows that the period between 1805 and 1815 exhibited an 
outpouring of political interest represented by increasing voter participation, town 
representation, and legislative activity. The elections from 1805 to 1812 were closely 
contested: the percentage differences between the parties ranged from only 0.9% to 
just over 3.0%. People tended to vote along the same lines through the years— 
Federalist towns constantly supported Federalists, while Democratic-Republican 
towns supported Democratic-Republicans.  
Political leaders in this period tended to be revolutionary heroes with an anti-
partisan stance. War service in the 1770s and 1780s identified a person with the 
0
.2
.4
.6
.8
1795 1800 1805 1810 1815 1820 1825
Year
Federalist Share Republican Share Others
19 
 
 revolution and promoted him to high state offices. Both Federalists and Democratic-
Republicans tried to associate their candidates with these revolutionary heroes and 
claimed to be the true party of the Revolution. The popular leaders possessed 
moderate temperaments, a reputation of being a revolutionary hero, and anti-partisan 
views.  
Early nineteenth-century Massachusetts was undergoing a transformation from 
deferential to partisan politics. Political parties emerged, and then became organized, 
and gradually played an important role in mobilizing voters and shaping political 
competition. The antiparty ideology was replaced by partisan politics with fierce 
party competition. Under this transformation, the Federalist and Democratic-
Republican Parties were able to control government and banks.12 
 
Section 3 Partisan Banking, 1799-1810 
In 1799, the Massachusetts legislature passed a law to prohibit banking without a 
state charter. As a result, all existing and new banks had to petition for a charter 
through the state legislature to operate.13 By dominating the government, the 
Federalists controlled banks and excluded the Democratic-Republicans. For example, 
the Worcester Bank was chartered in 1804. Among its 135 subscribers, almost a 
quarter would join the Washington Benevolent Society (the national Federalist 
political club), and nine were prominent in Federalists county committees. The 
Democratic-Republican elites, such as the Lincolns or Bangs, were absent. The 
12 Formisano (1983) studies the transformation from deferential political culture to partisan 
political culture. 
13 There were only two national banks before the Civil War. All other banks were chartered 
by individual states.  
20 
 
                                                 
 president and directors of the bank were also Federalists, and Daniel Waldo, the bank 
president, would become the president of the Worcester branch of the Washington 
Benevolent Society.14  
Democratic-Republicans complained about Federalists’ exclusive control of 
banking. On February 16th, 1803, for example, the Democratic-Republican 
newspaper Columbian Centinel claimed:  
Monopolies of all kinds are odious in all countries, but they are more so 
in a free country like ours; they are here directly opposed to the genius 
and spirit both of the people and their government. And there can be no 
monopoly more invidious, than to give exclusive privileges by the acts of 
government to a few very rich men for improving their money in Banks, 
and to refuse the same privilege to the active merchants, and to the 
widows and orphans(as cited in Lake, 1937, p. 32).  
The Democratic-Republicans asserted that the Federalists manipulated banks for 
political purposes. For example, they charged the Federalist banks with being 
“engines of oppression,” enabling the Federalists to exploit enterprising merchants 
and shopkeepers.15 The Federalists monopolized “all the exclusive privileges…until 
the voice of private citizens is lost in the overbearing influence of privileged 
companies.”16 As long as “combined court parties grant banks and other privileged 
corporations to favored companies, equal rights cannot exist.”17 The purpose of 
chartering banks, they charged, was to give exclusive privileges to Federalist friends 
14 Brooke (1989), p. 281. 
15 Eastern Argus, April 2, 1807.  
16 Ibid.  
17 Eastern Argus, Dec. 13, 1805, and Feb. 22 Dec. 6, 1805; Salem Register, March 30, April 
2, 1807.   
21 
 
                                                 
 and “every incorporation for wealth and profit is a bulwark to aristocracy.”18 In 1803, 
after the legislature refused a petition for a “Town and Country Bank,” Democratic-
Republicans blamed Federalists monopolizing banks and opposing “every measure 
calculated to promote the interest of the middling class of citizens.”19  
The Democratic-Republicans also demanded banking reforms. Most bank 
charters would expire in 1812, and they thought that “incorporations should not be 
renewed unless the proprietors of banks consent that every officer of their banks be 
appointed by the State Government.”20 They also asked, “Will a director of the 
Boston Bank, or a man, whose ‘projects’ gripe every monied institution within the 
town, be advocates [sic] for such salutary measures as our situation calls for? Let the 
charters be free for all, if they are granted to any.”21  
The Democrat-Republicans tried every chance to overthrow the Federalist 
banking regime. In 1807, for example, the Democratic-Republicans managed to pass 
an act to insert six Democratic-Republican directors in both the Boston Bank and the 
Union Bank for one year so that “another political sect…participate[d] in their 
management.”22 When the Federalists controlled the legislature in 1808, however, 
these Democratic-Republican directors were subsequently excluded from the banks. 
In most years before 1811, the Federalist elites dominated politics, controlled banks, 
18 Eastern Argus, Nov. 15, 1805.  
19 Republican Gazette, April 27, 1803.  
20 Eastern Argus, Dec. 13.  1805.  
21 Boston Democrat, May, 1804.  
22 Massachusetts Spy, June 25, 1806. There were, in fact, two acts passed on February 10, 
1807, titled: “An act, in further addition to an act, entitled, ‘An act to incorporate sundry 
persons by the name of the President and Directors of the Union Bank’”; and “An act, in 
addition to an act, entitled, ‘An act to incorporate the President, Directors, and Company of 
the Boston Bank.’” Massachusetts Acts and Revolves, 1807.  
 
22 
 
                                                 
 and excluded the Democratic-Republicans from banking. The Democratic-
Republicans demanded sweeping reforms to open the access to banking; in 1811, 
when they assumed control of each branch of the government, they seized their 
chance.  
 
Section 4 Democratic-Republicans, Elbridge Gerry, and Political Reform of 1811 
The year 1811 is the center of our story. There were only seventeen states in the 
United States at that time. According to A.W. Dennis (1908), “State coaches were the 
means of transportation for passengers. The first railroad was not built to Boston until 
twenty-four years later, 1835. The Pacific coast was reached only by ships sailing 
around South America. Fire was struck by flints and tinder. The first matches came 
from England in 1827. The telegraph was unknown until thirty-three years later 
(1844); and the telephone sixty-five years later (1876). The early records of banks 
were written with a quill pen, and blotting was prevented by the sifting on of fine 
sand.” 23 1811 was by no means a year with a modern economy or lifestyle, but it is 
the year that Democratic-Republicans carried out a series of reforms which greatly 
transformed Massachusetts society. 
In a deferential society where Federalists controlled society and knitted a tight 
web over all careers, it had never been easy for Democratic-Republicans to assume 
political power. Judge Story described this era in his autobiographical writings:  
In Massachusetts that period an enormous majority of people were 
Federalists. The government, the judges, the legislators were ordained 
23 This vivid description of the life in early Massachusetts is from A. W. Dennis (1908), “The 
Merchants National Bank of Salem, Massachusetts: an Historical Sketch.”  
23 
 
                                                 
 in the same cause. It cannot be disguised too that a great preponderance 
of the wealth, the rank, the talent, and the civil and the literary character 
of the state in the same school. Almost all the profession of the law 
were of the party. I scarcely remember more than four or five lawyers in 
the whole state who dared avow themselves Republicans. The very 
name was odious and offensive epithets such as ‘Jacobians’ were 
familiarly applied to them. A great struggle was just over between 
Jefferson and Adams and the former had been chosen to the presidency. 
The contest had been carried on with great heat and bitterness, and the 
defeated party, strong at home, though not in the nation, was stimulated 
by resentment and by the hope of a future triumph. Under such 
circumstances there was a terrible spirit of persecution abroad. 
Intercourse of families was broken up and most painful feuds were 
generated.24  
In a society where Federalists webbed elites of various careers together, 
how did Democratic-Republicans rise up to the ascendency? 
Both Federalists and Democratic-Republicans attracted rich men, but within the 
Federalist Party, it was hard for merchants whose wealth were more recent to enter 
the circles of established elites. The social order at that time did not allow people who 
gained wealth and intelligence in a short time to climb up the social ladder. The 
foremost example was the Crowninshield family of Salem, who accumulated their 
wealth in French trade in 1790s but were denied access to power for a decade by the 
Derby family. Another example was William Gray, the wealthiest American at that 
24 Dennis (1908), p. 9-10 
24 
 
                                                 
 time, who was excluded from the inner circle of Essex leadership. In Maine, William 
King gained his wealth in the 1790s at the age of 20s. He joined the Maine Federalists 
but was not able to enter the Federalist inner circle. After King and his faction failed 
in the fight for power within the Federalist Party, in 1804 they joined the Democratic-
Republicans and dominated Maine. These newly wealthy young men desired access 
to patronage, land, and banks but were excluded by the existing Federalist elites. 
They then joined the Democratic-Republicans and helped them to acquire political 
power.25 Both the Federalist and Democratic-Republican parties were parties of elites. 
Both the Federalist and Democratic-Republican parties had supporters from 
various social and economic groups, and it was hard to differentiate party members 
by social class or economic career.26 In a deferential society where the poor and 
others of low social rank depended on elites, the success of political parties relied on 
elites in these parties instead of the social classes that they represented. The nature of 
party competition between Federalists and Democratic-Republicans was competition 
between elite factions, instead of class struggle or competition between elites and 
citizens. 
The Democratic-Republicans were able to capture both houses as well as the 
governorship in 1811. The support of Maine voters was crucial for their success. 
Maine was part of Massachusetts until the 1820s. It was New England’s frontier, with 
unoccupied land and vast resources. Young immigrants from more settled parts of 
Massachuetts, especially those who wanted to seek economic opportunities or to 
25 Banner (1970), Chapter V. p. 182-183. William Whiney (1958), “The Crowninshields of 
Salem, 1800-1808”; Edward Gray (1914), “William Gray of Salem, Merchant”; Goodman 
(1964), p. 123-127. Also see Sheidley (1998): “Sectional Nationalism” for the the study on 
Boston elites. 
26 See Goodman (1972). 
25 
 
                                                 
 escape from the established Federalist ideology, identified themselves with the 
Democratic-Republicans.27 Among those immigrants, squatters played a major role in 
supporting Democratic-Republicans. Migrants to Maine often settled on both private 
and public tracts with unclear titles. Settlers developed farms and founded 
communities, but they were required by land owners to buy the land. The law did not 
recognize squatter rights, leading to conflicting claims and in some cases violence. 
From 1805 to 1809, Democratic-Republicans sponsored a series of land reforms 
which favored compromise and confirmed squatters’ rights.28 Through land reforms, 
Democratic-Republicans formed a political alliance with Maine immigrants, whose 
political support provided Democratic-Republicans the margin of victory in capturing 
both houses as well as the governorship in 1811.  
In 1811, the Democratic-Republicans held power in both houses and their 
candidate Elbridge Gerry was elected as the state governor. Gerry had been elected as 
state governor in both 1810 and 1811. He was recognized as one of the revolutionary 
leaders, as he had signed the Declaration of Independence and the Articles of 
Confederation. He was picked as Vice-President of the United States in 1813 and 
1814. His first term as governor in 1810 was moderate and sought conciliation of the 
two parties. He restrained radical Democratic-Republicans that desired patronage and 
demanded the removal of Federalists from state offices. In addition, the political 
balance did not allow Gerry and Democratic-Republicans to push reforms either. 
While Democratic-Republicans held power in both houses and governorship, the 
27 Banner (1970), p. 170 - 173; Goodman (1964), p. 119-127. In 1800, 79 per cent of the male 
voting-age population in Maine was under forty-five, compared to 65 per cent in downstate 
Massachusetts (Banner, 1970, p. 172). 
28 See Goodman (1964), p. 155 - 162. For election statistics, see Billias (1976), p. 424-427, 
note 21, 30, and 63. 
26 
 
                                                 
 Senate was equally divided in 1810. The Federalist leader Harrison Gray Otis was the 
president of the Senate and blocked every Democratic-Republican reform.29 
In 1811, however, Gerry abandoned his conciliatory policy. The admission of 
Louisiana to the United States had already aroused animosities among Federalists. 
When Congress approved President James Madison’s Non-Intercourse Act to cease 
commerce with Britain, Boston Federalists organized a mass meeting and protested 
the law, denouncing it as tyrannical and oppressive. They threatened to call for 
measures “short of force,” and to elect officers who would “oppose by peaceable, but 
firm measures, the execution of the laws, which if persisted in must and will be 
resisted.”30 Gerry denounced the Boston mass meeting and claimed it advocated a 
revolution. He was convinced that if Federalists returned to power, they would nullify 
the Non-Intercourse Act or resist its enforcement, in which case “our constitutions are 
nullities, our constituted authorities are usurpers, and we are reduced to a state of 
nature.”31 In his second inaugural address in June 1811, Gerry publically criticized 
Federalists who “excite the spirit of the insurrection and rebellion to destroy our 
internal peace and tranquility.”32 He began to remove Federalists from state offices 
and appointed Democratic-Republicans to any new office.  
In 1811, Democratic-Republicans captured both houses of the state legislature 
and helped Gerry implement a series of reforms to capture patronage in the state, to 
remove Federalists from state offices, and to occupy Federalist-controlled 
29 On Gerry and the issues in 1811, see the following reference: Formisano (1983), p. 74-75; 
Billias (1976), p. 314-322. James T. Austin (1829), p. 333-42, p. 346-347; Seaburg and 
Patterson (1971), p. 228. Goodman (1986), p. 154-181. Morrison (1929).  
30 “Governor’s Speech to the Representatives’ Chamber, June 7,” Massachusetts Acts and 
Resolves (1811), p. 184. 
31 Ibid. p. 184 
32 Ibid. p. 185 
27 
 
                                                 
 organizations.33 One of the most famous of these reforms was the so-called 
“gerrymander.” In February 1812, Democratic-Republicans passed a bill to divide the 
state into senatorial districts along partisan lines. This change redistricted the state to 
make the Democratic-Republican votes count as much as possible and the Federalist 
ones as little as possible. This practice was nothing new, but since it was carried to 
extremes during Gerry’s administration, it was coined the “gerrymander.”34 
The Democratic-Republican ascendency aimed to capture patronage from the 
Federalists. They replaced the Federalists in state offices and captured Federalist 
organizations. As shown in the following section, they also tried to “gerrymander” the 
banking system by refusing to renew Federalist banks and instead chartering 
Democratic-Republican banks.   
 
Section 5 Banking Reform of 1811 
As Democratic-Republicans assumed state power in 1811, they faced the 
problem of how to handle the banking system had long criticized as an exclusive 
Federalist privilege. They had to deal with both an economic problem and a political 
problem at the same time.  
Before 1811, Democratic-Republicans had tried unsuccessfully to reform the 
banking system on at least two occasions. In 1807, when Democratic-Republicans 
controlled both the State House and the Governorship, they passed laws to appoint six 
Democratic-Republican directors in both the Boston Bank and the Union Bank for 
33 For Democratic-Republican reforms in other sectors, see Goodman (1964). 
34 Griffith (1907), p. 17-21; Austin (1829), p. 322; Dean (1892), p.374-383. 
28 
 
                                                 
 one year so that “another political sect…participate[d] in their management.”35 When 
the Federalists controlled the legislature in 1808, however, these Democratic-
Republican directors were subsequently excluded from these banks. Also in 1807, to 
mitigate “the frequent & distressing inconveniences & losses . . . and also the 
immense quantities of bank paper in circulation,”36 Democratic-Republican Governor 
James Sullivan recommended a bill refusing to grant new charters or renew old ones, 
and establishing a state bank by combining all existing banks. The bill was passed in 
the House, but it was killed in the closely divided Senate by the Federalists.37 These 
failed attempts at banking reforms convinced Democratic-Republicans that they had 
to totally restructure the banking sector by abolishing existing Federalist banks and 
establishing new Democratic-Republican banks, instead of simply chartering boards 
of directors, and they had to have absolute control over both houses and the 
governorship at the same time. In 1811, when Democratic-Republicans captured both 
houses and the governorship, they finally had the opportunity to implement a 
successful reform.   
In 1811, the Federalist banks petitioned for rechartering, as all existing bank 
charters would expire in 1812, except the charter of the Massachusetts Bank, which 
ran in perpetuity. The Democratic-Republican legislature, however, refused to renew 
35 Massachusetts Spy, June 25, 1806. Two acts were passed on February 10, 1807, titled: “An 
act, in further addition to an act, entitled, ‘An act to incorporate sundry persons by the name 
of the President and Directors of the Union Bank’”; and “An act, in addition to an act, entitled, 
‘An act to incorporate the President, Directors, and Company of the Boston Bank.’” 
Massachusetts Acts and Revolves, 1807.  
36 House Journal, Jan. 8, 1807, MA 
37 Goodman (1964), p. 177-178. For indications of group attitudes see Columbian Centinel, 
June 6, 1807, Jan. 27, Feb. 10, 1808. “Bill to Establish a State Bank, 14 Jan. 1808,” 
Massachusetts Legislative Documents, 1798-1809, Massachusetts State Library. For the 
legislative history see House Journal, Feb. 20, May 28, June 5, 9, 1807, Feb. 10, 26, 1808, 
MA; Boston Gazette, Feb. 11, 1807; Columbian Centinel, Feb. 10, 1808. 
29 
 
                                                 
 any of them.38 When these banks expired, Democratic-Republicans argued that new 
ones were needed “to make loans to those persons who are indebted to existing 
Institutions and thereby enable them to wind up their affairs with the least possible 
embarrassment.”39 Democratic-Republicans chartered two new banks under their 
control: the Merchant Bank of Salem and the State Bank.  
The charter of the Merchant Bank of Salem was granted to the Democratic-
Republican elites in Salem. By 1811, Salem already had two Federalist banks— the 
Salem Bank and the Essex Bank. Unable to get loans from either bank, a number of 
Salem’s most prominent Democratic-Republicans, led by the Crowninshields, a 
powerful Massachusetts family, desired to start a new Democratic-Republican bank. 
For years their petitions for bank charters had been rejected by the Federalist 
legislature. When they assumed in 1811, Democratic-Republicans secured a charter 
for the Merchant Bank of Salem. The minister and writer William Bently explains in 
his diary, “To give weight to the Republican Interest in Massachusetts, the last 
Legislature placed several banks into the hands of their friends, and among others, 
one in Salem, which was completely organized this day, under the name of 
Merchant’s Bank.”40 The Merchant Bank was started as a Democratic-Republican 
bank. 
The Federalists questioned the value of the new bank even before it opened. On 
September 10, 1811, the Salem Gazette gravely censured the “new bank”: 
38 The unpassed petitions for rechartering banks can be found in the Massachusetts State 
Archive. 
39 Petition for the State Bank, June 11, 1811. Goodman (1964), p. 179. 
40 Dennis (1908), p. 7. 
30 
 
                                                 
 It requires but little foresight to predict the influence which the institution 
will, and which the legislature intended it should have on the political 
circumstances of our Commonwealth, and particularly its elections. 
Viewing it in this light, it cannot be considered as an institution for the 
common benefit of our citizens, but on the contrary for the purpose of 
unblushing political corruption. Federalists will be excluded entirely 
from accommodation, as they were from the privilege of subscribing for 
shares, and Democrats only enjoy its benefits. We hesitate not to assert, 
that (until the Spring elections are over, at least) any Democrat (or 
“friend of the government” as the committee call them) who can bring 
good proofs of his attachment to the cause, will be furnished with what 
money he wishes from this Bank, while federalists, let them be never so 
competent, will be sedulously refused a discount, except perhaps a few, 
who will be held up as a mask to cover their gross, corrupt partially. Let 
every candid man consider this course of conduct, lay his hand on his 
heart, and say if he can call it by any other name than BRIBERY.41 
The other charter was issued to the State Bank, the largest bank chartered in 
Massachusetts. The bank was granted a capital of $3,000,000, which was thirty times 
more than most banks at that time.42 The Democratic-Republican reform of banking 
policy was institutionalized in the State Bank charter. The state would take a 
significant ownership share in the bank, initially $1 million. The state taxpayers 
would benefit from the bank both through dividends on state-owned stock and 
41 Salem Gazette, Sep. 10, 1811. Emphasis Mine.  
42 Measured by Wealth/GDP, it is equivalent to 64 billion dollars in 2012, according to 
http://www.measuringworth.com/ 
31 
 
                                                 
 through the levy of a tax on bank capital of 1/2% (Wallis, Sylla and Legler, 1994). 
The State Bank charter is important because subsequent bank charters also included 
the same capital tax, increasing the incentive for the state to charter more banks. 
When new banks were chartered and the charters of existing banks renewed, the 
charters usually contained the provision, “That the rules, restrictions, limitations, 
reservations and provisions, which are provided in and by the third section of an Act, 
entitled, ‘An Act to incorporate the President, Directors, and Company of the State 
Bank,’ shall be binding on the bank hereby established” as in the rechartering of the 
Worcester bank in 1812.43  
The Democratic-Republicans directed the State Bank in its early history. Eight 
of its first twelve directors had been Democratic-Republican legislators, and none 
were Federalists. The first president was William Gray, who was a leader of the 
Democratic-Republican Party, the lieutenant-governor of the State, and a rich 
merchant ship-operator. In the circular of the bank published in July 1811, the bank 
committee declared, “the establishment of the present institution should be so 
conducted that its benefits shall be diffused as extensively as possible among the 
friends of the government throughout this Commonwealth.”44  
It was the Federalists’ turn to denounce the Democratic-Republican monopoly 
over banking. They charged the State Bank of being “a powerful engine of bribery 
and corruption, and a machine established for the purpose of creating Democrats and 
destroying Federalists.”45 In the Boston Gazette of August 22, 1811, “A 
43 Massachusetts Acts and Resolves, 1821, Chapter 26, “An Act to incorporate the President, 
Directors, and Company of the Worcester Bank,” p. 422 
44 Stetson (1891), p. 13. 
45 This and the following quotes are from Stetson (1891). 
32 
 
                                                 
 Massachusetts Yeoman” addressed a letter to William Gray, declaring “it was beyond 
all precedent, and wicked in the extreme, to grant a set of men, who have always been 
borrowers, the whole control of the circulating medium of the State.” In the 
Columbian Centinel, August 31, 1811, “A Constitutional Republican” listed two 
complaints, “1st, that the grant of a charter to the State Bank is a violation of the 
Constitution; 2nd, that those who gave it countenance and voted for it have acted 
corruptly.” The Salem Gazette, September 10, 1811, wrote a most violent 
denunciation,  
The State Bank is managed as a powerful engine of bribery and corrupt 
influence. … The constitutions and the principles of republican 
government are derided and contemned. …. It is unblushingly avowed 
that the new bank is intended as a machine to create Democrats and 
destroy Federalists. In this State there has been so much clamor by this 
very party against banks, bank directors, and exclusive privileges, that 
consistency required them to discountenance all. It appears that in each 
county an electioneering committee has been appointed, who through the 
influence of the new bank are to act as almoners of democratic bribes and 
commissioners of official corruption. 
Aside from establishing new Democratic-Republican banks, the Democratic-
Republicans wanted to eliminate the existing Federalist banks. The Massachusetts 
Bank was the first bank in Massachusetts, founded in 1784 with a perpetual charter to 
serve as the fiscal agency of the state. It was a Federalist bank, and its first president 
became the second state governor. After Democratic-Republicans chartered the State 
33 
 
 Bank, they tried to abolish the Massachusetts Bank. Afraid of losing their charter, a 
directors’ meeting voted on February 15, 1812, “that the whole Board be a committee 
to exert themselves by every fair and honorable means in their power to prevent the 
passing of any act by the legislature to limit the duration of the charter of the 
Massachusetts Bank which charter is deemed perpetual.” A subcommittee was given 
$2,000 “for the purpose,” and “a remonstrance be offered and that the president sign 
the same in behalf of the Board.” The bank had to accept a new charter with a limited 
duration (lasting only until 1831).46 In fact, the Democratic-Republicans attempted to 
reshuffle the banking industry jeopardizing all Federalist banks.  
The Democratic-Republican legislature, led by Governor Gerry, seized the 
chance in 1811 to implement a series of reforms. However, President Madison’s 
unpopular foreign policy caused them to lose subsequent elections. In 1812, 
Federalists conducted a vigorous campaign, and won a majority in the House and the 
governorship. The Federalist legislature rechartered existing banks in 1812 to prevent 
their expiration. The old banks were sustained under the same name but with a charter 
of the 1812 model, including a provision specifying a bank capital tax as in the State 
Bank charter.47  
The Federalists were chastened by the experience of 1811 and 1812. They 
realized that a future switch in government control might cause them to lose their 
bank charters. To retain their own banks in case of another political turnover, the 
Federalists chose to cooperate with the Democratic-Republicans. While they 
continued to dominate the legislature after 1811, the Federalists chartered more banks 
46 On the Massachusetts Bank, see Gras (1937) p. 84-85, and Williams (1984). 
47 Handlin and Handlin (1969), p. 129; Dodd (1954), p. 210. 
34 
 
                                                 
 and their banks also accommodated Democratic-Republican legislators. “The 
settlement of 1812 had substantially stabilized the banking system, withdrawing it 
from the grasping hands of a favored few,” as Handlin and Handlin points out, “For a 
time thereafter, the question of currency was academic only.”48 As shown in Figure 
2.1, more bank charters were granted after 1811 than previously. Compared to the 
years before 1812, it was “free and easy” to incorporate a bank, and the banks were 
no longer confined to one party. Farmers, manufacturers, artisans, and even 
merchants in every region demanded banks to serve themselves. People demanded 
banks in every city and every street.49 
 
Section 6 Parties, Banks, and Laws, 1820s-1850s 
The Federalist and Republican Parties faded away in the mid-1820s to be 
replaced in the 1830s by the second party system which included the Whigs and 
Democrats as new parties. The second party system endured from the early 1830s to 
1860 and included National Republicans, Whigs, Democrats, Americans, Know 
Nothings and other parties. Figure 2.4 is based on Dubin (2007) and shows the party 
composition of the Massachusetts Senate for this period. The National Republicans 
and then the Whigs usually controlled a majority of Senate seats in a competitive 
political regime. Figure 2.5 shows the party composition of the Massachusetts House. 
National Republican, Whig, and then Republican domination of the House are also 
apparent, again in the context of wild party competition and entry. 
48 Handlin and Handlin, p. 175. 
49 Handlin and Handlin, p. 177-182 
35 
 
                                                 
 0
.2
.4
.6
.8
1
1825 1830 1835 1840 1845 1850 1855 1860
year
Dem NR Whig AM
FS KN Rep Other
 
Figure 2.4: Senate Composition, 1825-1859 
 
0
.2
.4
.6
.8
1
1825 1830 1835 1840 1845 1850 1855 1860
year
Dem NR Whig AM FS
KN Rep Other Lib WK
 
Figure 2.5: House Composition, 1825-1859.  
 
Source: Dubin 
Note: Dem – Democrat, NR – National Republican, AM – Anti-Mason, FS – 
Free Soil, KN - Know-Nothing, Rep - Republican  
 
 
36 
 
 The Democrats often attacked Whigs’ banking policy and argued for reforms, 
but the argument was no longer about limited access to banking. In their 1830 address, 
Democrats acknowledged the significance of 1811 to the transition towards free 
banking: 
Monopolies of various grades and characters, from exclusive privilege in 
banking, to an exclusive right to bridge navigable streams-from a 
compulsory support of a religious order, to unfair exemptions and 
exclusive privileges to members of the learned professions-from entails 
by literary and religious mortmains, to private entails in life annuities and 
life Insurance offices, have been the favourite means by which the 
federal party has built up an Aristocracy, and sought to establish its 
permanency. Their banking monopoly crumbled beneath the democratic 
power in 1811: and by the wisdom of that measure which brought life 
into the State Bank, and established the principle that all were alike 
entitled to bank Corporations.... At the same period and by the same 
party, the link which in some degree bound together Church and State, 
was broken asunder.50 
Democrats’ assertions were verified by their own internal disagreements on the 
banking reform. The famous Democratic reformer, the United States senator and 
Massachusetts House Representative Robert Rantoul blamed the Whigs for fostering 
the evils of the paper-money system, and sought a “complete and entire separation of 
Bank and State.”51 However, many Democrats showed an inclination to vote for new 
50 Boston Statesman, Feb. 13, 1830. Emphasis mine.  
51 Bulkley (1971), p. 202-204; Handlin and Handlin (1969), p. 232.  
37 
 
                                                 
 bank charters for themselves.52 Even Rantoul compromised when he knew many 
Democrats were involved in banking business. In 1837, before Rantoul was going to 
give a speech in Worcester to propose banking reforms, he talked with local 
Democratic leaders. However, he changed his remarks on banking reform after he 
learned that all local leaders were connected with bankers as stockholders or 
officers.53 In the next year, Rantoul fought for banking regulations and tried to forbid 
legislators who were bankers from voting on the matter. However, his proposal failed 
with the support from just over one-fourth of the votes of the House.54 In the second 
party system, both parties had connections with banks and were alike entitled to bank 
corporations. 
De facto free banking was further consolidated by formal laws. The general law 
of 1829 included all essential provisions of the earlier acts,55 56 and created 
uniformity of regulation. Its section 31 stated that “if during continuance of any bank 
charter, granted or renewed under the provisions of this act, any new or greater 
privileges shall be granted to any other bank now in operation, or which may 
hereafter be created, each and every bank in operation at the time shall be entitled to 
the same.”57 As elites from both political parties obtained equal access to banks, what 
52 Handlin and Handlin (1969), p. 232-233.  
53 Formisano (1983), p. 319-20. 
54 Bulkley (1971), p. 159, 201, 217-19; Formisano (1983), p. 319-20.  
55 Similar general laws were passed earlier in other sectors. Massachusetts enacted a law 
enumerating the “general powers and duties” of turnpike corporations in 1805, and a similar 
law for the manufacturing companies in 1809. Thereafter, the incorporation to turnpike 
companies and the manufacturing firms were made reference to this law. The charters were 
standardized, but each charter was still a special act. Acts and Resolves of Massachusetts 
(1805), chap. 125; Acts and Resolves of Massachusetts (1809), chap. 65. 
56 As far as I read, the 1829 Regulatory Act was the first comprehensive general law to 
regulate banks in human history. Its emergence shows how regulation evolved gradually from 
standardization of specific contracts to general laws. 
57 Massachusetts Acts and Resolves, 1829 
38 
 
                                                 
 mattered were unequal privileges across banks. The 1829 regulatory act equalized 
banking privileges. In retrospect, the solution to the political problem in 1811 paved 
way for the passage of the law.    
In April 1851, House Representative Richard Frothingham of Charlestown 
introduced a bill to permit self-incorporation of banks. Frothingham and other 
Democrats criticized the existing system as being monopolistic and inadequate to 
secure bank notes. The debate, however, focused on economic problems instead of 
political corruptions. The major argument for the law was that the demand for special 
legislative acts to create or amend corporations placed a burden on the legislature.58 
In May, 1851, Governor Boutwell approved the new law, entitled “An act to 
authorize the Business of Banking”, authorizing any group of not less than fifty 
persons to incorporate a bank. The general law, however, did not forbid the grant of 
charters by special laws. In 1852, the alliance of Democrats and Free Soilers became 
the majority and they refused to grant special charters. However, bank petitioners 
waited for the return of the Whigs to political power. In the fall of 1852, the Whigs 
retained control of the legislature and issued special charters.  
The Democrats and the Free Soilers also sought to solve the conflicts between 
public power and special privileges through amending the Constitution. The 
Massachusetts Constitutional Convention of 1853 tried to revise Article VI and VII 
and to replace them by two new propositions VII and VIII. The new Proposition VII 
stated that “the Legislature shall not create corporations by special act when the 
58 “Unless we strike down this sort of special legislation, the legislature, because of the 
increasing business and enterprise of the community, … must … become not only a general 
court, but an everlasting and unadjourning court, the mere makers, managers, and agents of 
special incorporations”, Debates and Proceedings of the State Convention of 1853, vol. 3, 
p.52, 69, Maier (1992). Rantoul and Morton had expressed similar argument. 
39 
 
                                                 
 object of the incorporation is attainable by general laws.” Another new Proposition 
VIII stated that “The Legislature shall have no power to pass any act granting any 
special charter for banking purposes, or any special act to increase the capital stock of 
any chartered bank; but corporations may be formed for such purposes, or the capital 
stock of chartered banks may be increased, under general laws.” However, these 
amendments were rejected, and as a result, the legislature the power to enact special 
acts of incorporation.59   
Until the Civil War, only 7 banks were chartered under the general law, and 44 
banks got special charters. The general law of 1851 was unpopular and was 
threatened with repeal in the following years.60 I found no evidence on why the law 
was unpopular in Massachusetts, but in Vermont and Connecticut, “banks chartered 
by special act were considered stronger financially, better regulated, and, being more 
limited in number, less likely to spring up during a period of inflationary excesses.”61 
Vermont passed the General Act for Banking in 1851, but there was “a general and 
widespread distrust to companies created under general laws,” and by 1870 only one 
bank formed under the general act.62 For the same reason, the General Banking Act of 
Connecticut of 1852 was attacked and its use was prohibited after 1855.63  
 
59 Dodd (1954), p. 287 
60 Maier (1992) states that “The adoption of general laws of incorporation for business 
enterprises was not, then so much a major departure in Massachusetts corporate legislation – 
the General Court had, after all, passed similar laws in the eighteenth century – as it was yet 
another in a series of changes adjusting a long-established regulatory tradition to altered 
economic and institutional circumstances.” 
61 Kessler (1948), p. 49 and fotenote 14. 
62 Ibid. 
63 Ibid. 
40 
 
                                                 
 Section 7 Conclusion 
The history of partisan banking shows that in a society where the legislature 
authorized corporations for public welfare, corporate privileges may be seized to 
benefit private interests of political and social elites. This outcome was possible in a 
deferential society such as early nineteenth-century Massachusetts, where elite 
factions played critical roles in webbing the whole society together. Powerful elite 
factions can determine the outcome of political and economic arrangements. However, 
these elite factions may fight with each other, leading to the instability of these 
arrangements. In order to achieve stable economic rents, elite factions must agree not 
to use their political power to compete for economic interest. The outcome of this 
arrangement is an open access social order in which all elites have access to 
organizational forms. The case of Massachusetts banking shows that Federalists and 
Democratic-Republicans formed a political arrangement in 1812 to accommodate 
each other’s banking interests, and then formally equalized banking privileges in the 
1829 Regulatory Act. The 1851 general incorporation law provided an additional 
legal tool for self-incorporation. From underlying politics to formal legal rules, 
Massachusetts achieved open entry.   
 
 
41 
 
 Chapter 3: Empirical Studies on Bankers, Legislators, and 
Political Parties, 1790-1859  
Section 1 Introduction 
Chapters 2 shows that entry into Massachusetts banking, despite its democratic 
origins and the active political competition, was limited and highly partisan in the 
first thirty years of the state’s history. Citizen demands for bank charters were often 
not met, because political competition prevented those from minority party from 
getting charters. While there were two competitive major political parties, the 
Federalists and the Democratic-Republicans, most banks and bankers remained 
Federalist until 1811, and Democratic-Republicans were frequently denied charters. 
However, once the Democratic-Republicans gained simultaneous control of the 
House, Senate, and Governor’s office for the first time in 1811, they threatened to 
disband the Federalist banks and chartered their own banks. After 1811, both parties 
were chastened by the “bank war” and reached consensus to allow open entry of 
banks. After the 1820s, the banking sector became virtually open. This chapter 
empirically explores the long-term relationship between politics and banking from 
1790 to1860 to complement the historical narrative.  
The empirical results show that before 1812, politics and banking were highly 
connected, but after 1812 the connection became weaker. First, I find that prior to 
1811, over 70% of bankers either had been or would become state legislators at some 
point in time, but between 1812 and 1860, this proportion dropped from 70% to 40%. 
Second, before 1811 groups found it extremely difficult to get a charter if they were 
42 
 
 not connected to the Federalist Party, but by the late 1810s, banking became more 
open access. After 1812, the probability that a new banker had been a Democratic-
Republican legislator increased by 20%, while there was no significant change for 
Federalists. Third, the bank level analysis shows that most banks still included 
legislators in the board of directors in the 1840s and 1850s, but these legislators who 
were bankers held less political power than those in the early 1800s, as the average 
legislative tenure of all legislators dropped from 10 years in the early 1800s to 2 years 
in the 1850s. 
Although previous literature on political economy and economic history, such as 
North, Wallis, and Weingast (2009), and Acemoglu and Robinson (2012), is 
organized around the concept of “elites”, these studies did not measure elites in 
historical contexts. This chapter provides a measurement of elites by identifying 
bankers who were state legislators in early nineteenth-century Massachusetts. The 
evidence suggests that the North, Wallis, and Weingast contention that intra-elite 
competition led to open access applies to Massachusetts banking over the long period 
from 1790 to 1860. Banking and bankers remained elite throughout the period—at 
least if we define elites in terms of legislative connections—but access to banking 
was no longer limited. 
 
Section 2 Data  
The names of bank directors and presidents are collected from the Massachusetts 
Register (1790-1859). This is a sample of bank presidents and directors, because the 
Registers did not collect information on every bank in every year.  Particularly in the 
43 
 
 early years, the Registers contained complete information on Boston banks. For 
“country” banks outside of Boston, however, they included only the names of bank 
presidents. The second database catalogs personal and biographical information for 
every Massachusetts legislator between 1780 and 2003, provided by the 
Massachusetts State Library. I match bankers and legislators by their names, and after 
comparing the years that bankers appear in the data and legislators’ birth year and 
death year, I remove the matches that went beyond a reasonable age (20-80).  The 
dataset has 20,457 banker-year observations, of which 16,794 (82.1%) are director-
year observations and 3,663 (17.9%) are president-year observations. I match 9,749 
(47.7%) of the banker-year observations to legislators.  
The banker sample includes almost all of the banks operating in Massachusetts 
between 1792 and 1836 and again between 1848 and 1859.  I have compared the bank 
series to the data collected by Weber, by Van Fenstermaker, and by Sylla and Wright, 
showing that the data have essentially all of the banks in operation. Between 1837 
and 1847, however, the Registers stopped collecting information on most of the banks 
outside of Boston. They resumed collecting data after 1848. Before 1851, the 
Registers collected bank directors for some country banks, whereas after 1851 the 
Registers recorded every director. For most years I have complete information on 
presidents and directors for the Boston banks, but often only bank presidents for the 
banks outside of Boston. As a result, there are different ways to parse the data to 
obtain a consistent sample over time. For instance, we can look at the entire sample of 
all bankers or just Boston bankers, or we can look at both presidents and directors, or 
44 
 
 just a sample of presidents. The basic empirical results appear to be robust no matter 
what sample we look at.  
Figure 3.1 shows the number of banks in my sample compared to the number of 
banks in Weber’s sample.  Weber tended to include banks from the year they were 
chartered, while the registers usually recorded banks in operation. Except for the 
1837-1847 gap in the country banks, the series are quite close.64  
 
Figure 3.1: Number of Banks in the Registers and Weber’s data, 1790-1862 
 
Sources: Number of Banks in the Registers comes from Massachusetts Registers 
(1790-1862), Massachusetts State Library. Number of Banks in Weber’s data comes 
from Weber “Census of State Banks” (2011) 
 
Figure 3.2 shows the number of new bank charters, excluding renewals of 
existing charters, created by the state legislature. Only eight banks were chartered 
before 1799, when the state restricted non-chartered banks from issuing notes.  
64 Weber estimated the beginning and ending year of banks. For some banks he relied on the 
chartering dates. Weber did not include Maine banks in Massachusetts before 1820, when 
Massachusetts split into two different states. Weber’s data are better than Fenstemaker, and 
Sylla and Wright because these two sources relied exclusively on chartering dates. The 
Almanacs include Maine banks before 1820, which is why the number of banks falls in that 
year.  
0
50
10
0
15
0
20
0
1790 17951800 1805 18101815 18201825 18301835 18401845 18501855 1860
year
Number of Banks in Almanacs 1790-1862
Number of Banks in Weber's data 1790-1860
45 
 
                                                 
 Between 1799 and 1805, the state chartered another 17 banks.65 A surge of chartering 
occurred between 1811 and 1813, followed by a lull. Chartering rose to higher levels 
in the 1820s and 1830s, but came to a halt between the financial crisis in 1837 and the 
early 1840s.   
 
Figure 3.2: Number of New Charters excluding Renewals, 1780-1860 
                 Source: Sylla and Wright (2012) 
 
I have data on the entire universe of legislators, but only a sample of bankers.  
This causes a couple of problems.  Many bankers appear in more than one year, but a 
significant number do not.  As a result, if I use the entire sample of 20,457 banker-
year observations I have a sample selection and weighting problem.   Some bankers 
have more weight in the “total” sample because their banks appear more often in the 
registers due to longer period of survival. The second way of parsing the data, 
therefore, is to look at “new bankers.” A “new” banker is observed in the year when 
he first enters the sample and only in that year. For bankers who were also legislators, 
65 In total 17 banks. 1799: 2, 1800: 1, 1802: 3, 1803: 7, 1804: 4. 
46 
 
                                                 
 I compare the first year they became bankers to the first year they became legislators. 
If they had been legislators before they became bankers, I identify them as “Had 
Been” bankers; if they became legislators after they became bankers, I identify them 
as “Would Be” bankers. The three categories—“Had Been” a legislator, “Would Be” 
a legislator, and “Never Was” a legislator— is a complete and exhaustive set of 
categories. This is true whether we are looking at the “total” sample or the “new 
banker” sample. We determine whether a banker is a “Had Been”, “Would Be”, or 
“Never Was” legislator at the time they enter the banking sample for both samples. 
The total sample and the new banker sample generally show the same trends over 
time.  The third way of organizing the sample is by individual banks rather than 
bankers. I look at the proportion of banks without state legislators.  
I can directly identify bankers with political parties by looking at bankers who 
were also legislators. In each legislative session, legislators reported their party 
affiliations to the legislature. As political parties emerged in history in the late 1790s, 
the Legislative Biographies began to record the party affiliations of legislators 
beginning from 1797. A second limitation is that I cannot associate all bankers with 
political parties, because I only know the political party affiliation of legislators. As a 
result, the number of legislators with party affiliations (Party IDs) might influence the 
identification of party affiliation of bankers.    
To see how many legislators identify their party affiliations in the Legislators’ 
Biographies, Figure 3.3 shows the proportion of legislators with Party IDs. In 1797 
the proportion of legislators with Party IDs is 74%. In 1798 and 1799 this proportion 
is 88% and 87%, respectively. From 1800 to 1804, this proportion ranged from 94% 
47 
 
 to 97%. From 1805 to 1816, the proportion is above 99%, while it is 100% from 1808 
to 1812. The proportion stays around 96% to 98% from 1816 to 1819. The proportion 
begins to drop in 1820: 80% in 1820, 73% in 1821, 77% in 1822. In 1823 and 1824 
the proportion drops to 55% and 48% respectively. The proportion was below 20% 
from 1825 to 1829, but it increased to almost 100% from 1831 to 1859.  
To check whether the relatively smaller proportion of Party IDs in some years is 
due to errors in data collection, for instance the loss of legislators’ Party IDs by 
collectors, I compare the Legislators’ Biographies and the data collected by Dubin 
(2007). Dubin’s data document the aggregate number of legislators in each party from 
1797 to 1860. For each party, the two data sources have almost the same numbers of 
legislators. This suggests that the smaller proportion of Party IDs in some years 
genuinely reflects the fact that political parties weakened or disappeared in these 
years.  
 
 
 
Figure 3.3: Share of all Legislators (not just bankers) who have a Party ID in the 
Legislative Biographies. 
48 
 
  
Note: Figure 3.3 plots the annual proportion of legislators with Party IDs. The first 
parties began emerged in 1797 and disappeared around 1824. As a result, the 
proportion of the legislators with Party IDs also increased from 1797 and decreased 
after 1820. The second party system emerged in the early 1830s. The proportions are 
derived from the biographies of the state legislators provided by the Massachusetts 
State Library. Years are labeled on the horizontal axis.  
 
Studies in political history suggest that the relatively small proportion of Party 
IDs in some years might reflect a lesser degree of party formation and party 
competition. Political historians agree that it was only after 1800 that party lines 
became clear (Goodman, 1964; Robinson, 1968; Morse, 1909). For example, 
Robinson (1968) claims that, 
In Massachusetts there were traces of Anti-federalist and Shays influence 
in some places and two Anti-federalists, Elbridge Gerry and Jonathan 
Grout, were chosen members of the first Congress. But party lines were 
not clearly drawn, as is shown by the large number of candidates 
presenting themselves and the difficulty, persisting for many years, in 
securing a majority for any one. After 1800 party organization tended to 
do away with this difficulty.  
The literature also suggests that the Federalist party and Democratic-Republican 
party almost died in 1823 and 1824 (Formisano, 1983).  
In reviewing the political history over a longer period, Formisano (1983) states 
that, 
After 1800 political life changed and for a time displayed activity on a 
scale not seen before. The period 1805-1815 in particular exhibited a 
spectacular outpouring of political interest, politicking, and above all, 
49 
 
 voting in state elections. In the 1820s public attention fell off and the 
apathetic ways of the past returned. Then sometime in the 1830s, political 
activity rose again at all levels, and with it political party organizations 
entrenched themselves to stay, both in the structure of government and, 
to an unprecedented degree, in the emotions of the people (Formisano, p. 
33). 
Both Dubin’s data and historical literature suggest that the smaller proportions of 
Party IDs before 1800 and after 1820 might reflect a lack of fierce party competition 
instead of data collection bias. In the following sections, I will assume that there is a 
potential bias in collecting Party IDs and show that the bias does not affect the 
empirical results.  
 
 
 
20
0
40
0
60
0
80
0
nu
m
_l
eg
1790 179518001805 181018151820 18251830 183518401845 18501855 1860
year
 
Figure 3.4: Number of Legislators, 1790-1859 
 
Source: Massachusetts Legislators’ Biographies, Massachusetts State Library.  
50 
 
 Note: Figure 3.4 plots the annual number of state legislators including members in 
both the House and the Senate. Years are labeled on the horizon axis.  
Source: Massachusetts Legislators’ Biographies, Massachusetts State Library.  
 
 
Figure 3.4 shows the number of state legislators from 1790 to 1859. This figure 
has a large variation across years due to political reasons. For example, there was an 
increase from 1800 to 1811, followed by a drop from 1812 to 1822. As towns had to 
pay state representatives’ housing and transportation costs while they were serving, many 
towns avoided sending representatives to the legislature. Party competition became fiercer 
after the bitterly contested election of 1800, and both parties tried to mobilize people 
to elect representatives for them. As a result the number of legislators increased in the 
early 1800s. After the war of 1812, the nation entered the “era of good feeling,” in 
which party competition began to disappear, so the number dropped.66 When the 
National Republicans (later called the Whigs) and the Jacksonian Democrats entered 
politics in the late 1820s, there was another round of rise and fall of the number of 
legislators.67  
To explore the relationship between bankers and legislators, I will first examine 
the sample of all bankers and then the sample of Boston bankers.  
 
Sample of All Bankers 
Figure 3.5 exhibits the number of bank directors and presidents for all banks 
collected by the Massachusetts Registers (1790-1859). The way that the Registers 
recorded bankers changed over time. Between 1837 and 1847, the Registers stopped 
collecting information on most of the banks outside of Boston. They resumed 
66 The seats of the Senate are fixed, but the seats of the House depend on how many 
representatives the towns sent. The towns did not send all representatives every year.   
67 Formisano (1983), p. 33-35. 
51 
 
                                                 
 collecting these data after 1848. The Registers also began to record every director of 
the country banks after 1851. The predominance of the country bankers results in a 
great increase in the number of bankers in 1851.  
0
50
0
10
00
15
00
N
um
be
r 
of
 B
an
ke
rs
1790 179518001805 181018151820 18251830 183518401845 18501855 1860
year
 
Figure 3.5: Number of Bank Directors and Presidents in the Registers (1790-
1859) 
 
  
I match the names of bankers to the names of state legislators, then I record the 
Party ID for these matched bankers if the legislators can be identified by political 
party. Figure 3.6 shows the proportion of bank directors and presidents that either had 
been or would become legislators from 1790 to 1859. The proportions were above 
70% in most years before 1815. However, the proportions began to drop quickly after 
1812. The proportions began to rise in the late 1840s as the Registers began to collect 
data of the country banks. The overall results suggest that bankers were closely 
52 
 
 connected to legislators in the early post-Revolutionary years, but that this close 
connection began to fade after 1812.    
 
.4
.5
.6
.7
.8
pr
op
_l
eg
1790 179518001805 181018151820 18251830 183518401845 18501855 1860
year
 
Figure 3.6: Proportions of Bankers that were Legislators, All Banks in the 
Registers, 1790-1859 
Source: Massachusetts Registers (1790-1859), and Massachusetts Legislators 
Biographies (1780-2003). Both are from Massachusetts State Library.  
Note: Figure 3.6 plots the annual proportion of bank directors and presidents who had 
been or would become state legislators. The proportions are derived by matching the 
list of bank directors and presidents in the Massachusetts Registers (1790-1824) and 
the biographies of the state legislators provided by the Massachusetts State Library. 
The proportion began to drop after 1812. 
 
 
 
         Figure 3.7 further breaks out the “Had Been” and “Would Be” proportions. 
From 1790 to the early 1800s, the “Had Been” proportion is decreasing and the 
“Would Be” proportion is increasing. The “Would Be” proportion begins to decrease 
after 1804. In 1812, the “Had Been” proportion reaches a peak, and after that it also 
decreases over time. I will discuss this pattern later when I analyze the sample of 
Boston Bankers. Beginning in 1852, the “Had Been” proportion is larger than the 
53 
 
 “Would Be” proportion, as the Registers began to record the names of directors of the 
country banks, many of whom had been legislators in the past. Thus the change in 
1852 merely reflects the changing methods the Registers used in recording data.   
.1
.2
.3
.4
.5
1790 1795 1800 1805 1810 1815 1820 1825 1830 1835 1840 1845 1850 1855 1860
year
Legislators First
Bankers First
 
Figure 3.7: Proportion of Bankers that had been Legislators before they 
became bankers, and Proportions of Bankers that would become Legislators 
after they became bankers. All Banks in the Massachustts Register, 1790-1859 
 
 
The main outlines of the data are shown in table 3.1. For different time periods, 
the 1790s, the 1800s, 1800 to 1812, the 1810s, 1820 to 1825, 1825 to 1839, and 1840 
to 1859 the table lists the number of bankers, the number of bankers who were 
legislators, and the number of bankers who were legislators with Party ID in columns 
(1), (2), and (3). The enormous increase in the size of the banking sector in 
Massachusetts is evident in column (1). The number of banker-years in the 1790s was 
54 
 
 304, while from 1840 to 1859 it was 12,597.68 Part of the increase is due to the fact 
that the Registers listed all the country bank directors after 1851. The most significant 
numbers overall are found in column (4), which gives the share of all banker years 
that were composed of bankers who had been or would become a legislator. In the 
1790s, 74 percent of the banker years were for bankers who had been or would be in 
the legislature. From 1800 to 1812, that number was 70 percent. In the short period 
from 1820 to 1825 the share of banker years by bankers who were also legislators fell 
to 55 percent, more than half of the decrease to a 44 percent share of banker years for 
bankers who were never legislators between 1840 and 1859. The 1820-1825 period 
was also when the structure of parties, in Massachusetts and the nation, underwent 
dramatic changes, reflected in the sharp decline in the share of legislators with Party 
IDs in Figure 3.3. Column (5) shows that in the 1790s, only 24 percent of all the 
legislator years have Party IDs in the Legislative Biographies.  If we look at 
individual bankers and legislators, the share of banker-legislators with Party IDs was 
98.9 percent from 1800 to 1812, dropped to 56 percent between 1820 and 1825 and 
increased to 100 percent from 1840 to 1859.    
The second way to measure the connection between legislators and bankers is to 
measure each banker just once, when he enters the banker sample, the “new banker” 
sample.  Table 3.2 provides the number of individual new bankers in different time 
periods, and whether they had been or would become a legislator. The weights are 
different in Table 3.2 than in Table 3.1, since each banker enters only once. Between 
1790 and 1799, 67 percent of all individual new bankers had been or would become 
68 In these numbers an individual banker can appear in more than one year. Each banker year 
represents an individual banker in a given year. If a banker appears in multiple years, there 
will be multiple banker-year observations for him.   
55 
 
                                                 
 legislators, and between 1810 and 1815 the proportion was 64 percent. But between 
1815 and 1825 the share of new bankers who were legislators at some point fell to 45 
percent. The share of new bankers who were also legislators declined from 67percent 
in the 1790s to 37percent in the 1840s.   
All above results show that something happened in the period between 1815 and 
1825 that led to a change in the relationship between bankers, legislators, and 
political parties. The sample of all bankers, however, is not consistent over time as 
the Registers changed the way of recording data over time. In the following section, I 
use the sample of Boston bankers to study the relationship between legislators and 
bankers.  
 
Sample of Boston Bankers 
        The Massachusetts Registers records a continuous series of Boston bankers from 
the 1790s to 1859. The advantage of using Boston banks is that it provides a 
consistent set of banks and bankers over the entire period, although Boston banks do 
not represent country banks (i.e., banks outside of Boston) perfectly.  Figure 3.8 gives 
the number of bankers in Boston, both Presidents and Directors, annually from 1790 
to 1859.  Figure 3.9 gives the proportion of all Boston bankers in each year that had 
been or would become a state legislator.  Figure 3.10 breaks out the proportion that 
had been legislators and the proportion that would become legislators. 
56 
 
 0
10
0
20
0
30
0
N
_b
an
ke
rs
_p
er
_y
ea
r
1790 179518001805 181018151820 18251830 183518401845 18501855 1860
year
 
Figure 3.8: Number of Boston Bank Directors and Presidents in the 
Registers, 1790-1859 
 
 
.3
.4
.5
.6
.7
.8
1790 17951800 1805 18101815 18201825 18301835 18401845 18501855 1860
Proportions of Boston Bankers that had been or would become Legislators
Local Polynomial Smooth Plot
 
Figure 3.9: Proportions of Boston Bank Directors and Presidents who 
had been or would become Legislators, and Local Polynomial Smooth Plot, 
1790-1859 
Source: Massachusetts Registers (1790-1859), and Massachusetts Legislators 
Biographies (1780-2003). Both are from Massachusetts State Library.  
57 
 
 Note: Figure 3.9 plots the annual proportion of bank directors and presidents who had 
been or would become state legislators. The proportions are derived by matching the 
list of bank directors and presidents in the Massachusetts Registers (1790-1824) and 
the biographies of the state legislators provided by the Massachusetts State Library. 
The proportion began to drop after 1812. 
.  
 
.1
.2
.3
.4
.5
.6
1790 1795 1800 1805 1810 1815 1820 1825 1830 1835 1840 1845 1850 1855 1860
year
Had Been Would Be
 
Figure 3.10: Proportions of Boston Bank Directors and Presidents who had been 
Legislators, and Proportions of Boston Bank Directors and Presidents who would be 
Legislators, 1790-1859. 
 
        
        Figure 3.9 initially shows that a strikingly high proportion of bankers in Boston 
had been or would become legislators in the early years. For the period from 1790 to 
1812, the proportion never falls below 67 percent and is as high as 83 percent, with 
the typical year somewhere in the 70 percent range. The proportion of bankers who 
had been or would become legislators declined quickly from 1815 to 1825, 65 percent 
to 45 percent, and then declined slowly for the next 35 years. 
        Figure 3.10 breaks out the proportions that had been and would become 
legislators. From 1790 to 1802, the “Had Been” proportion was decreasing and the 
58 
 
 “Would Be” proportion was increasing. After that the trend reversed. This is because 
in 1799, Massachusetts passed a law to prohibit banks without state charters from 
operating, and in the following years, more banks obtained state charters. As the 
legislators had the sole power to charter banks, they chartered banks under their 
control. Therefore more legislators joined banking and the “Had Been” proportions 
began to rise after 1800. For bankers who were not legislators in the 1790s, many 
would also become legislators after the law passed, so the “Would Be” proportions 
rose before 1800. This suggests that the act of 1799 put the banking system 
exclusively under legislators’ control. The proportion of bankers who had been 
legislators reached its peak in 1812, after the Democratic-Republicans finally 
established two banks of their own in 1811, whose presidents and directors were 
largely Democratic-Republican legislators. From 1815 and 1825, banking became an 
entryway to politics, with between 25 and 30 percent of bankers becoming legislators, 
while the proportion of bankers who had been legislators declined to between 12 and 
17 percent.  
        Figures 3.9 and 3.10 depict the sharp decline in the association of bankers and 
legislators that occurred between 1815 and 1825, a decline caused by a shift from 
limited elite access to open access.  That was followed by much wider access in the 
late 1840s and 1850s, although bankers and politicians remained closely linked even 
then. The large overlap between bank directors and state legislators shows that 
financial elites and political elites were the same people. 
      The reduction in the close association between bankers and legislators reflects the 
breakdown of party identities at the national and the state level in the 1820s as well as 
59 
 
 the breakdown of partisan politics in Massachusetts. Party associations began to 
weaken after 1815, while the Federalists remained dominant in politics until the 
1820s.  I examine the regimes of party competition from 1790 to 1859 using the 
sample of Boston bankers in the following section. 
 
Section 3 Regimes of Party Competition 
Chapter 2 provided evidence that the Federalist party controlled Massachusetts 
politics for most of the 1790s and 1800s, and it dominated the banking sector in this 
period. To compare all three regimes with a consistent set of data, this section 
examines the sample of Boston bankers. 
 
The First Party Regime: 1780 to 1821 
       Figure 3.11 shows the number of Boston bankers that had already been a 
Federalist or a Democratic-Republican state legislator in the year they became a 
banker. The sum of the two parties’ proportions in Figure 3.11 is lower than the “Had 
Been” proportion in Figure 3.10. This is because Figure 3.10 matches bankers with all 
legislators dating back to 1790, while Figure 3.11 matches only legislators with Party 
IDs dating back to 1797. Therefore, the “Had Been” proportions in Figure 3.11 begins 
to rise after 1797, and though the sum of two parties is still smaller than the “Had 
Been” proportion in Figure 3.10. As Figure 3.11 shows, of the Boston bankers before 
1810, only 1 had already been a Democratic-Republican legislator (.02 of roughly 50 
bankers), while a significant number had already been Federalist legislators.  
60 
 
 Figure 3.11 demonstrates the importance of the year 1812. From 1797 to 1811, 
an average of 7.8 percent of bank directors and presidents had been Federalist 
legislators, but the proportion of the Democratic-Republicans was zero for most 
years. In 1812, however, the Democratic-Republican proportion jumped to 24 
percent, when the Democratic-Republican legislature chartered their own banks. 
After that, the Democratic-Republicans’ share in banking was 8 percent on average 
between 1812 and 1824, five times greater than those in the years before 1812.   
As I match bankers with all the legislators of past years that can be identified 
with political parties, one question is whether the dramatic change of Democratic-
Republican banking share in 1812 was caused by the increasing number of legislators 
with Democratic-Republican Party IDs over time. To show that this is not a concern, I 
compare Figure 3.11 and Figure 3.12. Figure 3.12 exhibits the Democratic-
Republican proportion in the State House, which is similar to the proportion in the 
State Senate. Before 1812, the Democratic-Republican proportion in the State House 
kept rising, while its proportion in banking was almost zero. The Democratic-
Republican proportion of bankers jumped only in 1812. This suggests that the time 
pattern of Democratic-Republican bank directors was not caused by the increasing 
number of legislators with Democratic-Republican Party IDs.  
61 
 
  
Figure 3.11: Proportions of Boston Bankers that had been Federalist or 
Democratic-Republican Legislators before they became Bank Directors and 
Presidents, 1790-1827 
1811
0
.2
.4
.6
.8
1795 1800 1805 1810 1815 1820 1825
Year
Federalist Proportion Democratic-Republican Proportion
Others
 
Figure 3.12: Annual Proportion of Federalist and Democratic-Republicans in 
Massachusetts House, 1797-1822 
 
Note: Figure 3.11 plots the annual proportion of bank directors and presidents 
that had been Federalist or Democratic-Republican legislators. The dotted line 
reflects the Federalist proportion, and the hollow squares reflect the Democratic-
Republican proportion. As a comparison, Figure 3.12 plots the annual Federalist and 
Democratic-Republican proportion in the State House from Dubin (2007). The dotted 
line reflects the Federalist proportion, and the hollow squares reflect the Democratic-
Republican proportion. In 1812, the Democratic-Republican proportion in banking 
62 
 
 jumped, but its proportion in the State House did not have corresponding changes. In 
both graphs, years are labeled on the horizontal axis. 
 
 
Figure 3.13 shows the number of Boston bankers who would become a 
Federalist or Democratic-Republican legislator at a later date. Bankers were much 
more likely to become Federalist legislators than Democratic-Republican legislators. 
There was an increasing trend of “Would Be” Federalist legislators before 1800. This 
was because in 1799 the Federalist legislature passed a law to prohibit banks without 
state charters, and many bankers became Federalist legislators after the law was 
passed. These “Would Be” bankers appeared in the sample before 1800, showing an 
increasing trend as the year 1800 approached. After 1800, the proportion of bankers 
who would become Federalist legislators had a decreasing trend, without significant 
change for Democratic-Republicans. The decreasing trend might reflect the fact that 
political parties disappeared around 1824 so fewer bankers would become partisan 
legislators as that year approached.  
 
63 
 
          
0
.1
.2
.3
.4
.5
1790 1795 1800 1805 1810 1815 1820 1825 1830
year
Bankers First - Federalist
Bankers First - Democratic Republicans
 
 
Figure 3.13: Proportions of Boston Bankers who became Federalist or 
Republican Legislators after they became bankers, 1790-1827 
 
Note: Figure 3.13 plots the annual proportion of bank directors and presidents that 
would become Federalist or Democratic-Republican legislators. The dotted line 
reflects the Federalist proportion, and the hollow squares reflect the Democratic-
Republican proportion. Most bankers would become Federalist legislators. Years are 
labeled on the horizontal axis. 
 
 
The analysis shows that bankers and legislators had a close relationship during 
the 1790s and early 1900s and that the Federalists dominated banking. Of the 68 
bankers in the statewide sample in 1810, 47, or 70%, had been (33%) or would 
become (37%) legislators. Of these 47 bankers, 4 had no party affiliation, 38 were 
Federalists (81%), and 5 were Democratic-Republicans (11%). Banking in 
Massachusetts was close to a Federalist monopoly. Of the 23 banks in our sample in 
1810, only 3 banks had presidents who were Democratic-Republican legislators. Two 
other Democratic-Republican legislators were directors in banks dominated by 
Federalists. Perhaps even more telling, of the 23 banks, only four did not have a state 
legislator as president or director. Of those four, the Nantucket Bank was a 
64 
 
 Democratic-Republican bank, having had three Democratic-Republican legislators in 
1803, the only year for which we have information on directors for that bank. The 
Berkshire Bank’s president was Simon Larned.  He was a legislator, but he was not 
identified with a party. While representation in the House and Senate was roughly 
60% Federalist, and 40% Democratic-Republican over these years, the Federalist 
banks outnumbered the Democratic-Republican banks by roughly a 5 to 1 ratio.  
Figures 3.11 and 3.12 correspond to the history in Chapter 2. In 1806 and 1807, 
the number of Democratic-Republicans in both houses surpassed the Federalists. In 
1807, the Democratic-Republican legislature passed an act to insert six Democratic-
Republican directors into both the Boston Bank and the Union Bank for one year. The 
Democratic-Republicans’ proportion in banking rose from zero to 7% in the 
following year. But when the Federalists controlled the state legislature in 1808, the 
Democratic-Republicans were once again excluded from banking and their proportion 
dropped to zero in the next year. The Democratic-Republicans controlled the 
governorship as well as both houses only in the election of 1811.69 Elbridge Gerry 
was the elected governor in both 1810 and 1811.70 In the session of 1810-11 he 
attempted to work out a compromise with Federalists over banking and a number of 
other issues. When he could not reach a compromise and when some Federalist 
leaders came out against what would become the War of 1812, Gerry campaigned 
actively for himself and a Democratic-Republican legislature in the elections of 1811, 
leading to reforms in many sectors including banking.   
69  The election of 1811 selected the legislature for the 1811-1812 term. 
70  The governors are elected yearly.  
65 
 
                                                 
 The legislature of 1811-12 changed the state banking policy. It chartered two 
new banks: the Merchant’s Bank of Salem and the State Bank. The State Bank had 
three times the capital of any existing bank. It was also a Democratic-Republican 
bank. All of the twelve directors and the bank president had been or would be state 
legislators, and 11 of these were Democratic-Republicans. The State Bank was also 
intended to be a reform bank. One-third of the $3 million capital was subscribed by 
the state government, with an option to subscribe an additional $1 million. The Bank 
was to pay a tax to the state of ½ of 1 percent of its paid in capital each year.  The 
reform ideas behind both state ownership of stock and the capital tax was that the 
Bank, rather than being a source of private privilege to its owners, would be a source 
of revenue for the state government.   
The last element of the new banking policy resulted from the unusual fact that 
the charters of all the existing banks in Massachusetts expired in 1812. In the 1811-
1812 legislative sessions, the Democratic-Republicans refused to renew the charters 
of any existing banks. This was, literally, an existential crisis for the Federalist 
bankers. Without their charters they would not be able to issue bank notes, a basic 
function of their banks. In 1812, the Federalists carried out a vigorous campaign and 
regained the Governorship and the House, but the Democratic-Republicans had 
redistricted the Senate (as a result of the “Gerrymander”) and retained control of it.  
In the fall of 1812 (the 1812-13) legislative session, the charters of the existing 
Federalist banks were renewed. All of the renewals contained the reform provisions 
included in the State Bank charter, including the bank capital tax. After these banking 
66 
 
 reforms, bank charters were issued more frequently, and the relationship between 
bankers and legislators changed over time.  
In order to focus on changes in the behavior of bankers after 1815, I study each 
individual banker in the new banker sample which includes a banker only in the first 
year in which he enters the Register data.  Because the new banker sample is a subset 
of the full banker year sample, the proportion of new bankers that had been, would be, 
or never became legislators is much more volatile.  Figure 3.14 gives the number of 
new bankers in Boston each year, Figure 3.15 gives the proportion of new bankers in 
Boston who had been Federalist or Democratic-Republican legislators for the entire 
period, and Figure 3.16 gives the proportion of new bankers in Boston who would 
become Federalist or Democratic-Republican legislators. Figure 3.14 also tells us 
about the rate of bank formation. The rate of bank formation was high in 1811, 1812, 
and 1813, slowed for a time during the active part of the war in 1814 and 1815 and 
the economic recession in 1818, and then picked up rapidly in the 1820s. The number 
of new bankers picks up in 1816, but then falls back until 1823. 
 
67 
 
 0
20
40
60
80
nu
m
_b
an
ke
r
179017951800180518101815182018251830183518401845185018551860
year
Number of New Bankers
 
Figure 3.14: Annual Number of New Bankers, Boston Banks, 1790-1859 
 
0
.1
.2
.3
.4
.5
1790 1795 1800 1805 1810 1815 1820 1825 1830 1835 1840 1845 1850 1855 1860
year
Federalist Democratic Republican
 
Figure 3.15: Proportions of New Bankers that had been Federalist and 
Democratic-Republican Legislators, Boston Banks, 1790-1859 
  
 
68 
 
 0
.0
5
.1
.1
5
1790 1795 1800 1805 1810 1815 1820 1825 1830
year
Federalist Democratic Republican
 
Figure 3.16: Proportions of New Bankers that would become Federalist and 
Democratic-Republican Legislators, Boston Banks, 1790-1830 
 
Although the small numbers of new bankers leads to graphs that fluctuate a lot 
from year to year,71 a general trend is clear. Figure 3.15 shows that in the decade 
before 1812 there were years when half of the new bankers had been legislators. In 
1812, half of the new bankers had been Democratic-Republican legislators. In the 
next decade, there were three years in which a third of the new bankers had been 
legislators, all Federalist. After 1822, when the Federalists disappeared as a party, but 
individuals who had been Federalist legislators in early years were still becoming 
bankers, the proportion of new bankers who had been Federalist legislators falls to 
less than 10 percent and then dwindles to zero.  Similarly, the proportion of new 
bankers who would become legislators was highest before 1810, sometimes reaching 
5 percent or higher for the Federalists.  After 1810 the proportion was generally lower, 
71 The current graphs are a bit confusing/misleading as well because a “0” for a single year 
can reflect either that there were no new bankers, or that the proportion of new bankers of a 
particular party was “0”. 
69 
 
                                                 
 rarely higher than 2.5 percent, again mostly for the Federalists.  As both Federalists 
and Democratic-Republicans were in the process of disappearing as parties, the 
potential number of bankers who “would be” in either party was diminishing rapidly.   
In summary, there was a very close relationship between bankers and state 
legislators in early 19th century Massachusetts.  Up to 1812, two thirds of all 
individuals who became a bank president had been or would become a state legislator. 
Federalists dominated the formation of banks up to 1811. The large majority of banks 
were under Federalist control. The ratio of the number of bankers and banks 
controlled by Federalists to the number controlled by Democratic-Republicans was 
roughly 5 to 1. 
In 1811, for the first time, the Democratic-Republicans obtained control of the 
House, Senate, and Governor’s chair, turning the tables on the Federalists.  They 
chartered two new Democratic-Republican banks. They refused to renew the charters 
of any Federalist banks, all of which were due to expire in 1812. In 1812, the 
Federalists recaptured the Governorship and the House, and they renewed the existing 
bank charters on the same reform terms as the State Bank charter in 1811. After the 
“bank war” of 1811 and 1812, the state continued to charter banks, but new bankers 
were significantly less likely to have been or become a state legislator, and the 
relationship between bankers and legislators began to weaken.  
  
The Non-Party Regime: 1820-1830 
For much of the 1820s, many state legislators were not identified with parties in 
the Legislative Biographies. As we saw earlier, Figure 3.3 graphs the share of 
70 
 
 legislators with a Party ID in the Legislative Biographies from 1797 to 1860.  
Although there was an increase in bank chartering in 1812 and 1813 (Figure 3.2), the 
explosion of banking occurred in the 1820s.72  As Figures 3.1, 3.2, and 3.8 show, the 
numbers of bank charters and banks in operation increased dramatically.  This was 
the same period in which the proportion of bankers who had been or would become 
legislators declined sharply, from roughly two thirds of all bankers to around 40 
percent of all bankers, as shown in Figures 3.9 and 3.10.  
Table 3.1 shows that the proportion of all bankers who were state legislators at 
some point dropped from 68% between 1810 and 1819 to 55% between 1820 and 
1825 (Column 4). In the same period, the proportion of bankers that can be identified 
with political parties dropped from 56% to 46% (Column 5), although the share of 
legislators with Party IDs dropped from 99% between 1810 and 1819 to 56% between 
1820 and 1825. This is because the number of bankers who were state legislators with 
Party IDs did not drop much, from 535 between 1810 and 1819 to 485 between 1820 
and 1825 (Column 2 & 3). The small drop in numbers is because I match bankers in a 
given year to legislators in all the years from 1790 to 1859, rather than the legislators 
in the same year. As a result, the sharp drop of Party ID between 1820 and 1825 does 
not significantly affect the share of bankers affiliated with a particular party.  
Overall, as political parties broke down in the 1820s, more banks were chartered 
and the connection between bankers and legislators dropped greatly. Chapter 2 also 
shows that in 1829 the state passed an impersonal law for banking. The temporary 
disappearance of political factions in the era of “Good Feelings” turned out to be 
associated with the open access to banking.  
72 The War of 1812 slowed the formation of banks, as did the recession of 1818. 
71 
 
                                                 
  
The Second Party Regime: 1830 to 1860 
The structure of party politics in the United States fragmented in the 1820s.  In 
three of the four national elections between 1824 and 1836, three or more candidates 
received electoral votes in the presidential elections. The exception was the election 
of 1828, featuring the John Quincy Adams and Andrew Jackson rematch of their 
1824 race, in which Jackson had won a popular and electoral vote plurality, but 
Adams won the election in the House with the support of Henry Clay. Elections from 
1840 to 1852 resulted in electoral votes for only the Whig and the Democrat 
candidates. But, as we shall see, a cauldron of party formation and loyalties boiled at 
the state level during this period. In 1856 and 1860, multiple parties and candidates 
won electoral votes, ending in the election of Lincoln and the onset of the Civil War. 
Figures 2.4 and 2.5 in Chapter 2 show the mix of parties that competed for 
dominance in Massachusetts between 1830 and 1860. The dominant parties in 
succeeding elections were National Republicans, Whigs, and Republicans, with one 
brief period in which the Democrats held the legislature, and a second brief 
dominance of the Know Nothing Party.  The sequence of parties could be seen as 
representatives of the same group of dominant political players, but that would be a 
mistake. There was not one continuous coalition that simply changed its name over 
time. The National Republicans, Whigs, and Republicans were parties that succeeded 
each other rather than competed with each other.73 The connection between politics 
and banking remained important, but not as important as in the first party system.   
73 The idea that the Whigs were a simple continuation of the Federalist party has a long 
history, but it appears to be wrong.  Holt summarizes the idea: “Even historians routinely 
72 
 
                                                 
 Table 3.2 shows that the proportion of bankers who were also state legislators at 
some point dropped sharply from 63% in the period 1800-1815 to 45% in the period 
1815-1825. From 1825 to 1959, the proportion of new bankers that had been or would 
become legislators stayed relatively steady between 40 and 45 percent. 
To track the association between political parties and bankers, Table 3.3 
summarizes the information on New Bankers and political affiliation in three periods: 
1790-1815, 1816-1824, 1825-1859.  The first three columns give the number of 
individual bankers in each period, whether they were a legislator or not, if they were a 
legislator whether they had a party affiliation (PartyID), and which party they 
belonged to, if any. Columns (4), (5), and (6) give each of the numbers as a share of 
all bankers in each period, while columns (7), (8), and (9) give the numbers as a share 
of all banker/legislators in each period. 
Tracking the association between parties and bankers is more difficult, for two 
reasons. First, as we noted earlier, in the early years there were no organized political 
parties, so many legislators did not identify with a party.  As a result, while the 
number of bankers who were legislators at some point dropped significantly from 
1815 to 1824, the proportion of all bankers who became legislators and were 
associated with a party does not change much over the entire period from 1790 to 
1859. As the second and third rows of the second panel (Columns (4), (5), and (6)) 
shows, the percentage of bankers who were legislators drops from 64% between 1790 
and 1815, column (4), to 48% between 1816 and 1824, column (5).  But the 
echoed Democratic propaganda and described Whigs as ex-Federalists.  Experts now know 
better.  Massive research in the past forty years has shown that the Whig Party evolved not 
from the Federalists but from divisions within the Jeffersonian party” (Holt, 1999, p. 2). The 
national literature may not apply specifically to Massachusetts.   
73 
 
                                                                                                                                           
 percentage of all bankers who can be identified with a party only declines from 42% 
in column (4), to 40% in column (5). This is because before 1797 there were no 
organized political parties in Massachusetts, as shown in Figure 3.3, and the first row 
of Column (5) of Table 3.1. 
Second, the number of parties after 1825 is much larger, with four different 
parties commanding a majority in the same period of time. In the lower panel of 
Table 3.3, the Federalist Party accounted for 27 percent of all bankers between 1790 
and 1815 and 42 percent of all bankers who were legislators.  Similarly, if we merge 
the Federalist, National Republican, Whig, and Republican parties as a single 
“dominant party” they account for 27 percent of the bankers between 1825 and 1859 
and a whopping 65 percent of all bankers who were legislators. 
        The multitude of parties after 1825 may offer us two different understandings 
about the role of political coalitions in the banking sector.  If the succeeding parties 
were simply a manifestation of a political coalition (like elite groups we discussed in 
Chapter 2) in Massachusetts that responded to changing political conditions 
nationally by changing the party label attached to the political wing of the coalition, 
then it is possible that the coalition was still using access to banking as a way to 
create economic rents and hold the coalition together.  On the other hand, the relative 
ease with which charters were made available, the declining but not disappearing 
direct association of bankers with legislators, and the fact that few banks after 1851 
were established under the free banking law suggests that entry had opened 
considerably.
74 
 
  
Section 4 Regression Studies on Parties and Legislators, 1797-1824 
The historical narrative has demonstrated that the banking sector began to open 
access to all political factions after 1811 because of government turnover and the 
Democratic-Republican threat of charter revocation. In this section, I use the sample 
of individual new bank directors and presidents for all banks I collected in 
Massachusetts from 1797 to 1824 to test whether the political turnover of 1811 had an 
effect on the probability that a new banker had been a Federalist or Democratic-
Republican legislator. I use OLS, Logit, and Probit models to estimate the probability 
that an individual new banker had been a Federalist or Democratic-Republican 
legislator before and after 1811.  
There are several alternative hypotheses that can explain the data presented 
above. My preferred explanation is that the probability of a new banker being a 
Democratic-Republican legislator rose after 1811, while the probability was 
unchanged for Federalists. The first alternative explanation is that more Democratic-
Republicans joined banking because there were more banks after 1811. The second 
one is that the increase of Democratic-Republican directors merely reflects the fact 
that there were more Democratic-Republican legislators, and we matched these 
legislators to bank directors. The third alternative is that the Democratic-Republicans 
had more power in the State Senate and House. The fourth alternative is that other 
possible events around 1811, such as the War of 1812, may have caused the change.  
To test whether my preferred hypothesis can be distinguished from these 
alternative hypotheses, I control for the annual number of incoming new directors, the 
75 
 
 number of cumulative Federalist or Democratic-Republican legislators, and the 
Federalist or Democratic-Republican proportion in the House and Senate. The annual 
number of incoming new bank directors can be used as the control variable for the 
number of new banks suggested by the first alternative hypothesis. The number of 
cumulative Federalist or Democratic-Republican legislators is used to control for the 
Federalist or Democratic-Republican population suggested by the second alternative 
hypothesis. This variable also controls for potential errors in the collection of Party 
IDs in years such as 1797, 1823, and 1824, which have fewer Party IDs than other 
years. Even if in these years the Legislators’ Biography identifies legislators with one 
party more than the other, the cumulative number of Federalist and Democratic-
Republican legislators reflects the cumulative number of legislators with Party IDs 
and controls for the potential bias. The Federalist or Democratic-Republican 
proportion in the House and the Senate can be used to control for Federalist or 
Democratic-Republican strength in the legislature as suggested by the third 
alternative hypothesis. By comparing the effect of 1811 on Democratic-Republicans 
and Federalists, I can exclude the factors that may have a common effect on both 
Federalist and Democratic-Republican directors, such as the War of 1812. As the 
Federalists and the Democratic-Republicans emerged in 1797 and disappeared around 
1824, I use the sample of new bank directors and presidents between 1797 and 1824. 
The estimation equation is: 
 
The unit of observation is an individual new bank director or president in the 
sample. The dependent variable is the probability that a new bank director or 
76 
 
 president had been a Federalist legislator, or the probability that a new bank director 
or president had been a Democratic-Republican legislator. I run regressions for the 
Federalists and the Democratic-Republicans separately. D1812 is a dummy variable, 
representing whether a banker appeared in years 1812-1824. I control for the number 
of new bankers in each year (Bankert). When the dependent variable is the probability 
that a new banker had been a Democratic-Republican legislator, I control for the 
number of cumulative Democratic-Republican legislators that had already served in 
the legislature (CumLegt), and the Democratic-Republican proportions in the House 
(HouseSharet) and Senate (SenateSharet) in each year. By the same token, when the 
dependent variable is the probability that a new banker had been a Federalist 
legislator, I control for the number of cumulative Federalist legislators, and the 
Federalist House and Senate proportions. The number of cumulative legislators is 
measured at the level of thousands, and the House and Senate Shares are measured as 
a percentage. 
The results are shown in Table 3.4, which reports the average marginal effect. 
Columns (1)-(6) report the results without controlling for political parties’ House and 
Senate proportions. Columns (1)-(3) report the regressions in which the probability 
that a new banker had been a Democratic-Republican legislator is the dependent 
variable, and (4)-(6) report the regressions for the Federalists. There is no significant 
change in the probability that a new banker had been a Federalist legislator before and 
after 1811 in any of the three models. However, after 1811, the probability that a new 
banker had been a Democratic-Republican legislator increased by 19.35% in the OLS 
regression, by 26.33% in the Logit Regression, and by 20.88% in the Probit 
77 
 
 Regression. All these effects are significant at 5% level. Columns (7)-(12) report the 
regression results after controlling for political parties’ House and Senate proportions. 
Columns (7)-(9) report regression results for Democratic-Republicans, and (10)-(12) 
report results for the Federalists. The effect of 1811 on the probability that a new 
banker had been a Democratic-Republican legislator is significant at 1% in all three 
models. The estimates of the marginal effect in OLS, Logit, and Probit regressions are 
40.36%, 27.51%, and 26.78% respectively. In addition, the Democratic-Republican 
proportion in the House also has a positive and significant impact on this probability. 
As a comparison, in the regressions for the Federalists (10)-(12), the 1812 dummy 
and the Federalist proportions in the House and Senate do not have significant effects 
on the probability that a new banker had been a Federalist legislator. If other events 
that occurred around 1811, such as the War of 1812, also had any effect, they should 
affect both the Democratic-Republicans and the Federalists. The significant and large 
effect for the Democratic-Republicans, compared with the zero effect for the 
Federalists, suggests that it is more likely that the results are driven by the political 
competition in 1811, rather than other contemporary events such as the War of 1812.  
The regression results have shown that after the political turnover in 1811, the 
probability that a new banker in a given year had been a Democratic-Republican 
legislator increased by more than 20%. The result is robust after adding other control 
variables. By carrying out regressions for Democratic-Republicans and Federalists 
separately, the results suggest that other events around 1811, such as the War of 1812, 
cannot explain the differential effect of 1811 on Federalists and Democratic-
Republicans. The banking sector became open to all political factions after 1812. 
78 
 
 Section 5 Bank Level Analysis 
As I showed in previous sections, the share of all bankers that were legislators at 
some point declined sharply from 1815 to 1825, but then remained fairly steady at 
about 40 to 45 percent. This section examines the bank level by defining elite banks 
as banks including at least one legislator in the board of directors. This definition is 
strict because even today, many banks are connected to politics to some degree. 
However, it provides us a different perspective on data.  
However, this perspective raises some difficulties. One difficulty is that the 
Registers often only report the name of the bank presidents for some country banks. 
Since only one banker name is associated with the bank, the fact that the president is 
not a legislator does not mean that the bank is not associated with the legislature 
through a director. In an attempt to control for the problem I made a few adjustments 
in the following discussions. 
Figure 3.17 shows the number of banks that had no legislators in each year.  As 
we expected, the number rises over time, except for the period between 1837 and 
1847, when the Registers only recorded Boston banks. In order to estimate the effect 
of banks with only a president reported, Figure 3.18 excludes banks that only report 
one banker in the Register. In other words, banks without directors reported in the 
Registers are excluded from Figure 3.18. The picture is much different. Prior to 1840, 
only one bank, the Bangor Bank in 1819 and 1820, reported the names of directors 
and had no legislators among its president or directors. It appears that when the focus 
shifts from individual bankers to individual banks, almost all banks are connected to 
79 
 
 the legislature by having a president or at least one director who had been or would 
become a legislator.  
The results are consistent with the Lamoreaux (1996) that banks were mostly as 
a tool for rich people to channel funds to their family business, and as a result, it 
cannot be a bank serving the ordinary people. These banks were commercial banks, 
not savings institutions or saving banks. Their purpose was not to enable ordinary 
people to save their money or exploit good investment opportunities. It should not be 
surprising that they were connected to some legislator.  
 
Figure 3.17: The Number of Banks with No Legislators as President or a Director, 
All Banks (whether they have Directors or not), 1790 to 1859. 
80 
 
  
 
Figure 3.18: Number of Banks with Directors who have No Legislators, 1790-1859.  
This sample excludes banks with only Presidents in the Registers. 
 
 
Although banks were still connected to the legislature after 1812, at least by our 
crude definition of including a legislator in the board of directors, the legislators held 
less political power over time. To see how long legislators retained power, I calculate 
the annual tenure of a state legislator from the Legislative Biographies. Figure 3.19 
presents the average lifetime tenure of legislators serving in each legislature. The 
sharp drop after 1820, indeed all the way to 1850, stands out in the figure.  
The drop of the legislative tenure shows that political power was not dominated 
by a few established elites, as the legislative power turned over more frequently. 
Individual legislators were spending much less time as lawmakers. Elite groups who 
wanted their voice in the legislature heard could much more easily do so, given the 
steadily rising turnover of legislators. But the turnover itself would have magnified 
the interest that all elites had in making sure that they could obtain a bank charter and 
81 
 
 that all the bank charters would be the same. This was particularly true for rising 
elites whose fortunes were tied to manufacturing or commerce and wanted access to 
their own banking facilities, ala Lamoreaux. They were not shut out.  There was open 
access for elites, at least in the limited way we have defined elites here. Although 
most banks were connected to elites, those elites were not as established as those in 
the early 1800s when average legislative tenure was more than 10 years, but more 
like rising elites who held legislative power for only one to four years.  
2
4
6
8
10
av
g_
te
nu
re
1780 1790 1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900
average tenure
 
Figure 3.19: Annual Average Tenure of State Legislators, 1780-1900. 
Source: Legislators’ Biographies. 
82 
 
  
Section 6 Conclusion 
This chapter explores the long-term relationship between politics and banking. 
By looking at the data of bank directors and state legislators from 1790–1859, this 
chapter shows that politics and banking were highly connected, although this 
connection became weaker after 1812 in several respects. First, before 1812, 70% of 
bankers had been or would become state legislators, but from 1812 to 1860, the 
proportion of bank directors that had been or would become state legislators at some 
point in time dropped from 70% to 40%. Second, before 1811 groups found it 
extremely difficult to get a charter if they were not connected to the Federalist Party, 
but by the late 1810s, limited partisan access to banking had virtually disappeared. 
Third, the bank level analysis shows that banks were still connected to legislature 
after 1812, but the average legislative tenure dropped from 10 years in the early 1800s 
to 2 years in the 1850s, suggesting that political elites themselves became less 
established. The overall results complement the history narrative of Chapter 2, 
suggesting that banking and politics were highly connected in the Federalist era, but 
that access began to open after the “bank war” in the year 1811 and 1812, and that in 
the second party system, the banking sector opened access to all elite groups.  
83 
 
  
Chapter 4: Empirical Studies on Political Connection of Suffolk 
Legislators, 1790-1859  
Section 1 Introduction 
 
Chapter 3 measures the connection between politics and banking by defining 
elites as bankers who had been or would become state legislators. This measure 
provides insights into the behavior of an elite coalition, but it may also overestimate 
the proportion of elites by defining elites as including any banker who was a legislator 
at some point of their life. This section measures the group of elites in an alternative 
way by exploring people who were bankers and legislators in the same year. The 
section studies the connection between bank directors and state legislators in the 
Suffolk County, Massachusetts from 1790 to 1859.  The results show that people who 
were ever state legislator at some point in their life had a significantly larger chance 
of being a bank director at the same time in the 1790s and the first decade of the 19th 
century.  Over time the chance that a person would be both a legislator and a banker at 
the same time declined to almost zero.  
 
Section 2 Data and Empirical Tests 
As in Chapter 3, data was taken from Legislators’ Biographies at the 
Massachusetts State Library, and the names of bank directors for all banks in Boston, 
84 
 
 the major city of Suffolk County, and several banks in other counties, from 1790 to 
1859. I match state legislators to bank directors in Boston by name and time to 
identify whether a legislator was a bank director in a given year. 
This section focuses on the sample of legislators from Suffolk County in the 
years between 1780 and 1859. There were roughly 40 legislators from Suffolk County 
in each year. I use their birthdate and death date to derive individual observations.   
Every person in the sample was a legislator at some point in their life, and they are 
tracked from age 20 until their death.  Referring to the sample as “legislators” can be 
confusing, because the purpose is to determine whether these people have a greater 
chance of also being a banker when they are serving in the legislature in comparison 
to when they are not in the legislature.  For convenience, I refer to people who were a 
legislator at some point in their life as “politicians.” I generate indicators for years 
when individual politicians were legislators and indicators for years that they were 
bank directors. There were 46,681 individual observations in the sample.  
Two empirical tests were carried out to estimate the correlation of being a state 
legislator and being a bank director in a given year. The first specification is  
 
       (1)      
 
 is an indicator to measure whether a person is a bank director i in a given year 
t. =1 for years when a person is a bank director, and =0 for otherwise.  
equals 1 if a person is a legislator in a given year and 0 otherwise.  is the individual 
85 
 
 dummy and  is the time dummy. So specification (1) includes both individual and 
time fixed effects. 
 
Specification (1) uses  as an independent variable to control the persistent 
effect of being a bank director. The regression interacts  with each year from 
1790 to 1859. I am interested to see the correlation between the identity of being a 
legislator and the identity of being a bank director in each of these time periods, and 
how these correlations changed over time. It should be noted that for years from 
1780-1790, there are no observations on bank directors and we cannot estimate the 
coefficients.  
In the following specification (2), I include only the year fixed effect but ignore 
the individual fixed effect. So the coefficient  measures the cross-sectional 
correlation of   and year dummies in each year 1790-1859.  
 
       (2) 
 
Column (1) of Table 4.1 reports the estimated coefficients for specification (1), 
and Column (2) reports the estimated coefficients for specification (2). The 
coefficients from both regressions are similar. The results show that in early years 
being in the legislature significantly increased the chance of a person also being a 
bank director in that year. For example, the coefficient for the year 1800 is above 0.5, 
implying politicians in the legislature in 1800 had a 50 percent higher probability of 
being a banker than politicians who were not in the legislature in 1800. The 
86 
 
 connection between legislators and bank directors was very close in the 1790s and 
1800s, but gradually dropped after 1800.  After 1816, the estimated coefficient 
dropped to below 10%, and after 1840, the coefficient is not significantly different 
from zero. One possible explanation is the Federalist and the Democratic-Republican 
legislators were elites who were able to control the banking sector, whereas in the 
second party system, the elite dominance in banking gradually disappeared. As results 
are similar for both Column (1) and Column (2), Figure 4.1 plots the coefficients from 
Column (2) only.    
 
 
 
Figure 4.1: Regression Coefficients, Time Fixed Effect Only. 
 
Section 3 Conclusion 
This section provides a second measurement of elites focusing on people who 
were bankers and legislators in the same year. This section shows that  politicians, 
87 
 
 people who were legislators at some point in their life, were more likely to be 
legislators and bankers at the same time in the 1790s and the early 1800s than 
afterwards. In the 1790s, for people who were ever state legislators at some point of 
their life, a person in the legislature was 50% more likely to be a bank director in that 
year than a politician who was not in the legislature in that year.  In the 1820s, that 
probability decreased substantially, and by the 1840s, the statistical difference 
dwindled to almost zero. 
This measurement of elites, however, has its own problems. Average legislative 
tenure decreased from 10 years in the early 1800s to 2 years in the 1850s, implying 
that it may have been more difficult to be a legislator and a banker in the same year. 
However, these findings complement the results in Chapter 3 and both results suggest 
that the long-time relationship between bankers and legislators weakened over time. 
88 
 
  
Chapter 5: Empirical Studies on Bankers’ Wealth and Bank 
Balance Sheets  
 
Section 1 Introduction 
This chapter studies the transition to open access banking from an economic 
perspective. The previous chapters examined the transition to open access from the 
view of elite coalitions between bankers and state legislators, but they do not show the 
economic implications of the transition. Did a weaker association between bankers 
and politicians in the 1840s and 1850s imply that ordinary citizens with moderate 
wealth were able to join banking? And did less well-connected banks entering the 
1840s and 1850s have fewer assets? This chapter examines these questions. 
This chapter carries out two empirical studies. The first explores the wealth of 
bankers relative to other wealthy people in Boston from 1829 to 1859, where wealth 
is measured from property assessments in the Boston Tax Lists. The second empirical 
study examines bank assets from 1804 to 1861 by looking at bank balance sheets. The 
following subsections discuss data and empirical analysis for each of these studies. 
 
Section 2 Bankers’ Wealth, 1829-1859 
5.2.1 Introduction 
In the Jacksonian era, the idea that bankers were wealthy and corrupt elites was 
widely held. Andrew Jackson and the Democratic Party accused these “monied 
89 
 
 interests” of swaying economic powers to manipulate political elections. Recent 
literature, however, suggests that bankers were becoming less elite and less wealthy in 
the 1830s. For example, Lamoreaux and Glaisek (1991) exploit the wealth data of 
bank directors in Providence, Rhode Island during the period from 1830 to 1845 and 
find that bank charters granted in the 1830s benefited men with relatively less 
property than earlier charters. Hilt and Valentine (2012) show that corporate 
ownership in New York, including that of banks, became more diversified and 
democratic in the year of 1826 compared to 1791. This research suggests that in the 
second party system ordinary citizens were able to participate in banking. The 
findings are inconclusive, however, because data were collected in sporadic years, and 
the literature ignores Massachusetts, the state with most banks per capita and one of 
the financial centers in the banking system of the antebellum era (Wallis, Sylla & 
Legler, 1994). This section complements the literature by studying the long-term 
pattern of bankers’ wealth in Boston from 1829 to 1859.  
Massachusetts bankers may have been richer than non-bankers because the 
banking sector required a larger initial investment compared to other sectors: most 
banks had at least $100,000 initial capital in the 1830s, equivalent to $ 1,640,000,000 
in 2013 inflation-adjusted dollars.74 Lamoreaux (1994) shows that banks in the 
antebellum era were vehicles to facilitate investments in manufacturing companies 
owned by a few bank directors from rich families. There is, however, a lack of 
74 The value is calculated by https://measuringworth.com, measuring the amount of 
income or wealth relative to the total output of the economy and compares these historical 
values in different years.  
90 
 
                                                 
 substantial statistical evidence to assert that bankers were richer than other citizens 
over a longer time frame. This section collects the wealth data of bankers and other 
wealthy taxpayers and compares them from 1829 to 1841.  
Chapter 3 provides empirical evidence showing that after 1811, the banking 
sector in Massachusetts moved to de facto free banking. Those results suggest that 
bank directors (or banks), legislators, and political parties gradually became less 
affiliated with one another between the 1810s and the 1850s, implying that the 
banking sector became less elite over time.75 Even in the 1840s, however, 30 to 40 
percent of bankers had been or would become state legislators at some point in their 
lives, so a significant connection between bankers and legislators remained. The 
question is whether bankers were or were not considerably richer than others, as 
Lamoreaux and Glaisek (1991) found out in Providence, besides their high political 
connection?   
 This section answers this question by analyzing a sample of taxpayers’ real and 
personal assessed wealth collected from the Boston tax rolls between 1829 and 1859. 
Inclusion in the reported list was based on total value of property, so the list only 
included wealthy taxpayers. I then identify whether an individual in the sample was a 
bank director. Average wealth for bankers and non-bankers in the sample are 
calculated and compared. The basic results suggest that bankers were always richer 
than other wealthy taxpayers from 1829 to 1859, but the relative wealth of bankers to 
other taxpayers, measured by the ratio of wealth of bankers to that of taxpayers, was 
75 I use bankers to represent bank directors in this article.  
91 
 
                                                 
 stable. As entry and exit to the sample may affect the distribution of wealth, various 
robustness checks are performed.  
5.2.2 Data 
From the Legislators’ Biographies, available at the State Library, I collected the 
names of state legislators in Suffolk County (where the major city is Boston); from 
the Massachusetts Registers (1790-1859), I compiled a list of all bank directors in 
Boston. The lists of wealthy taxpayers in the city of Boston—from List of Persons, 
Copartnerships, and Corporations, Taxed in the City of Boston— document a 
person’s or an organization’s real and personal holdings (under the name “real estate” 
and “personal estate”), and taxes paid between 1829 and 1859 (1831, 1834, 1854, 
1855, and 1856 are missing).76 Only wealthy taxpayers with wealth above certain 
thresholds are included in the tax lists. From 1829 to 1848, the list includes wealth for 
individuals taxed $25 and upwards (since the tax rate was roughly 0.8% of wealth, the 
property cut-off was approximately $3,125); from 1849 to 1853, the list includes 
individuals whose personal property was $6,000 and upwards, and from 1857 to 1859, 
$10,000 and upwards. Thus, the sample included in the lists varies across years. As 
demography changed and younger people aged, they presumably acquired more 
wealth. The varying data truncation levels and the demographic patterns across years 
mean that making comparisons over time are problematic.  
76 The tax lists do not specify how the taxes were collected. However, according to Steckel & Moehling 
(2001), which surveyed the historical literature and documents on the wealth data in Massachusetts, 
“Real estate included land and buildings, and personal estate included goods, chattels, money; ships; 
money at interest; public stocks and securities; stocks in turnpikes, bridges, and moneyed corporations, 
in or out of state. Property exempted from taxation included household furniture not exceeding $1,000 
in value, wearing apparel, farming utensils, and mechanics’ tools initially up to an unlimited amount 
and later up to a value of 300.” 
92 
 
                                                 
 I collected random samples of personal taxpayer information from the tax rolls. 
The tax rolls include wealth from partnerships, various corporations such as banks, 
manufacturing corporations, wharfs, and heirs of the deceased which I exclude. The 
studied sample also does not include illegible entries from the taxation rolls.77 Table 
5.1 shows that the taxpayers in the Tax Lists represent roughly the top 15% to 19% 
wealthy taxpayers in Boston. In most years the sample size is over 1,000 and yields 
reliable comparisons of different groups. I match the sample of wealthy taxpayers to 
Boston bank directors. There are 42,923 individual taxpayers and 3,277 bankers.78.  
Table 5.2 shows the total number of entries on the tax rolls, the size of the 
random sample drawn from the rolls, and the respective percentages. The table also 
shows for each year the number of Boston bankers, the sample size and percentage of 
those bankers that matched to taxpayer rolls. Columns (1)–(3) in the table show that 
in most years the size of the taxation samples was large enough to carry out reliable 
statistical analysis and comparisons. In 16 of 26 years the sample size was above 40% 
of the size of the tax rolls, and in the other 8 of 26 years was approximate to or above 
20% of the size of the tax rolls. In 19 out of 26 years, the samples included more than 
1,000 individuals. Only in 1833, the year with most illegible names, was the random 
sample below 10%, at just 7.4% of the tax rolls, but even in this year there were 174 
taxpayers in the sample. Columns (4) - (6) show the number of all Boston bankers in 
77 I copy the names of taxpayers and their “personal estate” and “real estate”, and paste 
them into excel. I then parse these data into names and numbers. I organize the data that are 
easily parsed and recognized in the excel. These data are presumably random samples.  
78 Among these 3,277 bankers, 1,108 (or 33.8%) either had been or would become state 
legislators. I carry out the same analysis for bankers who were state legislators, and the results 
are the same as for bankers taken as a group. In terms of wealth, legislators are slightly less 
wealthy than bankers, but wealthier than the sample average.  
93 
 
                                                 
 the Massachusetts Registers and the sample size and percentage of Boston bankers. 
Except for 1833, the banker samples were fairly large. In 15 out of 26 years, above 
40% of the bankers can be found in the tax rolls and in the other 8 out of 26 years we 
can locate above 20% of the bankers.  
 
5.2.3 The Basic Results 
The basic empirical results compare the average wealth of wealthy taxpayers and 
bankers.79 Table 5.3 shows the mean and standard deviations of the wealth, real estate, 
and personal estate holdings from 1829 to 1859 (wealth = real estate + personal 
estate). In most years, the standard deviation is larger than the mean: there is a large 
variation of wealth in most years. Figure 5.1 plots the average wealth for all taxpayers 
and bankers in the wealth sample. The average wealth of bankers is always larger than 
the average wealth of taxpayers. Column (7) shows that the ratio of bankers’ wealth 
over taxpayers’ wealth stayed between 1.4 to 2.2 over all the years, and around 1.7 or 
1.8 in 17 of all 26 years. Plotting ratios over years presents a stable and relatively flat 
curve (Figure 5.2). Table 5.4 shows the growth rates of wealth for taxpayers and 
bankers and their difference. Figures 5.3 and 5.4 plot these statistics. Columns (3) and 
(4) of Table 5.4 present the annual growth rates by dividing growth in the annual 
average wealth in a given year t over the average wealth level in the last year t-1: 
. Column (5) shows the 
79 Huse(1916) states that Boston raised the assessment from 50% of market value to 100% of 
market value in 1842. For all the wealth data collected before 1842, I double the their value. 
94 
 
                                                 
 difference of growth rates by differentiating bankers’ and taxpayers’ growth rate in a 
given year. In most years, the difference is not larger than 10%. Figure 5.3 and Figure 
5.4 present the growth rates and the growth difference respectively.  
A basic analysis of the data shows four distinctive features. First, the average 
wealth of bankers was larger than the average wealth of all listed taxpayers over all 
years. Second, average wealth was decreasing from 1829 to 1836, but after that it 
began to increase from 1837 to 1859. In 1829 the average wealth of taxpayers and 
bankers were $26,976 and $46,804 respectively, and in 1859 they rose to $45,558 and 
$84,558 respectively.80 There were consecutive financial crises in 1837, 1839 and in 
1841/1842, which may undoubtedly affect wealth accumulation, but the exact 
measurement of the impact is beyond the scope of this research. From 1837, there was 
a rising wealth inequality over time, consistent with Steckel and Moehling (2001), 
which analyzes long-term trend in wealth inequality between 1820 and 1910, by 
matching the households heads listed in the manuscript schedules of the census 
matched to with real and personal property tax record in Massachusetts. Third, despite 
the large difference in the absolute wealth level, the ratios of the wealth between 
bankers and taxpayers did not change much over the years, suggesting relative wealth 
inequality between bankers and taxpayers was not growing. Fourth, the difference in 
the wealth growth rates between bankers and taxpayers is smaller than 10% in most 
years. For the purpose of this research on bankers’ elite status, the most important 
80 All number for wealth are in nominal terms. 
95 
 
                                                 
 results are that bankers were always richer than other taxpayers from 1829 to 1859, 
and that relative wealth inequality stayed stable over time.  
 
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Figure 5.1: Average Wealth of Taxpayers and Bankers, 1829-1859. 
 
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Figure 5.2: Average Wealth of Bankers to Taxpayers 
 
96 
 
  
Figure 5.3: Growth Rates of the Wealth of Taxpayers and Bankers, 1829-1859.  
 
 
Figure 5.4: Difference in Growth Rates of the Wealth of Bankers and Taxpayers, 
1829-1859  
I adjust the wealth by deflating inflation by historical CPI.81 The inflation-
adjusted average wealth shown in Figure 5.5 and Table 5.5 is close to the data shown 
81 Taxpayers and Bankers’ Average Wealth is deflated by Annual Consumer Price Index 
for the United States 1826-1859, using the price level in 1840 as the base level. The CPI data 
are available at Measureworth.com. 
97 
 
                                                 
 in Figure 5.1 and Table 5.3, suggesting that inflation did not play a large role in the 
pattern of wealth accumulation over time. 
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Figure 5.5: Taxpayers and Bankers’ Deflated Average Wealth, 1829-1859 
Note: Taxpayers and Bankers’ Average Wealth is deflated by Annual Consumer 
Price Index for the United States 1829-1859, using the price level in 1840 as the base 
level. The CPI data are available at Measureworth.com. 
 
 
5.2.4 Robustness Checks 
The comparison of wealth over time may be problematic due to potential 
sampling bias, data truncation, and entry and exit of taxpayers and bankers. The 
varying truncation levels over years may affect the distribution of wealth and the level 
of average wealth over time. The entering new people may be young and relative poor 
and the exiting people may be old and rich, so in years with more entering taxpayers 
and bankers, the average wealth may be lower than other years. To see whether these 
98 
 
 potential biases affect the  basic results, I provide some robustness checks. The first 
robustness analysis is to look at the wealth data for all taxpayers and bankers whose 
family names start with letter “P.” I collect all the names and wealth data for the letter 
“P” people, and then look at their average wealth over time. This exercise helps us 
check the potential sampling errors in the data collection process. The second 
robustness check is to look at the wealth growth rates for people appearing in two 
adjacent years. This exercise helps us check the results by eliminating the potential 
problems caused by entry and exit. The third robustness check examines the average 
wealth of entering new taxpayers and bankers. This helps us explores the wealth 
pattern of entering new people, and also whether the varying truncation levels affect 
the wealth distribution. The fourth robustness check  estimates a counter-factual 
average wealth by considering both the entering new people and the growth of wealth 
growth for existing people, and the counter-factual average wealth of considering 
growth rates of existing people only. I compare these two counter-factual average 
wealth to roughly estimate the contribution of entering new people on growth of 
wealth. 
The first robustness check looks at the people whose last names starting with 
letter “P”. Table 5.6 presents the statistics on wealth of those taxpayers and bankers. 
Figures 5.6 plot the average wealth of these taxpayers and bankers over the years. 
There are not many bankers in the “P” sample: in some years such as 1859 there are 
only 3 bankers. In both years bankers had exceptionally high average wealth due to 
the small sample. The results are consistent with the results from the full sample: 
99 
 
 bankers have larger average wealth than wealthy taxpayers in most years. Figure 5.7 
plots the ratios of the wealth of the bankers to taxpayers. The ratios are exceptionally 
high in 1859, and they drop in 1837 and 1840, but in most years stay around 1.5. The 
ratios for the years after 1841 are not larger than those in the 1830s. Overall, the 
results for taxpayers whose family names starting with letter “P” suggest that bankers 
were always richer than taxpayers, and the relative wealthy inequality measured by 
the ratio of bankers’ wealth to taxpayers’ wealth did not change much.  
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Figure: 5.6: Average Wealth of Taxpayers and Bankers whose Family Names 
Starting with Letter “P,” 1829-1858 
 
Note: the numbers can be seen from Table 5.6. Figure 5.6 excludes 1859, in 
which the average wealth level for bankers is exceptionally high due to the small 
banker sample. 
 
100 
 
  
Figure 5.7: Ratios of Average Wealth of Taxpayers to Bankers whose Family 
Names Starting with Letter “P,” 1829-1858 
Note: the numbers can be seen from Table 5.7. In 1827, the ratio is as high as 6.6. 
In other years, the ratios did not change much, stay around 1.5. 
 
In order to control for entry and exit effects, the second robustness check 
includes only people who appear in two adjacent years. As many taxpayers and 
bankers enter and exit the sample due to changing demography, the tax threshold, or 
the distribution of wealth over time, the pattern of the average wealth level may 
reflect the pattern of entering and exiting taxpayers and bankers. Entering new 
bankers and taxpayers tends to be less wealthy and exiting ones tend to be richer, 
which may result in lower average wealth. For a given year, I focus on the sample of 
existing taxpayers and bankers who appeared in both this year and the prior year. I 
calculate the average wealth for existing taxpayers and bankers in a given year. I then 
calculate the growth rates of wealth in year t by 
. I call this sample the 
101 
 
 linked sample and the growth rate the “linked growth rate.” Table 5.7 shows the mean, 
the standard deviation, and the number of observations of the average wealth of 
existing taxpayers and bankers, and the estimated linked growth rate. It also shows the 
difference in the linked growth rate. Figure 5.8 plots the average wealth of existing 
taxpayers and bankers, Figure 5.9 plots their linked growth rates, and Figure 5.10 
plots the difference of the linked growth rates.  
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Figure 5.8: Average Wealth of Existing Taxpayers and Bankers, 1829-1859 
 
 
102 
 
  
Figure 5.9: Linked Growth Rates of the Wealth of Taxpayers and Bankers, 1830-
1859.  
 
Figure 5.10: Differences in Linked Growth Rates of Taxpayers and Bankers, 
1829-1859. 
The Figures and the Table suggest that the growth pattern of existing taxpayers 
and bankers is similar to that of the full sample of taxpayers and bankers. Bankers’ 
wealth growth rates are higher than taxpayers’ in most years, and are lower only in 
1832, 1833, 1837, 1840, 1847, 1848, 1850, and 1852. In most years the absolute 
difference between bankers’ and taxpayers’ linked growth rates are within the 15% 
103 
 
 range. From 1841 to 1846, bankers’ wealth growth rates were persistently higher than 
non-bankers, which may lead to cumulative effect on wealth divergence. Overall, 
bankers’ wealth growth rate is larger than taxpayers, but in most years the differences 
in growth rates were not large. 
To further explore the accumulated wealth derived from the linked growth rates 
and the growth rates calculated from the entire sample, I carry out a counter-factual 
analysis. I assume two people, one banker and one taxpayer, have the same wealth 
$1,000 in 1836. Then I calculate their wealth each year from 1837 to 1853, assuming 
both individuals grow at the linked growth rate. I choose the period between 1836 and 
1853 because we have data on growth rates for all these years. I also calculate the 
actual growth rates of the average wealth of all taxpayers and bankers in the sample, 
including new ones and existing ones. Table 5.8 presents the estimates of the average 
wealth in each year 1837-1853. The estimated actual wealth based on the growth rate 
of the wealth of all taxpayers and bankers in 1853 is $1,322 and $1,337 respectively, 
that is, 1.32 and 1.34 times of the wealth in 1836. The estimated wealth based on the 
linked growth rate for existing taxpayers and bankers in 1853 is $1,146 and $1,163. 
That is, 1.15 and 1.16 times of the average wealth in 1836. Figure 5.11 shows the 
estimated counter-factual wealth for taxpayers and bankers. The gap between the 
wealth of taxpayers and bankers was not large in the years before 1842, but it began 
to be widening after 1842. This is because from 1841 to1846, bankers’ linked growth 
rates were persistently higher than taxpayers, as shown in Figure 5.10. This 
robustness check suggests that while entry and exit is significant, when we control for 
104 
 
 them using the linked samples, bankers’ wealth grows at similar rate as non-bankers 
in most years, and only a bit faster from 1841 to 1846. 
 
Figure 5.11: Counter-Factual Wealth, Estimated by Linked Growth Rate 
 
The third robustness check is to look at the wealth of entering new bankers and 
new taxpayers. The linked wealth growth rates exclude individuals in the year they  
enter the sample. However, new entrants were likely to have lower than average 
wealth. Table 5.9 exhibits the mean, the standard deviation, and the number of 
observations of wealthy taxpayers and bankers when they were entering the sample. 
Figure 5.12 plots the average wealth of the entering people over the years. The 
average wealth of new bankers entering the sample was larger than that of the wealthy 
taxpayers in most years. Figure 5.13 plots the ratios of the average wealth of entering 
new bankers to taxpayers. The ratios in most years are around 1.7. As with the linked 
growth rates, the wealth of entering bankers increased relative to non-bankers in the 
105 
 
 mid and late-1840s to above 2, and then dropped back in the 1850s. The data on 
entering taxpayers and bankers are consistent with the entire sample.  
 
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Figure 5.12: Average Wealth for Entering Taxpayers and Bankers, 1829-1859. 
 
         
Figure 5.13: The Ratios of Avg. Wealth of Entering New Bankers to Avg. Wealth of 
Entering New Taxpayers 
 
106 
 
 The fourth robustness check is to create a counter-factual growth in wealth by 
considering both the linked growth rates and the entry of new taxpayers and bankers. 
Both the wealth growth for existing taxpayers and bankers and the entry of new 
people contribute to the growth of the overall average wealth. In each year, the entry 
of new people tends to lower the average wealth for all taxpayers and bankers, 
reducing the pace of wealth accumulation. To estimate the contribution of the entering 
new people on the growth of average wealth of the taxpayers and bankers, I estimate 
the counter-factual average wealth by weighting the wealth of existing people and the 
wealth of entering new people with the following formula: 
 
Only in consecutive years there are linked growth rates, so I focus on the years 
between 1837 and 1853, which covers all the 1840s and is most relevant to the study. 
The exercise starts with the actual average wealth of taxpayers and bankers in 1836, 
$25,747 and $43,950 respectively, and then uses the linked growth rates, the 
proportion of new taxpayers and bankers, and the average wealth of entering new 
people to calculate the counter-factual wealth using the formula. Table 5.10 shows the 
estimated counter-factual wealth in each year from 1837 to 1853 and the data used to 
calculate it. The estimated counter-factual wealth in 1853 for taxpayers and bankers 
are $20,861 and $ 39,574 respectively, or 0.81 and 0.90 times of the wealth in 1836.  
Table 5.11 compare the estimated counter-factual wealth considering both the 
entering new people and the linked growth rates of existing people, with the estimated 
107 
 
 counter-factual wealth considering linked-growth rates only. The estimated wealth 
from linked growth rates only is larger than the estimated counter-factual wealth 
considering both the entry and linked growth, suggesting that the entry of new 
taxpayers and bankers lowered the average wealth. For example, in 1853, the 
estimated counter-factual wealth using the linked growth rates only for taxpayers and 
bankers are $29,501 and $51,114, larger than the wealth calculated from both entering 
new people and linked growth rates are $20,861 and $39,574. Both the counter-
factual wealth of taxpayers and bankers in 1853 for linked growth rates only are 1.15 
and 1.16 times of the wealth in 1836, whereas the counter-factual wealth for both the 
entry and linked growth are 0.81 and 0.90 times of the wealth in 1836. Over 17 years, 
the entry of new taxpayers and bankers lowers the accumulated wealth by 30% and 
22.4% respectively.82 Figure 5.14 plots the estimated counter-factual wealth 
considering both the entry and the linked growth and the counter-factual wealth 
considering linked growth only. The wealth estimated from the linked growth rates 
only were larger than the wealth estimated considering both the entry and the linked 
growth rates.    
82 The entrance of new taxpayers lower the wealth accumulation of taxpayers by ((1.15-
0.81)/1.15)=30%, and the entrance of new bankers lower the wealth accumulation of bankers 
by ((1.16-0.90)/1.16)=22.4%. 
108 
 
                                                 
  
Figure 5.14: Counter-Factual Wealth of Taxpayers and Bankers with Linked 
Growth Rates and Entrance of New People, and Wealth of Linked Growth Only 
This empirical method also has its own deficiencies. In each year the linked 
sample is different and there are also people constantly exiting the sample. The 
growth rates calculated from linked sample may not be applicable to the average 
wealth of the existing bankers of the prior year. However, it provides a simple method 
to estimate the relative contribution of the growth rates and entrance on wealth 
accumulation. 
The results suggest that bankers had larger wealth than taxpayers over all the 
years from 1829 to 1859, but their relative wealth remained stable. These results are 
robust when we look at the inflation-adjusted wealth, taxpayers whose last name starts 
with letter “P,” linked wealth growth rates for existing taxpayers and bankers 
appearing in two adjacent years, the wealth of entering new taxpayers and bankers, 
and the counter-factual exercises with both entering new people and linked growth 
rate. In addition, the entrance of new taxpayers and bankers considerably lower the 
growth of wealth for existing taxpayers and bankers. These results do not show that 
109 
 
 the wealth of bankers fell relative to other wealthy taxpayers, as suggested by the 
literature, but they do suggest that the relative wealth inequality between bankers and 
taxpayers do not change much over time in the era of de facto free banking. The 
assertion that in the 1830s bankers’ wealth became close to ordinary citizens, people 
in the 1830s, as suggested by Lamoreaux and Glaisek (1991), does not apply to 
Massachusetts banking. 
 
 
 
 
Section 3 Bank Balance Sheet 
5.3.1 Introduction 
The previous section analyzed the transition to open access from the perspective 
of bankers’ wealth. This section studies the transition from the perspective of bank 
balance sheets. It explores whether new banks chartered in the era of de facto free 
banking were smaller or larger in size, and whether such banks had a higher or lower 
proportion of legislators on their boards of directors, as compared to banks chartered 
before the financial crisis between 1837 and 1842.  
Bank assets from 1804 to 1861 are taken from the Boston banks’ balance sheets 
collected by Warren Weber (2011).83 In particular, bank assets are examined for three 
groups of banks: the banks that opened before the crisis and closed during the 
83 Weber, Warren E. 2011. Balance sheets for U.S. Antebellum State Banks. Research 
Department, Federal Reserve Bank of Minneapolis. 
http://www.minneapolisfed.org/research/economists/wewproj.html 
110 
 
                                                 
 financial crisis (1837-1842), banks that opened before the crisis and continued to 
operate afterwards, and banks that opened after the financial crisis. As Tables 5.12 
and 5.13 show, 11 banks opened before 1837 and closed during the crisis, 24 banks 
opened before the crash and continued to operate afterwards, and 22 new banks were 
chartered after the banking crisis.84 The new banks chartered after the crisis opened 
between 1846 and 1862, during the de facto free banking era.85 After examining the 
chronological dimension, I categorized new banks into three subcategories: banks 
with fewer than 33% of directors as state legislators, banks with between 33% and 
66% directors as state legislators, and banks with more than 66% directors as state 
legislators. Bank size and the political connections of new banks chartered in the era 
of de facto free banking are also examined. 
The results suggest that, first, the average assets across banks had a large 
fluctuation in the years before the mid-1820s, stabilized in the 1830s, and increased in 
the 1840s and the 1850s. Second, banks that failed during the crisis were, on average, 
smaller than the banks that lasted through the crisis. Third, new banks chartered after 
the crisis had fewer bank assets than banks opened before the crisis and continued to 
operate afterwards. Fourth, within new banks chartered after the crisis, less politically 
connected bankers had greater bank assets than more politically connected banks. 
 
84 All banks were transformed into National Banks before 1862. 
85 Among these 22 banks, 17 banks were chartered after 1851, when the state passed the 
general incorporation law for banking. After 1851, the state adopted a “dual-track” system for 
chartering banks: it issued both special charters and general charters. The balance sheets data 
do not separate both types of banks. What is the difference between banks with special 
charters and those with general charters are beyond the scope of this study.  
111 
 
                                                 
 5.3.2 Data 
The Boston bank balance sheets, collected by Warren Weber (2011),86 consist of 
individual bank balance sheets compiled from the reports of state banking authorities. 
The Secretary of the Commonwealth of Massachusetts collected bank balance sheets 
in various reports, such as A True Abstract of the Statement of the Several Bank 
Corporations in the Commonwealth of Massachusetts.87 The available reports cover 
the years 1803 – 1809, 1811 – 1815, 1819, 1820, 1822, 1823, and 1825 – 1861. The 
balance sheets include detailed information on bank assets and liabilities, from which 
I focus on “total bank assets.”88  
The United States went through an inflationary boom between 1832 and 1836, a 
financial panic in 1837, and a long depression lasting from 1839 to 1843. Many banks 
failed between 1836 and 1843. Table 5.14 categorizes three groups of banks from 
Weber’s data. I compare these banks with banks recorded in the Massachusetts 
Registers, shown in Table 5.13. The number of banks with bank balance sheet data is 
smaller than the number of banks in the Registers for each category.  
 
5.3.3 Empirical Results 
Table 5.14 shows the average assets across all banks in a given year for the years 
1804 to 1861. Figure 5.15 exhibits the average assets for all Boston banks from 1804 
86 Weber, Warren E. 2011. Balance sheets for U.S. Antebellum State Banks. Research 
Department, Federal Reserve Bank of Minneapolis. 
http://www.minneapolisfed.org/research/economists/wewproj.html 
87 The titles of the reports may vary across years. 
http://www.minneapolisfed.org/research/economic_research/bankarchive/info/Massachusettes
%20Bibliography.html 
88 I do not examine bank capital since they were fixed in the charters by the legislature, 
and thereby do not change much over time.  
112 
 
                                                 
 to 1861, and from 1826 to 1861. The large variation in years before 1825 obscures the 
pattern for the years after 1825, so Figure 5.16 focuses on the period after 1825. 1825-
1861 is also the period for which I have wealth data. These graphs show that the 
average bank assets increased from 1805 to 1813, dropped from 1814 to 1821, 
stabilized from 1821 to 1843, and gradually increased after 1843. The period before 
the 1820s was the period when Federalists and Democratic-Republicans fought for 
control of the banking sector (as shown in Chapter 2). Before 1812, Federalists 
dominated the banking sector and chartered banks with larger and larger assets. In 
1811, the Democratic-Republicans chartered their own banks, the State Bank and the 
Merchant Bank. The State Bank had a capital stock of $3 million, which increased the 
average of the banking sector, but it did not appear in the balance sheets data until 
1813, the year with the largest average asset.89 After that, more banks were chartered 
and these banks had smaller capital and assets. Between 1821 and 1843, which 
included the early stage of the second party system and the booming period in the 
mid-1830s and the crisis in the late 1830s, average bank assets stabilized. After the 
crisis ended in 1843, the economy began to recover and average bank assets began to 
grow.  
89 The Bank Asset is much larger than Bank Capital.  
113 
 
                                                 
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Figure 5.15: Average Assets for All Banks in Boston, 1804-1861 
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Figure 5.16: Average Assets, All Banks in Boston, 1826-1861 
Source: Figure 5.15 and 5.16, from Weber, Warren E. 2011. Balance sheets for 
U.S. Antebellum State Banks. Research Department, Federal Reserve Bank of 
Minneapolis. http://www.minneapolisfed.org/research/economists/wewproj.html. 
 
Table 5.15 and Figure 5.17 show average assets for new banks between 1803 and 
1861. The results show that the average assets of entering banks decreased from 1812 
114 
 
 to 1820, and increased after 1845. The pattern for entering banks is consistent with all 
banks over this time frame.  
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Figure 5.17: Average Asset for Entering New Banks, 1803-1861 
 
The general picture for the long-term development of the banking sector over a 
sixty-year range can be sharpened by dividing banks into three groups: banks opened 
before 1837 that continued to operate after 1843, banks opened before 1836 that 
closed between 1836 and 1843, and banks opened after 1843. I do not separate banks 
that closed because of the financial crisis and banks that closed for other reasons, but 
the concentration of closing banks shutting down in the financial crisis suggested the 
crisis was the most likely reason for bank closure.  
Figure 5.18 and Figure 5.19 show the average bank assets for banks of the three 
groups from 1803 to 1861, and from 1826 to 1861 respectively. Table 5.16 exhibits 
the mean value and the standard deviation of bank assets, and the number of banks for 
115 
 
 each group. The results show, first, that banks that survived through the financial 
crisis between 1836 and 1843 had greater average assets compared to banks that 
failed in the crisis, and compared to banks that opened after 1843. For example, in 
1840, the average assets for banks closed during the crisis were $642,022, just half of 
the average assets for banks opened before the crisis that continued to operate 
($1,313,536). In 1853, the average assets for banks opened after the crisis was 
$1,579,164, and the average assets for banks opened before the crisis that continued to 
operate was $1,890,945. Second, all the banks closed during the crisis were chartered 
after 1825 during the second party system, and all surviving banks were chartered 
before 1825. Third, for new banks that opened after 1843, their initial average assets 
were smaller than surviving banks but they grew faster. Overall, the larger banks 
chartered in the first party system survived whereas smaller banks chartered in the 
second party system failed in the crisis. New banks chartered after 1843, during the de 
facto free banking era, tended to have fewer assets, when compared to banks 
chartered before the crisis. 
 
 
 
116 
 
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Avg. Asset - Banks Opened After 1843
 
Figure 5.18: Average Assets for Banks Opened before 1837 and Closed during 
Crisis, Banks Opened before 1837 and Operated after 1843, and Banks Opened after 
1843. Period 1826-1861. 
 
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Figure 5.19: Average Assets for Banks Opened before 1837 and Closed during 
Crisis, Banks Opened before 1837 and Operated after 1843, and Banks Opened after 
1843. Period 1826-1861. 
 
 
117 
 
 How were these banks connected to legislators? For each bank, I calculate the 
proportion of bank directors who were also state legislators at some point in their lives. 
Figure 5.20 shows the average proportion of state legislators across all banks in a 
given year. The proportion was high before 1812, around 70%, and dropped to around 
35% in the 1850s. It is similar to Figure 5.21, which shows the proportion of bankers 
that had been or would become state legislators, calculating the ratio of all connected 
bankers over total bankers. The difference between Figure 5.20 and 5.21 is that the 
former calculates the proportion by averaging across all individual banks, and the 
latter calculates the proportion of all connected bank directors over the total number 
of bank directors. Both figures show decreasing trends over time.  
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Figure 5.20: The Average of the Legislators’ Proportion Across Banks, 1790-
1859 
118 
 
         
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Proportions of Boston Bankers that had been or would become Legislators
Local Polynomial Smooth Plot
 
Figure 5.21: Proportions of Boston Bank Directors and Presidents who 
had been or would become Legislators, and Local Polynomial Smooth Plot, 
1790-1859 
Source: Massachusetts Registers (1790-1859), and Massachusetts Legislators 
Biographies (1780-2003). Both are from Massachusetts State Library.  
Note: Figure 5.21 plots the annual proportion of bank directors and presidents who 
had been or would become state legislators. The proportions are derived by matching 
the list of bank directors and presidents in the Massachusetts Registers (1790-1824) 
and the biographies of the state legislators provided by the Massachusetts State 
Library. The proportion began to drop after 1812. 
 
Why did banks chartered after 1843 start with small assets and increase over 
time? I categorize banks according to the proportion of legislators on boards of 
directors: legislators whose proportion was smaller than 33%, those larger than 33% 
and smaller than 66%, and those larger than 66%. I focus on the banks chartered after 
1843 and examine their assets over time. Table 5.17 and Figure 5.22 show the average 
bank assets in the three subcategories for banks chartered after 1843. The figure 
shows that the average assets for banks in the below 33% category and 33%-66% 
category were initially small, and kept increasing over time, but the bank assets for 
the category of above 66% category were stable. In the years 1847 and 1850, there 
119 
 
 was only one bank with over 66% of its directors as state legislators, and this bank 
had $800,000 more in assets than banks of the other two categories. In the 1850s, 
although the number of banks in the above 66% category increased to 4 – 6, their 
average bank assets dropped below the average assets of the other two categories. For 
example, in 1855 there were four banks in the above 66% category with the average 
assets of $1,176,039, four banks in the 33% - 66% category with average assets of 
$1,847,671, and five banks in the below 33% category with average assets of 
$1,581,968. Among those banks chartered after the crisis, banks in the above 66% 
category tended to have lower average bank assets. One explanation for why average 
bank assets for banks chartered after 1843 started small and rapidly increased, is that 
banks with a smaller proportion of directors as state legislators also started small and 
rapidly increased fast.   
  
50
00
00
1.
0e
+0
6
1.
5e
+0
6
2.
0e
+0
6
2.
5e
+0
6
1846 1847 1848 1849 1850 1851 1852 1853 1854 1855 1856 1857 1858 1859
year
Leg<=0.33 0.33<Leg<=0.66
0.66<Leg
 
Figure 5.22: Average Bank Assets for Banks with Different Proportion of Bank 
Directors as State Legislators: Proportion of Legislators<=0.33, 
0.33<Proportion<=0.66, and 0.66<Proportion. 
120 
 
  
The overall results for bank balance sheets suggest first that the average assets 
across banks had a large fluctuation in the years before the mid-1820s, stabilized in 
the 1830s, and increased in the 1840s and the 1850s. Second, new banks chartered 
after the crisis had fewer assets than banks opened before the crisis and continued to 
operate afterwards. Third, within new banks chartered after the crisis, less politically 
connected banks had greater bank assets. While more detailed and advanced 
econometric analysis could be done in further studies, the basic analysis of the data 
has provided a picture that banks entering in the de facto free banking era were 
smaller and less connected to politics. 
121 
 
  
Section 4 Conclusion 
 
This chapter examines economic variables such as bankers’ wealth and bank size 
over an extended time frame. The literature suggests that in the 1830s, bankers 
became more democratic in the sense that less wealthy people were able to participate 
in banking. The results from previous sections, which suggested that bankers became 
less associated with politicians over a long time frame, also suggest that bankers may 
have been less elite. This section provides empirical studies from tax lists and bank 
balance sheets to examine whether bankers and banks became less elite in the sense 
that bankers were not wealthier than taxpayers, whether bank sizes were decreasing , 
and whether banks were becoming less closely associated with legislators. Although 
the empirical research does not establish the direct causal link between bankers’ 
wealth and their connection to politics, it provides various views of the data and 
statistics from multiple datasets. The general conclusions are that the wealth 
inequality between bankers and other taxpayers did not shrink but remained stable, 
and that banks chartered in the era of de facto free banking were smaller in size. 
These results suggest that the conclusions in the literature on bankers’ elite status in 
Rhode Island and New York should be reconsidered and further explored. Very 
possibly, democratic or grass-roots banking did not exist in Boston during the period. 
122 
 
  
Chapter 6: An Intra-Elite Explanation of Open Access  
 
We have seen that after the 1820s de facto access to banking opened. In the 
second party regime, no political parties were excluded from obtaining charters. The 
proportion of bankers who were also state legislators at some point in their lives 
dropped from 70% in the late 1790s to 40% in the 1850s. Bankers still enjoyed 
greater wealth than other wealthy taxpayers, although relative wealth inequality 
remained stable. New banks chartered in the de facto free banking era, in particular 
after the financial crises from 1837 to 1842, tended to be smaller. These results 
suggest that access to Massachusetts banking gradually opened, but elite political 
connections did not totally disappear and bankers remained wealthy. The transition to 
open access society does not imply that elites were overthrown by citizens or lost 
their political and economic power. Political and economic elites still held control of 
the banking sector, but banking moved to open entry. How do we explain this 
historical paradox? 
Two recent books examine the transition to modern society from the perspective 
of elites. North, Wallis, and Weingast (2009) argue that, in most societies, intra-elite 
competition and violence is limited by the creation of elite economic rents that sustain 
coordination within the elite coalition. Their understanding of the transition to open 
access hinges on the idea that competition within or between groups of elites can, 
under the right conditions, lead elites toward rules that allow all elites to form 
organizations. The society moves toward a new pattern of open political and 
economic access in which a competitive economy sustains competitive politics.  
123 
 
 In contrast, Acemoglu and Robinson (2005, 2012) suggest that human societies 
have two types of institutions: “extractive institutions” and “inclusive institutions.” 
Extractive institutions allow elite groups to extract wealth from citizens, while 
inclusive institutions “allow and encourage participation by the great mass of people 
in economic activities… and must permit the entry of new businesses and allow 
people to choose their careers.” The transition from extractive to inclusive institutions 
requires that elites be restrained or overthrown by non-elite citizens. Acemoglu and 
Robinson (2012) argue that Americans established inclusive institutions during the 
colonial period and the American Revolution. 
The key difference between North, Wallis, and Weingast (2009) and Acemoglu 
and Robinson (2005, 2012) is their conception of the role of elites in the transition to 
open access or inclusive institutions: the former emphasizes intra-elite competition 
and the latter emphasizes elite-citizen competition. The former suggests that it is 
possible to transition to open access through reconfiguration of elite groups, while the 
latter argues that the threat of revolution by citizens may force elites to extend their 
privileges and allow inclusive institutions to emerge. The evidence presented for 
Massachusetts shows that the transition from limited to open access banking in early 
nineteenth-century Massachusetts stemmed from intra-elite rather than elite-citizen 
competition. Intra-elite competition was not akin to a revolution that eliminated elites. 
Rather, banking elites remained politically connected and wealthy, but intra-elite 
competition moved the banking sector towards de facto free entry. 
From a larger perspective, politically active elites in early America competed 
with other elite groups. Their conflicts were vituperative and loud, and public rhetoric 
124 
 
 was vicious and personal, but it rarely broke out into open violence. Moreover, the 
government was rarely in one faction’s firm control. Even a well-organized coalition 
like the Massachusetts Federalists had trouble defeating their political rivals. In this 
environment, elites in control of government were willing to use their control to 
enhance their own privileges and weaken their opponents. Like elites in many 
countries around the world today, over time the Federalists might have figured out 
how to stabilize their coalition in the presence of democratic elections.  
Americans were particularly paranoid about the possibility that a political 
faction, like the Federalists, would manipulate economic privileges to gain control of 
the democratic polity, influencing the “interests” of individuals who relied on the 
political faction for their economic benefits (Wallis, 2006). For this reason, 
Americans, both elites and non-elites, feared organized political parties. Despite the 
existence of an electoral system in which parties were indispensable in managing the 
government, elites and non-elites alike viewed the emergence of parties as a sign of 
corruption. 
The Americans’ fear of political factions manipulating the economic system 
turned out to be a reality. All banks had to petition for bank charters from the state 
legislature, and Federalists, who dominated the legislature, monopolized the issuance 
of these bank charters from late 1790s to 1810. When Democratic-Republicans 
gained the control of both houses and the governorship in 1811 they rejected all 
Federalist charters and chartered their own banks instead. After Federalists regained 
power in 1812, they began to charter more banks.  As a result of the events of 1811 
and 1812, which exemplified the logic of a winner-take-all political competition, both 
125 
 
 Democratic-Republicans and Federalists were chastened. They came to face the 
reality that tying economic interests to political interests would produce unpredictable 
results if the winning party was free to dismantle the economic organizations of the 
losing party. They began to open access in the banking sector so that all elite groups 
could form banks no matter which party held political power. Thus, the competition 
between elite parties led to open access banking. Ultimately what mattered was that 
existing elites did not consolidate their position by denying rising elites access to the 
organizational tools that make competitive organizations viable, whether they were 
economic, political, or social organizations. 
What followed 1811 makes much more sense if we conceive of the relevant 
conflict as being between elites rather than between elites and the masses. The 
Democratic-Republicans put the State Bank forward as a model for future banks (it 
was also a power grab). A key part of the reform was the tax on bank capital, which 
was intended to return to the state and the state’s taxpayers some of the bank’s profits.  
Significantly, the Democratic-Republicans wanted the capital tax to apply to all future 
incorporated banks. According to the State Bank charter of 1811: 
Provided however, That the same tax, payable in manner aforesaid, 
shall be required by the Legislature of all banks that shall be hereafter 
incorporated within this Commonwealth, from and after the said first 
Monday of October: And provided further, That nothing herein 
contained shall be construed to impair the right of the Legislature to 
lay a tax or excise upon any bank already incorporated, under the 
authority of the Commonwealth, whenever they may think proper to 
do so.90  
 
 The Federalists could have reversed the “reform” provisions of the State Bank 
charter when they came back into power, but they did not. Rather than undo the 
90 Massachusetts, 1811, Chapter LXXXIV, “An Act to Incorporate the President, 
Directors, and Company of the State Bank,” p. 507. 
126 
 
                                                 
 capital tax provision, they kept it in place; all of the bank charter renewals in 1812 
contained the capital tax provision. In this new system, when the legislature chartered 
new banks, or renewed existing bank charters, the charters usually contained the 
provision that the new bank followed the rules of the State Bank charter. For instance, 
in the rechartering of the Worcester bank in 1812, “That the rules, restrictions, 
limitations, reservations and provisions, which are provided in and by the third 
section of an Act, entitled, ‘An Act to incorporate the President, Directors, and 
Company of the State Bank,’ shall be binding on the bank hereby established…” 91 
The charter of the Worcester Bank repeated the capital tax provision of the State 
Bank charter word-for-word. 
The terms of new bank charters in Massachusetts became formally standardized 
on February 29, 1829 with the passage of the Act to Regulate Banks and Banking.  
The Act required that all banks would be governed by the same rules and 
regulations.92  The Act reconfirmed the bank capital tax and the right of the state to 
invest in any bank, as well as to borrow from it.  The clincher was section 31, which 
not only guaranteed that all existing bank charters would have the same provisions 
but any new provisions introduced in the future would retroactively apply to all 
existing banks: “Be it further enacted, That if, during the continuance of any Bank 
Charter, granted or renewed under the provisions of this Act, any new or greater 
91 Massachusetts, 1821, Chapter 26, “An Act to incorporate the President, Directors, and 
Company of the Worcester Bank,” p. 422. 
92 Massachusetts, 1831, Chapter XCVI, “An Act to regulate Banks and Banking,” 
Section 1, p. 145, “That from and after the passing of this Act, every Bank which shall 
receive a Charter, from or by the authority of this Commonwealth, and every Bank whose 
Capital shall be increased, or whose Charter shall be extended, shall be governed by the 
following rules, and subjected to all the duties, limitations, restrictions, liabilities and 
provisions, contained in this Act.” 
127 
 
                                                 
 privileges shall be granted to any other bank now in operation, or which may 
hereafter be created, each and every Bank in operation at the time shall be entitled to 
the same” (p. 161). Massachusetts had passed an “impersonal” rule for the creation 
and governance of banks— a rule that treated all banks the same.  
The aftermath of the 1811 election confirmed that intra-elite competition, rather 
than competition between elites and regular citizens, was the driving force towards 
open access. The events of 1811 and 1812 exhibited the potential danger posed to all 
economic organizations by a change in legislative party control, if legal recognition 
of organizations could be revoked at the pleasure of the party in control. That all the 
existing bank charters (with the exception of the Massachusetts bank) were up for 
renewal in 1812 was a unique occurrence that highlighted the danger. One limited 
response was the movements towards making all bank charters contain the same 
privileges and provisions, a move began with the State Bank charter in 1811 and was 
finalized in the general regulatory Act of 1829. Making all bank charters the same 
removed one way in which the parties could manipulate economic organizations. 
Banks were still connected to political elites, and many bankers were wealthy 
economic elites, but no elite group could manipulate bank charters and gain 
additional privileges. 
The history and the empirical analysis suggest that the competition between elite 
groups, rather than between elites and citizens, was the key to move Massachusetts 
banking towards open access. 
  
128 
 
  
Chapter 7: Conclusion 
 
My dissertation examines how Massachusetts created open access in banking in 
the early nineteenth century. The first chapter introduces this question, and provides 
historical background and conceptual framework necessary for unpacking this 
question. The second chapter challenges the answer offered by Wallis, Sylla, and 
Legler (1994), providing new evidence that shows how the majority political party, 
the Federalists, held monopoly on banks by dominating the state legislature in charge 
of issuing charters for new banks, effectively prohibiting members of the opposing 
political parties from opening banks under the current legal system. Political turnover 
in the period between 1810 and 1812, temporarily eliminated the Federalist political 
monopoly, and allowed for the possibility of open entry in the banking sector. The 
third chapter presents original data about bank directors and state legislators in an 
effort to identify the party affiliations of bank directors, showing how the political 
composition of the banking sector changed during the Federalist and the Democratic-
Republican era, and how the banking sector became less connected to political elites 
(i.e. the legislators) in the 1830s to 1850s. The fourth chapter looks at the political 
connection of bankers and legislators by identifying the contemporary office holdings 
of bankers and state legislators in the same year. The fifth chapter collects data on 
private accumulation of wealth from Boston tax rolls and the data on bank balance 
sheets to show that in the era of de facto free banking, bankers were on average 
always richer than other wealthy taxpayers, but the relative wealth inequality 
remained stable; new banks chartered in this era were small banks. The sixth chapter 
129 
 
 provides an explanation of open access from the perspective of intra-elite 
competition. The overall results in these chapters show that the banking sector moved 
toward free entry by solving the problem of intra-elite competition exhibited by 
exclusive party politics. Intra-elite competition did not eliminate elites from banking: 
political elites and banks were still connected, bankers remained wealthy, but intra-
elite competition did lead the banking sector towards free entry.  
The dissertation has shown substantial evidence for a large change in the 
relationship between banks, legislatures, and parties occurred in Massachusetts 
between 1811 and 1829. The 1820s changes have their roots in the crisis of 1811 and 
1812, before the War of 1812 broke out. By 1829, Massachusetts had moved to 
impersonal rules for forming and operating a bank. Those rules provided 
sophisticated and powerful tools to banking organizations. The tools were not just 
listed in bank charters, they were embedded in the economic, political, and legal 
systems that gave shape and substance to the organizations created by the bank 
charters. Critically, bank charters and access to those tools was first opened to elites, 
and in the 1850s it spread to non-elites. 
American history has a complicated relationship with the notion of elites. Elites 
participated in and led the American Revolution and played central roles in the 
formation of new governments in the late eighteenth and early nineteenth century at 
both the national and state level. The widespread antipathy towards political parties 
produced a curious politics in which elite groups competed for control of 
governments, attempted to plausibly deny that they had formed a political party to 
promote the interests and objectives of their group, and vehemently denounced the 
130 
 
 opposing elite groups as corrupt, dangerous, partisans who would wreck American 
society in pursuit of their own goals. It is difficult to overstate the sheer nastiness of 
early American politics. 
There have been many approaches to this history by American historians. They 
differ in choosing the poles of their story: Federalists vs. Republicans, Hamilton vs 
Jefferson, Nationalist vs. Decentralists (not a good name for this, state’s rights is too 
loaded.)  In many histories the poles are abandoned as substantive devices, but 
retained as rhetorical ones. Accepting that the many sides of these many polarizing 
debates had merits as well as flaws, the interaction of elites is taken as a sign of the 
vibrancy of American culture and democracy. Then the bottom line often becomes a 
story of non-elites vs. elites, of Democrats vs. Whigs, of Populists vs. Plutocrats, and 
of communalists vs. capitalist. This is the story of the triumph of revolution, 
democracy, and the interest of the common man. It is a great story, but not one that 
that  very well with historical reality, since elites are the primary actors in the early 
part of the story. In order to rescue the story, America has to be endowed with good 
elites who acted in the nation’s best interest. The fluctuating historical fortunes of 
founding fathers like John Adams, Alexander Hamilton, and to a certain extent James 
Madison results from the periodic recalculations of what it means to be a good elite in 
American history.  George Washington and Thomas Jefferson seem secure. 
People outside the United States are doubtful that this kind of idiosyncratic and 
personalized American history holds much in the way of lessons for how their 
societies might attempt to promote development.  Their doubts are not surprising. 
Their societies are plagued by elites that propose reforms and then subvert them, by 
131 
 
 populist leaders who rise to influence and power and then act just like the elites they 
replaced. The only way American history makes sense in the development context is 
if we recognize that American elites were as competitive, vindictive, and personally 
motivated as well as elites in nations around the world today. What differed about 
elites in the United States was the dynamics of the way how the elites interacted, not 
their moral character or political philosophy. 
What happened in the United States, as exemplified by Massachusetts bankers, 
was a change in the internal dynamic of intra-elite competition. The change produced 
a set of institutional changes that altered relationships between elites. Significantly, 
Massachusetts moved to a set of impersonal rules for elites. At that point the politics 
of banking moved from creating special privileges through unique provisions in 
charters (or geographic monopolies, for examples) to a system where all elites 
enjoyed the same organizational tools. Entry was still limited to those who possessed 
the political clout and wealth to get into the legislature, but that was becoming a 
lower bar as the dynamics of political parties shifted and the average tenure 
(commitment) of a state legislator declined. Many bankers remained politically 
connected and wealthy but the banking sector did move to de facto free entry and no 
elite group was excluded from banking any longer.  
Impersonal rules and relative open elite entry produced a large number of 
relatively small banks. The banks were profitable, but did not enjoy substantial rents 
from limited entry. Instead, banks were useful in combination with the growing 
manufacturing and commercial sectors (Lamoreaux, 1994). Under those conditions 
extending banking privileges to non-elites was no longer such a big deal. 
132 
 
 The primary lesson to learn from Massachusetts is that even in a society with a 
long democratic tradition, with cultural norms that stress the importance of equality 
and charity, that it is difficult for a society to consciously and deliberately eliminate 
elite privileges. Support for, and limits on, organizations is a key element in those 
privileges. Until we understand the dynamics of how elites decide to move to 
impersonal rules for elites that can genuinely create and sustain open access for elites, 
we are unlikely to understand how to do it for the larger population. The naïve view 
that generating revolutions and transplanting democratic system is what facilitates 
political and economic open access, has not worked anywhere, even in the United 
States. 
133 
 
 Appendices 
 
                         
                         Table 3.1: Bankers and Legislators, 1790-1859 
Year 
Number of 
Bankers  
Number of 
Bankers who 
were 
Legislators 
Number of 
Bankers who 
were 
Legislators with 
Party ID 
Share of 
Bankers who 
were 
Legislators 
Share of 
Legislators 
with Party ID 
 
 
Shares of 
Bankers with 
Party ID 
(6)   (1) (2) (3) (4) (5) 
1790-1799 304 225 95 0.740132 0.244 0.3125 
1797-1799 115 82 46 0.713043 0.836 0.4 
1800-1809 544 378 268 0.694853 0.983 0.492647 
1800-1812 757 533 388 0.704095 0.989 0.51255 
1810-1819 949 646 535 0.680717 0.993 0.563751 
1820-1825 1066 589 485 0.552533 0.564 0.454972 
1825-1839 5019 2346 1904 0.467424 0.732 0.379358 
1840-1859 12597 5598 5035 0.444392 0.999 0.399698 
1790-1859 20244 9661 8226 0.477228 0.838375 0.406343 
Notes: Column (1) provides the total number of bankers in several overlapping periods. Column (2) measures 
the number of bankers who had been or would become state legislators. Column (3) presents number of bankers 
who were state legislators with Party ID. Column (4) shows the share of bankers who had been or would become 
legislators. Column (5) shows the share of legislators with Party ID. (4)=(2)/(1), and (6)=(3)/(1). 
134 
 
            Table 3.2: New Bankers and Legislators 
Year ALL Banker Only Banker&Leg %Banker Only %Banker&Leg 
  (1) (2) (3) (4) (5) 
1790-1799 77 25 52 0.324675 0.675325 
1797-1799 18 7 11 0.388889 0.611111 
1800-1809 85 32 53 0.376471 0.623529 
1800-1812 108 40 68 0.37037 0.62963 
1800-1815 144 53 91 0.368056 0.631944 
1810-1815 59 21 38 0.355932 0.644068 
1815-1819 94 46 48 0.489362 0.510638 
1815-1825 279 153 126 0.548387 0.451613 
1820-1825 185 107 78 0.578378 0.421622 
1820-1829 366 205 161 0.560109 0.439891 
1830-1839 483 292 191 0.604555 0.395445 
1840-1849 173 109 64 0.630058 0.369942 
1850-1859 1374 769 605 0.55968 0.44032 
Note: Column (1) shows the numbers of new individual bankers reported in the Massachusetts Registers. In 
contrast to Table 3.1, each banker is only counted once in Table 3.2. Column (2) shows the numbers of bankers 
who are never legislators. Column (3) shows the number of bankers either had been or would become a legislator. 
(4) = (2)/(1), (5)= (3)/(1). 
  
135 
 
              Table 3.3 All New Bankers, By Legislator or not, and By Party or not 
  
As Share of all Bankers As Share of all Banker/Legislators 
 
1790-
1815 
1816-
1824 
1825-
1859                
1790-
1815 
1816-
1824 
1825-
1829 
1790-1815 
1816-
1824 
1825-1829 
 
(1) (2) (3) (4) (5) (6) (7) (8) (9) 
Bankers 221 220 2268   
 
        
 
   
  
  
  
  Not Legislators 79 115 1305 0.36 0.52 0.58   
  
 
   
  
  
  
  Legislators 142 105 963 0.64 0.48 0.42 1 1 1 
 
   
  
  
  
  W/PartyID 93 87 849 0.42 0.4 0.37 0.65 0.83 0.88 
  
 
      
 
        
Parties:    
  
  
  
  
Federalist 60 51 
 
0.27 0.23 
 
0.42 0.49 
 Dem-Republican 29 17 
 
0.13 0.08 
 
0.2 0.16 
 Other 4 19 
 
0.02 0.09 
 
0.03 0.18 
 
 
   
  
  
  
  Whig 
  
321   
 
0.14   
 
0.33 
Republican 
  
159   
 
0.07   
 
0.17 
Democrat 
  
128   
 
0.06   
 
0.13 
Nat/Republican 
  
86   
 
0.04   
 
0.09 
Federalist 
  
55   
 
0.02   
 
0.06 
Know Nothing 
  
24   
 
0.01   
 
0.02 
Other 
  
76   
 
0.03   
 
0.08 
No Party 49 18 114 0.22 0.08 0.05 0.35 0.17 0.12 
 
 
136 
 
                   Table 3.4: The OLS, Logit and Probit Tests on the Probability that a New Banker had been a Party Legislator  
  (1) (2) (3) (4) (5) (6) 
 DR DR DR Fed Fed Fed 
  OLS Logit Probit OLS Logit Probit 
       
D1812 0.1935** 0.2633** 0.2088** -0.0502 -0.0609 -0.0659 
 -0.0892 -0.1263 -0.1041 -0.1191 -0.1308 -0.1245 
       
Number of New Bankers -0.0006 -0.0002 -0.0003 0.0030** 0.0028** 0.0027** 
 -0.0011 -0.0011 -0.0011 -0.0015 -0.0014 -0.0014 
       
Cumulative Dem-Rep Legislators -0.1853* -0.2592* -0.2079*    
 -0.0998 -0.1368 -0.1174    
       
Cumulative Federalist Legislators  0.0695 0.0855 0.0896 
    -0.1197 -0.1305 -0.1248 
       
Constant 0.1165*** 
-
2.007*** 
-1.1897*** 0.0514 -2.5663*** -1.4852*** 
 -0.0387 -0.4883 -0.2542 -0.0525 -0.4617 -0.2421 
Number of Observations 386 386 386 386 386 386 
adj. R-sq 0.0047   0.011   
Pseudo R-sqr 0.0265 0.0222  0.0215 0.0211 
F 1.61   2.43   
LR chi2   5.85 4.9   7.23 7.1 
Standard errors in parentheses   * p<0.10 ** p<0.05 *** p<0.01      
137 
 
  
Table 3.4 (Continued) (7) (8) (9) (10) (11) (12) 
 
DR  DR  DR  Fed  Fed  Fed  
 
OLS Logit Probit OLS Logit Probit 
D1812 0.4036*** 0.2751*** 0.2678*** -0.1174 -0.1454 -0.1298 
 
(0.0952) (0.0963) (0.0935) (0.1360) (0.1391) (0.1365) 
       Number of New Bankers -0.0015 -0.0005 -0.0006 0.0030** 0.0027* 0.0026* 
 
(0.0011) (0.0010) (0.0010) (0.0015) (0.0014) (0.0014) 
       Cumulative Dem-Rep Legislators -0.0004*** -0.0002** -0.0002** 
   
 
(0.0001) (0.0001) (0.0001) 
   
       Dem-Rep Senate Share 0.0026*** 0.0012 0.0010 
   
 
(0.0010) (0.0010) (0.0010) 
   
       Dem-Rep House Share 0.0081*** 0.0073*** 0.0078*** 
   
 
(0.0020) (0.0025) (0.0025) 
   
       Cumulative Federalist Legislators 
   
0.0001 0.0002 0.0002 
    
(0.0001) (0.0001) (0.0001) 
       Federalist Senate Share 
   
-0.0024 -0.0026 -0.0025 
    
(0.0015) (0.0016) (0.0016) 
       Federalist House Share 
   
0.0023 0.0024 0.0022 
    
(0.0018) (0.0018) (0.0018) 
       Constant -0.2472*** -7.008*** -3.7410*** 0.0645 -2.5278** -1.4057*** 
 
(0.0846) (1.5511) (0.7627) (0.1280) (1.0033) (0.5411) 
       Number of Observations 386 386 386 386 386 386 
adj. R-sq 0.068 
  
0.013 
  
Pseudo R-sqr 0.115 0.107 
 
0.0304 0.0293 
F 6.602 
  
2.015 
  
LR chi2 
 
25.31 23.69 
 
10.25 9.87 
Standard errors in parentheses 
   
* p<0.10  ** p<0.05  *** p<0.01 
 
 
138 
 
  
Table 4.1: Individual and Time Fixed Effects of Legislators’ Probability of 
Being a Bank Director at the Same Year 
 
Individual and Time Fixed Effects 
(1) 
Time Fixed Effects Only 
(2) 
lagbanker -0.00902* -0.00893* 
Leg1790 0.101* 0.102* 
Leg1791 0.104** 0.105** 
Leg1792 0.055 0.056 
Leg1793 0.138*** 0.139*** 
Leg1794 0.256*** 0.258*** 
Leg1795 0.467*** 0.470*** 
Leg1796 0.279*** 0.283*** 
Leg1797 0.428*** 0.433*** 
Leg1798 0.447*** 0.451*** 
Leg1799 0.491*** 0.496*** 
Leg1800 0.530*** 0.537*** 
Leg1801 0.0514 0.0541 
Leg1802 0.181** 0.187** 
Leg1803 0.213*** 0.220*** 
Leg1804 0.322*** 0.331*** 
Leg1805 0.329*** 0.336*** 
Leg1806 0.262*** 0.265*** 
Leg1807 0.226*** 0.229*** 
Leg1808 0.273*** 0.276*** 
Leg1809 0.213*** 0.217*** 
Leg1810 0.175*** 0.178*** 
Leg1811 0.197*** 0.200*** 
Leg1812 0.156*** 0.158*** 
Leg1813 0.155*** 0.159*** 
Leg1814 0.178*** 0.181*** 
Leg1815 0.130*** 0.132*** 
Leg1816 0.0827* 0.0843* 
Leg1817 0.0655 0.067 
Leg1818 0.089 0.0907 
Leg1819 0.156*** 0.158*** 
Leg1820 0.197*** 0.204*** 
Leg1821 0.0269 0.0312 
Leg1822 0.0532 0.0612 
Leg1823 0.132*** 0.138*** 
Leg1824 0.0817* 0.0862* 
Leg1825 0.0818* 0.0838* 
Leg1826 0.0174 0.0238 
139 
 
 Leg1827 -0.0491 -0.0432 
Leg1828 0.0133 0.0152 
Leg1829 0.0920*** 0.0964*** 
Leg1830 0.172*** 0.177*** 
Leg1831 0.110*** 0.114*** 
Leg1832 0.0869** 0.0895** 
Leg1833 0.120*** 0.124*** 
Leg1834 0.0920** 0.0934** 
Leg1835 0.0899*** 0.0927*** 
Leg1836 0.000362 0.00189 
Leg1837 0.0506 0.0512* 
Leg1838 0.0438 0.0456 
Leg1839 0.0935* 0.0995* 
Leg1840 0.0851** 0.0857** 
Leg1841 0.0864** 0.0877** 
Leg1842 0.0449 0.0448 
Leg1843 0.0649 0.0641 
Leg1844 -0.00111 -0.00272 
Leg1845 0.0107 0.00855 
Leg1846 -0.00998 -0.00973 
Leg1847 0.0161 0.0161 
Leg1848 -0.0139 -0.0138 
Leg1849 -0.057 -0.0584 
Leg1850 -0.0621 -0.0613 
Leg1851 0.0347 0.0336 
Leg1852 0.0423 0.0412 
Leg1853 -0.00671 -0.0087 
Leg1854 0.0711* 0.0693* 
Leg1855 -0.0289 -0.0336 
Leg1856 -0.0443 -0.0479 
Leg1857 0.0119 0.00877 
Leg1858 -0.0376 -0.0413 
Leg1859 0.00771 0.00407 
constant        0.0884                                       -1.63e-10 
   N      46681               46681 
adj. R-sq 0.039 
 F 12.08 
                       * p<0.05, ** p<0.01, *** p<0.001 
 
 
 
140 
 
  
  
Table 5.1: Representation of the Tax Lists and Sample 
   
Year 
Boston 
Population 
from the 
U.S. 
Census 
(1) 
U.S. Census 
Divided by 
Five 
(2)=(1)/5 
Number of 
Taxpayers in the 
Boston Tax List, 
Including 
Organizations          
(3) 
Number of 
Taxpayers 
in the 
Sample 
(4) 
Ratio of 
Taxpayers in 
the Tax Lists 
over All 
Taxpayers  
(5)=(3)/(2) 
Ratio of 
Taxpayers in 
the Sample 
over All 
Taxpayers 
(6)=(4)/(2) 
1830 61392 12278.4 1836 1083 14.95% 8.82% 
1840 93383 18676.6 3648 766 19.53% 4.10% 
1850 136881 27376.2 4921 2487 17.98% 9.08% 
Source: Boston Population in Column (1) are from U.S. Census 
  
141 
 
                                 Table 5.2: Sample Size of Taxpayers and Boston Bankers, 1829-1859  
Year 
Number of 
Taxpayers in 
the Tax Lists 
(including 
business 
organizations) 
Number of 
Taxpayers in 
the Sample 
(without 
business 
organizations) 
  
Number of 
All Boston 
Bankers in 
the Registers 
Number of 
Boston 
Bankers in 
the Sample 
  
  (1) (2) (3)=(2)/(1) (4) (5) (6)=(5)/(4) 
1829 1914 1180 61.65% 200 88 44.00% 
1830 1836 1083 58.99% 201 101 50.25% 
1832 2166 936 43.21% 219 86 39.27% 
1833 2345 174 7.42% 261 17 6.51% 
1834 2516 670 26.63% 280 72 25.71% 
1836 2835 1362 48.04% 283 140 49.47% 
1837 2997 585 19.52% 319 53 16.61% 
1838 2970 677 22.79% 306 77 25.16% 
1839 3552 600 16.89% 253 50 19.76% 
1840 3648 766 21.00% 232 61 26.29% 
1841 3663 1499 40.92% 223 99 44.39% 
1842 3605 1141 31.65% 227 83 36.56% 
1843 3888 1256 32.30% 219 83 37.90% 
1844 4270 1338 31.33% 221 84 38.01% 
1845 4830 1101 22.80% 220 47 21.36% 
1846 4902 2834 57.81% 226 145 64.16% 
1847 5265 2711 51.49% 221 125 56.56% 
1848 5883 3291 55.94% 225 153 68.00% 
1849 4572 2618 57.26% 229 142 62.01% 
1850 4921 2487 50.54% 224 132 58.93% 
1851 4921 2370 48.16% 237 131 55.27% 
1852 5168 2644 51.16% 263 162 61.60% 
142 
 
 1853 4512 2769 61.37% 253 156 61.66% 
1857 4256 2344 55.08% 271 130 47.97% 
1858 4224 1770 41.90% 250 111 44.40% 
1859 4320 1851 42.85% 281 128 45.55% 
Note: (1) Table 5.2 exhibits the annual sample size of all taxpayers in the tax rolls, 
and the sample size of taxpayers and bankers that I collected between 1829 and 
1859. It also shows the percentages of the collected samples in the sample of tax 
rolls. In most years, the samples are pretty large and good representatives of the 
sample of tax rolls.  
(2) The percentage in Column (3) changes from 22.8% in 1845 to 57.8% in 1846 
because it is easier to parse the data and recognize the names for the tax lists after 
1845.  
 
143 
 
                          Table 5.3: Summary Statistics for Wealth of Taxpayers and Bankers, 1829-1859 
Year   
Taxpayers' 
Wealth 
Taxpayers' 
Real 
Estate 
Taxpayers' 
Personal 
Estate 
Bankers' 
Wealth 
Bankers' 
Real 
Estate 
Bankers' 
Personal 
Estate 
Ratios of 
Average 
Wealth of 
Bankers 
to 
Taxpayers 
    (1) (2) (3) (4) (5) (6) (7) 
1829 mean 26976.13 17610.26 9334.124 46804.21 28183.16 18427.08 1.735023 
 
s.d. 41417.97 26547.32 25134.43 63471.24 36717.61 32096.04 
 
 
number 1176 1176 1180 95 95 96 
 
         1830 mean 24675.97 15729.57 8877.932 45738.18 27056.36 18513.51 1.853551 
 
s.d. 32824.76 24412.76 16696.96 49502.67 38421.7 20378.7 
 
 
number 1082 1082 1083 110 110 111 
 
         1832 mean 29928.21 20096.25 9800.445 62471.58 38901.05 23570.53 2.087381 
 
s.d. 51073.53 30828.94 30928.52 73995.11 49446.85 35442.54 
 
 
number 933 933 936 95 95 95 
 
         1833 mean 28954.02 18355.17 10598.85 45977.78 24922.22 21055.56 1.587958 
 
s.d. 42354.92 21662.06 29310.7 40109.55 21238.71 23030.6 
 
 
number 174 174 174 18 18 18 
 
         1834 mean 28254.87 17093.25 11111.64 40086.08 20111.39 19974.68 1.418732 
 
s.d. 59248.12 25283.47 52615.86 35682.41 18234.41 24295.44 
 
 
number 667 667 670 79 79 79 
 
         1836 mean 25747.42 18247.97 7458.425 43950.33 27431.37 16518.95 1.70698 
 
s.d. 42063.57 30108.15 20035.72 54099.66 30079.35 28617.11 
 
 
number 1354 1355 1359 153 153 153 
 
         
144 
 
 1837 mean 21089.17 18639.2 750.5146 36047.14 31546.43 704.9123 1.709273 
 
s.d. 34631.6 32128.93 3747.285 52820.74 50233.81 2936.932 
 
 
number 578 578 583 56 56 57 
 
         1838 mean 23965.53 16732.34 7186.963 35235.44 22002.53 13232.91 1.470255 
 
s.d. 28885.31 20712.73 16110.01 31902.14 21908.51 18496.35 
 
 
number 673 674 675 79 79 79 
 
         1839 mean 19952.68 15502.34 4225.795 36630.4 23429.09 11694.58 1.835864 
 
s.d. 25583.44 19852.81 12152.98 39483.77 27564.6 24124.63 
 
 
number 595 598 596 55 55 55 
 
         1840 mean 21240.57 15679.27 5064.999 45849.16 24611.59 18995.43 2.158565 
 
s.d. 30242.35 20387.51 15267.21 46697.56 26074.43 29879.47 
 
 
number 759 762 763 67 69 67 
 
         1841 mean 20181.25 15981.02 4106.933 33867.06 22596.52 11270.54 1.678145 
 
s.d. 27213.97 21709.39 12266.26 31150.65 21242.68 20996.11 
 
 
number 1493 1496 1496 115 115 115 
  
145 
 
                         Table 5.3 (continued): Summary Statistics of Wealth of Taxpayers and Bankers, 1829-1859 
Year   
Taxpayers' 
Wealth 
Taxpayers' 
Real 
Estate 
Taxpayers' 
Personal 
Estate 
Bankers' 
Wealth 
Bankers' 
Real 
Estate 
Bankers' 
Personal 
Estate 
Ratios of 
Average 
Wealth of 
Bankers 
to 
Taxpayers 
    (1) (2) (3) (4) (5) (6) (7) 
         1842 Mean 21907.18 15249.84 6634.005 36751.14 25365.17 11195.56 1.677584 
 
s.d. 30970.67 20419.79 19201.91 34060.84 28061.1 16080.78 
 
 
number 1137 1137 1141 88 89 90 
 
         1843 Mean 20424 14006.51 6317.288 36552.69 21385.11 14937.63 1.789693 
 
s.d. 24353.14 17368.85 13965.89 30892.42 17319.27 18898.76 
 
 
number 1244 1248 1251 93 94 93 
 
         1844 Mean 21571.82 14812.45 6729.035 40409.89 22091.21 18318.68 1.873272 
 
s.d. 29071.34 23175.17 14059.61 37107.69 20527.63 21008.49 
 
 
number 1331 1331 1337 91 91 91 
 
         1845 Mean 21415.57 14294.91 6878.95 43815.79 21429.82 22385.96 2.045978 
 
s.d. 30404.2 19766.87 16470.89 57120.65 28581.56 32526.96 
 
 
number 1100 1100 1101 57 57 57 
 
         1846 Mean 26049.68 13443.46 12606.22 56242.72 26406.27 29836.45 2.159056 
 
s.d. 55253.58 34219.85 32359.77 83808.58 34791.6 36746.64 
 
 
number 2833 2833 2833 187 187 187 
 
         1847 Mean 26613.43 14614.76 11998.66 58420.7 29921.44 28499.26 2.195159 
 
s.d. 57444.29 35830 33682.18 94339.31 43565.23 40026.13 
 
 
number 2710 2710 2710 164 164 164 
 
146 
 
          1848 Mean 24103.44 13992.99 10064.83 51845.71 24204.23 27553.82 2.150967 
 
s.d. 43078.72 29348.15 24498.92 74069.7 39659.03 34317.69 
 
 
number 3289 3289 3289 204 204 204 
 
         1849 Mean 30152.26 17092.06 13041.17 58071.84 27350.79 30593.87 1.925953 
 
s.d. 54331.22 35073.47 32247.45 84437.98 41650.07 39383.27 
 
 
number 2617 2617 2617 179 179 179 
 
         1850 Mean 31483.81 16590.44 14893.37 65961.22 31364.92 34596.3 2.095084 
 
s.d. 54931.8 36942.9 31054.45 99521.55 55373.19 38795.77 
 
 
number 2486 2486 2486 165 165 165 
 
         1851 Mean 32776.58 18508.81 14267.78 58122.87 28589.55 29533.32 1.773305 
 
s.d. 59972.04 40521.7 32248.13 68089.56 42707.98 37231.64 
 
 
number 2369 2369 2369 165 165 165 
 
         1852 Mean 32345.44 18651 13692.19 61322.91 32146.44 29176.47 1.895875 
 
s.d. 59750.13 41177.92 31044.84 97386.41 54622.24 37184.25 
 
 
number 2643 2643 2643 208 208 208 
 
147 
 
                          Table 5.3 (continued): Summary Statistics for Wealth of Taxpayers and Bankers, 1829-1859 
Year   
Taxpayers' 
Wealth 
Taxpayers' 
Real 
Estate 
Taxpayers' 
Personal 
Estate 
Bankers' 
Wealth 
Bankers' 
Real 
Estate 
Bankers' 
Personal 
Estate 
Ratios of 
Average 
Wealth of 
Bankers 
to 
Taxpayers 
    (1) (2) (3) (4) (5) (6) (7) 
         1853 Mean 34037.54 18715.56 15305.77 58773.2 25055.1 33718.1 1.726717 
 
s.d. 60866.32 37849.7 36745.74 63993.16 28676.96 40494.49 
 
 
number 2768 2768 2768 194 194 194 
 
         1857 mean 44847.84 21382.09 23449.51 76913.82 33297.75 43616.07 1.714995 
 
s.d. 65180.41 41258.69 43758.18 78402.68 46644.56 57756.69 
 
 
number 2344 2344 2344 158 158 158 
 
         1858 mean 44173.99 22550.24 21623.75 84074.08 40049.58 44024.5 1.903248 
 
s.d. 70329.17 45813.32 43477.77 99089.86 77560.14 58094.87 
 
 
number 1770 1770 1770 127 127 127 
 
         1859 mean 45557.62 27152.94 18404.68 84557.95 46201.67 38356.28 1.856066 
 
s.d. 73295.6 49781.25 46267.7 96148.26 77829.83 48917.92 
 
 
number 1851 1851 1851 150 150 150 
 
         Summary mean 29576.08 17340.95 12165.01 55183.16 28697.42 26279.02 1.865804 
 
s.d. 52606.02 34340.1 31285.24 74058.61 43773.79 37667.88 
  number 41976 41991 42025 3152 3156 3157  
 
Note: Table 5.3 lists the mean and the standard deviation of the total wealth (= real estate+ personal estate), 
real estate, and personal estate for all taxpayers and bankers in the sample from 1829 to 1859. It also presents 
148 
 
 the ratios of the average wealth of bankers to taxpayers in Column 7, which is derived from dividing the 
average wealth of bankers by the average wealth of taxpayers.
149 
 
 Table 5.4: Growth Rate of Taxpayers and Bankers, and their Difference 
Year 
Average 
Wealth of 
Taxpayers 
Average 
Wealth 
of 
Bankers 
Wealth 
Growth 
Rate of 
Taxpayers 
Wealth 
Growth 
Rate of 
Bankers 
Difference 
of Growth 
Rate 
  (1) (2) (3) (4) 
(5)  
= (4)-(3) 
1829 26976.13 46804.21 
   1830 24675.97 45738.18 -0.08527 -0.02278 0.06249 
1831 
     1832 29928.21 62471.58 
   1833 28954.02 45977.78 -0.03255 -0.26402 -0.23147 
1834 28254.87 40086.08 -0.02415 -0.12814 -0.104 
1835 
     1836 25747.42 43950.33 
   1837 21089.17 36047.14 -0.18092 -0.17982 0.0011 
1838 23965.53 35235.44 0.13639 -0.02252 -0.15891 
1839 19952.68 36630.4 -0.16744 0.03959 0.207032 
1840 21240.57 45849.16 0.064547 0.25167 0.187122 
1841 20181.25 33867.06 -0.04987 -0.26134 -0.21146 
1842 21907.18 36751.14 0.085521 0.085159 -0.00036 
1843 20424 36552.69 -0.0677 -0.0054 0.062303 
1844 21571.82 40409.89 0.0562 0.105524 0.049325 
1845 21415.57 43815.79 -0.00724 0.084284 0.091527 
1846 26049.68 56242.72 0.21639 0.283618 0.067228 
1847 26613.43 58420.7 0.021641 0.038725 0.017083 
1848 24103.44 51845.71 -0.09431 -0.11255 -0.01823 
1849 30152.26 58071.84 0.250953 0.12009 -0.13086 
1850 31483.81 65961.22 0.044161 0.135856 0.091695 
1851 32776.58 58122.87 0.041061 -0.11883 -0.15989 
1852 32345.44 61322.91 -0.01315 0.055056 0.06821 
1853 34037.54 58773.2 0.052313 -0.04158 -0.09389 
1854 
     1855 
     1856 
     1857 44847.84 76913.82 
   1858 44173.99 84074.08 -0.01503 0.093095 0.10812 
1859 45557.62 84557.95 0.031322 0.005755 -0.02557 
Mean 29576.08 55183.16 0.011948 0.006429 -0.00552 
 
Note: Columns (1) and (2) show the annual average wealth of taxpayers and bankers, 
calculated from the Boston Tax Lists, the same to Columns (1) and (4) of Table 5.3. Columns (3) 
150 
 
 and (4) present the annual growth rates of wealth. Column (5) shows the difference of growth 
rates by differentiating growth rate of wealth of bankers and taxpayers. 
151 
 
  
Table 5.5: Summary Statistics: Mean, S.D., and Number of Deflated 
Wealth of Taxpayers and Bankers by Year 
Year Historical CPI   
Taxpayers' 
Deflated 
Average 
Wealth 
Bankers' 
Deflated 
Average 
Wealth 
Ratio of 
Bankers' 
to 
Taxpayers' 
Wealth 
  (1)   (2) (3) (4)=(3)/(2) 
      1829 1.076372 mean 25062.08 43483.29 1.735023 
  
s.d. 38479.22 55067.36 
 
  
number 1176 95 
 
      1830 1.066826 mean 23083.49 42873.15 1.857308 
  
s.d. 30749.57 43064.42 
 
  
number 1082 110 
 
      1832 1 mean 29928.21 62471.58 2.087381 
  
s.d. 51073.53 70126.6 
 
  
number 933 95 
 
      1833 0.97136 mean 29807.7 47333.39 1.587958 
  
s.d. 43603.72 41284.83 
 
  
number 174 18 
 
      1834 0.990454 mean 28527.21 40472.45 1.418731 
  
s.d. 59819.19 34615.52 
 
  
number 667 79 
 
      1836 1.076372 mean 23920.55 40831.9 1.70698 
  
s.d. 39079.02 46299.95 
 
  
number 1354 153 
 
      1837 1.106205 mean 17534.01 29166.31 1.663414 
  
s.d. 29668.28 47018.33 
 
  
number 578 56 
 
      1838 1.076372 mean 22265.09 32735.37 1.470255 
  
s.d. 26835.8 27348.35 
 
  
number 673 79 
 
      1839 1.076372 mean 18407.57 32631.53 1.772723 
  
s.d. 23540.75 35367.01 
 152 
 
   
number 595 55 
 
      1840 1 mean 20832.93 44341.7 2.128443 
  
s.d. 29245.31 45691.83 
 
  
number 759 67 
 
      1841 1.009547 mean 19937.98 33546.81 1.682558 
  
s.d. 26895 30309.45 
 
  
number 1493 115 
 
153 
 
 Table 5.5 (continued): Summary Statistics: Mean, S.D., and Number of Deflated Wealth of 
Taxpayers and Bankers by Year 
Year Historical CPI   
Taxpayers' 
Deflated 
Average 
Wealth 
Bankers' 
Deflated 
Average 
Wealth 
Ratio of 
Bankers' 
to 
Taxpayers' 
Wealth 
  (1)   (2) (3) (4)=(3)/(2) 
      1842 0.942721 mean 23238.25 38915.57 1.674634 
  
s.d. 32852.43 35230.82 
 
  
number 1137 89 
 
      1843 0.855609 mean 23870.72 42721.27 1.789693 
  
s.d. 28462.95 34201.98 
 
  
number 1244 93 
 
      1844 0.865155 mean 24934.05 46708.26 1.873272 
  
s.d. 33602.46 41116.73 
 
  
number 1331 91 
 
      1845 0.874702 mean 24214.1 50092.27 2.068723 
  
s.d. 33710.41 63244.62 
 
  
number 1100 57 
 
      1846 0.884248 mean 29459.69 63605.12 2.159056 
  
s.d. 62486.5 63306.01 
 
  
number 2833 187 
 
      1847 0.952267 mean 27947.44 61349.06 2.195158 
  
s.d. 60323.7 68744.12 
 
  
number 2710 164 
 
      1848 0.912888 mean 26403.5 56793.08 2.150968 
  
s.d. 47189.51 62846.2 
 
  
number 3289 204 
 
      1849 0.884248 mean 34099.32 65673.69 1.925953 
  
s.d. 61443.41 73645.42 
 
  
number 2617 179 
 
      1850 0.903341 mean 34852.62 73019.16 2.095084 
  
s.d. 60809.58 89093.83 
 
  
number 2486 165 
 
      
154 
 
 1851 0.884248 mean 37067.18 65731.39 1.773304 
  
s.d. 67822.63 70493.81 
 
  
number 2369 165 
 
      1852 0.893795 mean 36188.88 68609.61 1.895875 
  
s.d. 66849.95 85682.05 
 
  
number 2643 208 
 
155 
 
 Table 5.5 (continued): Summary Statistics: Mean, S.D., and Number of Deflated Wealth of 
Taxpayers and Bankers by Year 
Year Historical CPI   
Taxpayers' 
Deflated 
Average 
Wealth 
Bankers' 
Deflated 
Average 
Wealth 
Ratio of 
Bankers' 
to 
Taxpayers' 
Wealth 
  (1)   (2) (3) (4)=(3)/(2) 
      1853 0.893795 mean 38082.06 65756.93 1.726717 
  
s.d. 68098.77 60142.05 
 
  
number 2768 194 
 
      1857 1.009547 mean 44423.75 76186.5 1.714995 
  
s.d. 64564.05 76638.17 
 
  
number 2344 158 
 
      1858 0.952267 mean 46388.23 88288.32 1.903248 
  
s.d. 73854.45 101440.6 
 
  
number 1770 127 
 
      1859 0.961814 mean 47366.36 87915.08 1.856066 
  
s.d. 76205.59 94936.42 
 
  
number 1851 150 
 
      Summary 0.947339 mean 31476.74 58394.92 1.855177 
  
s.d. 56440.14 67741.96 
   number 41976 3153  
 
Note: (1) Table 5.5 presents historical CPI, the mean, standard deviation, and the 
number of taxpayers’ and bankers’ wealth deflated by historical CPI, and their 
ratios. 
(2) Historical CPI is taken from Lawrence H. Officer and Samuel H. Williamson, 
"The Annual Consumer Price Index for the United States, 1774-2013," 
MeasuringWorth, 2014. The base period is 1840.
156 
 
 Table 5.6: Wealth of Taxpayers and Bankers whose Family Names Starting with 
Letter “P” 
Year   Taxpayers' Wealth  
Bankers' 
Wealth 
Ratio of 
Wealth of 
Bankers 
to 
Taxpayers 
    (1) (2) (3)=(2)/(1) 
     1829 mean 31872.73 52720 1.654079 
 
s.d. 47683.15 59303.6 
 
 
number 99 10 
 
     1830 mean 29175.26 45314.29 1.553175 
 
s.d. 44499.32 39273.55 
 
 
number 97 7 
 
     1832 mean 34520 73171.43 2.119682 
 
s.d. 56209.58 87048.3 
 
 
number 95 7 
 
     1833 mean 32416.53 64460 1.988492 
 
s.d. 52794.67 76139.87 
 
 
number 121 10 
 
     1834 mean 33967.74 58836.36 1.732125 
 
s.d. 55579.36 87173.93 
 
 
number 124 11 
 
     1836 mean 34004.38 64650 1.901226 
 
s.d. 73204.13 70202.26 
 
 
number 137 4 
 
     1837 mean 33456.58 30320 0.906249 
 
s.d. 72210.39 27749.09 
 
 
number 152 5 
 
     1838 mean 36216.42 50350 1.390253 
 
s.d. 76794.35 18364 
 
 
number 134 4 
 
     1839 mean 36377.27 55150 1.516057 
 
s.d. 79467.41 42674.7 
 
 
number 132 4 
 
     1840 mean 36936.84 31685.71 0.857835 
 
s.d. 113599.6 21002.49 
 157 
 
  
number 152 7 
 
     1841 mean 31789.28 47880 1.506168 
 
s.d. 62250.9 24900.84 
 
 
number 167 5 
 
158 
 
 Table 5.6 (continued): Wealth of Taxpayers and Bankers whose Family Names 
Starting with Letter “P” 
Year   
Taxpayers' 
Wealth  
Bankers' 
Wealth 
Ratio of 
Wealth of 
Bankers 
to 
Taxpayers 
    (1) (2) (3)=(2)/(1) 
1842 mean 31523.76 37687.5 1.195527 
 
s.d. 63790.83 30198.55 
 
 
number 181 8 
 
     1843 mean 29552.82 39088.89 1.322679 
 
s.d. 59769.38 32657.63 
 
 
number 195 9 
 
     1844 mean 32080.51 41472.73 1.29277 
 
s.d. 73014.4 32069.96 
 
 
number 197 11 
 
     1845 mean 29123.79 44344.44 1.522619 
 
s.d. 59596.6 33678.15 
 
 
number 206 9 
 
     1846 mean 27846.25 43216.67 1.551975 
 
s.d. 65752.39 35576.62 
 
 
number 240 12 
 
     1847 mean 28938.46 49300 1.703615 
 
s.d. 65795.45 37558.19 
 
 
number 247 10 
 
     1848 mean 27951.1 41866.67 1.497854 
 
s.d. 61027.34 38423.49 
 
 
number 272 12 
 
     1849 mean 35823.94 53988.89 1.507062 
 
s.d. 70964.43 39848.76 
 
 
number 213 9 
 
     1850 mean 35281.68 56387.5 1.598209 
 
s.d. 69220.47 45347.84 
 
 
number 202 8 
 
     1851 mean 35199.51 45585.71 1.295067 
 
s.d. 70636.04 38725.63 
 
 
number 204 7 
 159 
 
      1852 mean 32755.66 44785.71 1.367266 
 
s.d. 61360.59 39994.89 
 
 
number 212 7 
 
160 
 
 Table 5.6 (continued): Wealth of Taxpayers and Bankers whose Family Names 
Starting with Letter “P” 
 
Year   
Taxpayers' 
Wealth  
Bankers' 
Wealth 
Ratio of 
Wealth of 
Bankers 
to 
Taxpayers 
    (1) (2) (3)=(2)/(1) 
1853 mean 35322.48 43371.43 1.22787 
 
s.d. 71400.71 37979.41 
 
 
number 218 7 
 
     1857 mean 50345.86 91540 1.818223 
 
s.d. 88835.56 72220.34 
 
 
number 181 5 
 
     1858 mean 49539.13 89700 1.81069 
 
s.d. 86762.77 70591.01 
 
 
number 184 5 
 
     1859 mean 50852.36 147433.3 2.899242 
 
s.d. 86851.87 61126.62 
 
 
number 191 3 
 
     Summary mean 35270.24 60916.27 1.727129 
 
s.d. 72720.35 98071.69 
   number 4687 209 
  
161 
 
  
Table 5.7: Average Wealth of Existing Taxpayers and Bankers and Linked Growth Rates 
Year 
Average 
Wealth of 
Existing 
Taxpayers 
Taxpayers' 
Linked 
Growth 
Rate 
 Average 
Wealth 
of 
Existing 
Bankers 
Bankers' 
Linked 
Growth 
Rate 
Difference in 
Linked 
Growth 
Rates 
  (1) (2) (3) (4) (5)=(4)-(2) 
1829 35822.58 
 
53013.79 
  1830 28394.62 -0.20735 50142.22 -0.05417 0.153188 
1832 34080.66 
 
66033.73 
  1833 30938.21 -0.09221 49562.5 -0.24944 -0.15723 
1834 29302.83 -0.05286 43206.06 -0.12825 -0.07539 
1836 31670.7 
 
51052.18 
  1837 24763.21 -0.2181 40544.58 -0.20582 0.012283 
1838 27454.84 0.108695 36932.35 -0.08909 -0.19779 
1839 22641.22 -0.17533 37809.44 0.023749 0.199077 
1840 24313.83 0.073875 46650.68 0.233837 0.159962 
1841 23118.66 -0.04916 36768.49 -0.21183 -0.16268 
1842 24273.77 0.049964 39480.77 0.073766 0.023802 
1843 22840.74 -0.05904 38751.22 -0.01848 0.040558 
1844 24660.79 0.079684 43687.5 0.127384 0.047699 
1845 25038.48 0.015315 45525 0.04206 0.026745 
1846 31917.12 0.274723 60193.37 0.322205 0.047482 
1847 30227.01 -0.05295 63018.48 0.046934 0.099887 
1848 27275.11 -0.09766 52839.08 -0.16153 -0.06387 
1849 31248.07 0.145662 58611.77 0.10925 -0.03641 
1850 32848.01 0.051201 68003.21 0.160231 0.10903 
1851 34291.5 0.043945 58872.5 -0.13427 -0.17821 
1852 33673.82 -0.01801 62687.83 0.064807 0.082819 
1853 36287.84 0.077628 59373.63 -0.05287 -0.1305 
1857 50839.75 
 
80744.8 
  1858 47864.95 -0.05851 85694.41 0.061299 0.119813 
1859 48587.37 0.015093 89441.08 0.043721 0.028628 
Note: Table 5.7 shows the average wealth of existing taxpayers and bankers in a 
given year. It also shows their linked growth rates, the difference of their growth rates, 
and the estimated counter-factual wealth of taxpayers and bankers based on linked 
growth rates.  
 
162 
 
                               Table 5.8: Counter-Factual Estimates of Wealth  
year 
Wealth 
Growth 
Rates of 
Taxpayers 
Wealth 
Growth 
Rates of 
Bankers 
Estimated 
Wealth of 
Taxpayers 
Estimated 
Wealth of 
Bankers 
Linked 
Wealth 
Growth 
Rate of 
Taxpayers 
Linked 
Wealth 
Growth 
Rate of 
Bankers 
Estimated 
Wealth of 
Taxpayers 
Estimated 
Wealth of 
Bankers-
Linked 
Growth 
Rates 
- Linked Growth 
Rates 
  (1) (2) (3) (4) (5) (6) (7) (8) 
1836 
  
1000 1000 
  
1000 1000 
1837 -0.18092 -0.17982 819.079 820.1791 -0.2181 -0.20582 781.8965 794.1792 
1838 0.13639 -0.02252 930.7935 801.7105 0.108695 -0.08909 866.8845 723.4236 
1839 -0.16744 0.03959 774.939 833.4499 -0.17533 0.023749 714.8948 740.6038 
1840 0.064547 0.25167 824.9592 1043.204 0.073875 0.233837 767.7074 913.7843 
1841 -0.04987 -0.26134 783.8164 770.5758 -0.04916 -0.21183 729.97 720.2139 
1842 0.085521 0.085159 850.8495 836.1971 0.049964 0.073766 766.4425 773.3415 
1843 -0.0677 -0.0054 793.2445 831.6818 -0.05904 -0.01848 721.1947 759.0512 
1844 0.0562 0.105524 837.8245 919.4445 0.079684 0.127384 778.6626 855.7421 
1845 -0.00724 0.084284 831.756 996.9388 0.015315 0.04206 790.5881 891.7347 
1846 0.21639 0.283618 1011.739 1279.688 0.274723 0.322205 1007.781 1179.056 
1847 0.021641 0.038725 1033.635 1329.244 -0.05295 0.046934 954.4156 1234.394 
1848 -0.09431 -0.11255 936.1497 1179.643 -0.09766 -0.16153 861.2096 1035.001 
1849 0.250953 0.12009 1171.079 1321.306 0.145662 0.10925 986.6555 1148.076 
1850 0.044161 0.135856 1222.795 1500.813 0.051201 0.160231 1037.173 1332.033 
1851 0.041061 -0.11883 1273.004 1322.467 0.043945 -0.13427 1082.752 1153.183 
1852 -0.01315 0.055056 1256.259 1395.278 -0.01801 0.064807 1063.248 1227.917 
1853 0.052313 -0.04158 1321.979 1337.264 0.077628 -0.05287 1145.786 1162.999 
Note: Columns (1), (2), (5), and (6) of Table 5.8 show the growth rates of taxpayers and bankers 
calculated from the full sample and the linked sample. Columns (3), (4), (7), and (8) show the 
counter-factual estimates of the wealth by assuming the wealth of taxpayers and bankers in 1836 is 
$1000. 
163 
 
               Table 5.9: Average Wealth of Entering New Bankers and Taxpayers 
Year 
Average 
Wealth of 
Taxpayers 
Average 
Wealth of 
Bankers 
Ratio of 
Average 
Wealth of 
Bankers to 
Taxpayers 
 
(1) (2) (3)=(2)/(1) 
1829 20844.99 38854.05 1.863951 
1830 16291.72 26200 1.608179 
1832 18918.53 35650 1.884396 
1833 24168.63 17300 0.715804 
1834 25076.92 26430.77 1.053988 
1836 16481.06 21464.04 1.302346 
1837 10779.19 11618.75 1.077887 
1838 14187.57 24745.46 1.744165 
1839 12672.24 26040 2.054885 
1840 11682.87 19800 1.694789 
1841 12702.84 19843.72 1.562148 
1842 15035.62 15516.67 1.031994 
1843 13653.48 26209.09 1.91959 
1844 12947.35 20345.46 1.5714 
1845 13979.98 31783.33 2.273489 
1846 13883.02 46668.38 3.361544 
1847 14901.8 31828.88 2.135908 
1848 14026.22 40401.71 2.880442 
1849 23054.58 40912.5 1.774593 
1850 21728.66 51187.52 2.355761 
1851 19822.62 27406.25 1.382575 
1852 22384.67 34783.33 1.553891 
1853 20902.38 48160.4 2.304063 
1857 32321.44 51649.9 1.598007 
1858 27059.24 32562 1.20336 
1859 31007.23 28646.42 0.923863 
Summary 18582.23 34152.23 1.837897 
164 
 
 Table 5.10: Counter-Factual Estimates of the Average Wealth, Entering People and Linked Growth Rates 
Year 
Average 
Wealth for 
Entering 
Taxpayers 
Average 
Wealth 
for 
Entering 
Bankers 
Proportion 
of New 
Taxpayers 
Proportion 
of New 
Bankers 
Linked 
Wealth 
Growth 
Rates of 
Taxpayers 
Linked 
Wealth 
Growth 
Rates of 
Bankers 
Counter-
Factual 
Wealth of 
Taxpayers - 
Entering 
Taxpayers & 
Linked 
Growth 
Counter-
Factual 
Wealth of 
Bankers - 
Entering 
Bankers & 
Linked 
Growth 
(1) (2) (3) (4) (5) (6) (7) (8) 
1836 16481.06 21464.04 0.390602 0.271429   25747.42 43950.33 
1837 10779.19 11618.75 0.275214 0.150943 -0.2181 -0.20582 17557.909 31389.656 
1838 14187.57 24745.46 0.261448 0.142857 0.108695 -0.08909 18086.235 28043.482 
1839 12672.24 26040 0.28 0.1 -0.17533 0.023749 14287.154 28442.538 
1840 11682.87 19800 0.241514 0.04918 0.073875 0.233837 14458.737 34341.324 
1841 12702.84 19843.72 0.288859 0.171717 -0.04916 -0.21183 13446.057 25826.475 
1842 15035.62 15516.67 0.256792 0.120482 0.049964 0.073766 14353.545 26259.913 
1843 13653.48 26209.09 0.265924 0.13253 -0.05904 -0.01848 13545.301 25832.209 
1844 12947.35 20345.46 0.263827 0.130952 0.079684 0.127384 14182.129 27973.406 
1845 13979.98 31783.33 0.326976 0.191489 0.015315 0.04206 14262.211 29654.228 
1846 13883.02 46668.38 0.33204 0.186207 0.274723 0.322205 16753.477 40597.963 
1847 14901.8 31828.88 0.235706 0.152 -0.05295 0.046934 15639.023 40880.862 
1848 14026.22 40401.71 0.238833 0.091503 -0.09766 -0.16153 14091.297 34837.771 
1849 23054.58 40912.5 0.13369 0.028169 0.145662 0.10925 17067.757 38707.705 
1850 21728.66 51187.52 0.122638 0.083333 0.051201 0.160231 18406.075 45433.014 
1851 19822.62 27406.25 0.131224 0.030534 0.043945 -0.13427 19294.674 38968.56 
1852 22384.67 34783.33 0.117625 0.049383 -0.01801 0.064807 19351.512 41162.603 
1853 20902.38 48160.4 0.146262 0.064103 0.077628 -0.05287 20860.847 39574.421 
165 
 
 Note: Columns (1) and (2) show the average wealth of entering new taxpayers and bankers. Columns (3) 
and (4) exhibit the proportion of new taxpayers and bankers in a given year. Columns (5) and (6) present 
the linked growth rates of existing taxpayers and bankers. Columns (7) and (8) show the estimated 
counter-factual wealth by considering both the entering new taxpayers and bankers, and the linked 
growth rates. 
 
166 
 
 Table 5.11: Average Wealth of the Counter-Factual Wealth of the Entering New People 
and Linked Growth, and Counter-Factual Wealth of the Linked Growth Only 
year 
Counter-
Factual 
Wealth of 
Taxpayers - 
Entering 
Taxpayers & 
Linked 
Growth 
Counter-
Factual 
Wealth of 
Bankers - 
Entering 
Bankers & 
Linked 
Growth 
Counter-
Factual 
Wealth of 
Taxpayers - 
Linked 
Growth Only 
Counter-
Factual 
Wealth of 
Bankers - 
Linked 
Growth Only 
  (1) (2) (3) (4) 
1836 25747.42 43950.33 25747.42 43950.33 
1837 17557.909 31389.656 20131.908 34904.473 
1838 18086.235 28043.482 22320.145 31794.834 
1839 14287.154 28442.538 18406.754 32549.929 
1840 14458.737 34341.324 19766.553 40161.307 
1841 13446.057 25826.475 18794.83 31653.937 
1842 14353.545 26259.913 19733.894 33988.922 
1843 13545.301 25832.209 18568.805 33360.806 
1844 14182.129 27973.406 20048.442 37610.439 
1845 14262.211 29654.228 20355.484 39192.334 
1846 16753.477 40597.963 25947.603 51820.3 
1847 15639.023 40880.862 24573.678 54252.434 
1848 14091.297 34837.771 22173.812 45489.039 
1849 17067.757 38707.705 25403.694 50458.716 
1850 18406.075 45433.014 26704.389 58543.767 
1851 19294.674 38968.56 27877.913 50683.095 
1852 19351.512 41162.603 27375.832 53967.714 
1853 20860.847 39574.421 29500.963 51114.441 
Note: Columns (1) and (2) present the estimated counter-factual wealth considering 
both the entering new people and the linked growth rates of existing people. Columns 
(3) and (4) exhibit the estimated counter-factual wealth considering linked-growth 
rates only.  
167 
 
  
Table 5.12: Beginning and Ending Year of Boston Banks from Bank Balance Sheet 
Name of Bank Beginning Year Ending Year 
   
Group 1: Banks closed between1837 and 1843: 
  
11 banks 
  
Franklin Bank 1829 1836 
Lafayette Bank 1836 1837 
Winnisimmet Bank/Fulton Bank 1835 1837 
Commercial Bank 1831 1838 
Commonwealth Bank 1825 1838 
Oriental Bank 1832 1838 
Kilby Bank 1837 1838 
American Bank 1825 1838 
Hancock Bank 1834 1839 
Middling Interest Bank 1836 1839 
South Bank 1833 1842 
   
Group 2: Banks opened before 1837 and operated after 1843 
 
24 banks 
  
New England Bank 1814 1861 
Suffolk Bank 1819 1861 
Washington Bank 1825 1861 
Union Bank 1803 1861 
Warren Bank/Shawmut Bank 1837 1861 
State Bank 1812 1861 
Granite Bank 1833 1861 
North Bank 1826 1861 
Hamilton Bank 1832 1861 
Globe Bank 1825 1861 
Mechanics Bank 1836 1861 
Shoe & Leather Dealers Bank 1836 1861 
Eagle Bank 1822 1861 
Freeman's Bank 1836 1861 
Columbian Bank 1822 1861 
Atlas Bank 1835 1861 
Manufacturers & Mechanics Bank/Tremont Bank 1814 1861 
Traders Bank 1831 1861 
168 
 
 City Bank 1822 1861 
Merchants' Bank 1831 1861 
Market Bank 1833 1861 
Boston Bank 1804 1861 
Atlantic Bank 1828 1861 
Massachusetts Bank 1803 1861 
   
Group 3: Banks opened after 1843: 
 
22 banks 
  
Cochituate Bank 1850 1853 
Grocers' Bank 1849 1855 
Bank of Commerce 1850 1861 
Webster Bank 1853 1861 
Bank of the Metropolis 1859 1861 
Mount Vernon Bank of the City of Boston 1861 1861 
Howard Bank(ing Company) 1853 1861 
Eliot Bank 1854 1861 
Revere Bank 1859 1861 
Bank of Mutual Redemption 1858 1861 
Maverick Bank 1855 1861 
Safety Fund Bank 1859 1861 
National Bank of Boston 1853 1861 
Broadway Bank 1854 1861 
Bank of North America 1851 1861 
Faneuil Hall Bank 1852 1861 
Hide & Leather Bank 1858 1861 
Continental Bank 1861 1861 
Boylston Bank 1846 1861 
Exchange Bank 1847 1861 
Bank of the Republic 1860 1861 
Blackstone Bank 1852 1861 
Source: Weber, Warren E. 2011. Balance sheets for U.S. Antebellum State Banks. 
Research Department, Federal Reserve Bank of Minneapolis. 
http://www.minneapolisfed.org/research/economists/wewproj.html. 
Note: I do not separate banks that failed in financial crisis and those closed due to 
other reasons. 
169 
 
  
    Table 5.13: Beginning and Ending Year of Boston Banks from Massachusetts 
Registers 
Name of Bank Beginning Year Ending Year 
   
Group 1: Banks closed between 1837 
and 1843:  
15 banks 
  
Manufacturers 
and Mechanics' 
Bank 
1816 1830 
Winnisimmet Bank 1835 1835 
Branch of the 
United States 
Bank 
1793 1836 
Warren Bank 1837 1837 
Commonwealth 
Bank 
1825 1838 
Lafayette Bank 1837 1838 
Kilby Bank 1837 1838 
Oriental Bank 1833 1838 
Commercial Bank 1833 1838 
Franklin Bank 1824 1838 
Fulton Bank 1836 1838 
Middling 
Interest Bank 
1837 1839 
Hancock Bank 1834 1839 
American Bank 1825 1839 
South Bank 1834 1843 
   
Group 2: Banks opened before 1837 and operated after 1843: 
25 banks 
  
Charlestown Bank 1833 1845 
Mechanics Bank 1837 1859 
Suffolk Bank 1819 1859 
Union Bank 1793 1859 
Merchants Bank 1832 1859 
170 
 
 Traders Bank 1832 1862 
Boston Bank 1804 1862 
North Bank 1826 1862 
New England Bank 1814 1862 
Hamilton Bank 1833 1862 
Shoe & Leather 
Dealer's Bank 
1837 1862 
City Bank 1823 1862 
Massachusetts 
Bank 
1790 1862 
Columbian Bank 1823 1862 
Washington Bank 1826 1862 
Freeman’s Bank 1837 1862 
Granite Bank 1834 1862 
Atlantic Bank 1829 1862 
Globe Bank 1825 1862 
Market Bank 1833 1862 
Atlas Bank 1834 1862 
Eagle Bank 1823 1862 
State Bank 1812 1862 
Shawmut Bank 1838 1862 
Tremont Bank 1831 1862 
   
Group 3: Banks opened after 1843: 
26 banks 
  
Agawam Bank 1848 1849 
Blackstone Bank 1852 1854 
Boylston Bank 1846 1854 
Cochituate Bank 1850 1854 
Grocers' Bank 1849 1856 
Wamsutta Bank 1857 1857 
Exchange Bank 1848 1859 
Hopkinton Bank 1855 1859 
Webster Bank 1854 1862 
Maverick Bank 1855 1862 
Bank of Commerce 1851 1862 
Revere Bank 1862 1862 
Safety Fund Bank 1859 1862 
Continental Bank 1862 1862 
Pawners' Bank 1862 1862 
171 
 
 Bank of the 
Metropolis 
1859 1862 
Eliot Bank 1854 1862 
Bank of Mutual 
Redemption 
1859 1862 
National Bank of 
Boston 
1854 1862 
Shelburne Falls 
Bank 
1857 1862 
Howard Banking 
Co. 
1855            1862 
Broadway Bank 1854 1862 
Hide and Leather 
Bank 
1859 1862 
Bank of North 
America 
1851 1862 
Faneuil Hall 
Bank 
1852 1862 
Mount Vernon 
Bank 
1862 1862 
Source: Massachusetts Registers 1790-1862. 
Note: I do not separate banks that failed in financial crisis and those 
closed due to other reasons. 
 
172 
 
  
       Table 5.14: The Mean, the Standard Deviation, and the Number of Bank Assets, 
1803-1861. 
Year   Total Assets Year 
  
Total 
Assets 
            
1803 Mean 1773210 1836 mean 1274593 
 
s.d. 911616.2   s.d. 793481.8 
 
Number 2   number 33 
   
  
  1804 Mean 1392533 1837 mean 1260067 
 
s.d. 613027.3   s.d. 778665.3 
 
number 3   number 34 
   
  
  1805 mean 1062229 1838 mean 1172008 
 
s.d. 614418.1   s.d. 730921.7 
 
number 4   number 60 
   
  
  1806 mean 1348739 1839 mean 1060849 
 
s.d. 808843.8   s.d. 738896.2 
 
number 4   number 27 
   
  
  1807 mean 1248002 1840 mean 1286675 
 
s.d. 791153.8   s.d. 881188.5 
 
number 4   number 25 
   
  
  1808 mean 1552108 1841 mean 1319679 
 
s.d. 836506.5   s.d. 921488.1 
 
number 4   number 25 
   
  
  1809 mean 1529827 1842 mean 1224146 
 
s.d. 846814.9   s.d. 818673.7 
 
number 4   number 25 
   
  
  1811 mean 2799257 1843 mean 1619382 
 
s.d. 165267.2   s.d. 1374356 
 
number 3   number 24 
   
  
  1812 mean 2735785 1844 mean 1576335 
 
s.d. 739565.5   s.d. 1287205 
173 
 
  
number 4   number 24 
   
  
  1813 mean 3532422 1845 mean 1656260 
 
s.d. 1028419   s.d. 1384795 
 
number 4   number 24 
   
  
  1814 mean 2868873 1846 mean 1545880 
 
s.d. 1850338   s.d. 1242194 
 
number 6   number 25 
   
  
  1815 mean 2113685 1847 mean 1664969 
 
s.d. 900793.5   s.d. 1327226 
 
number 6   number 26 
   
  
  1819 mean 1563917 1848 mean 1398017 
 
s.d. 567046.2   s.d. 1036977 
 
number 7   number 26 
   
  
  1820 mean 1646181 1849 mean 1455036 
 
s.d. 571274   s.d. 1037710 
 
number 7   number 27 
   
  
  1822 mean 1141309 1850 mean 1519080 
 
s.d. 665061.4   s.d. 1133754 
 
number 10   number 29 
   
  
  1823 mean 1217285 1851 mean 1603003 
 
s.d. 460145.7   s.d. 1177172 
 
number 10   number 30 
   
  
  1825 mean 1251306 1852 mean 1723981 
 
s.d. 561466.3   s.d. 1212140 
 
number 14   number 32 
   
  
  1826 mean 1207370 1853 mean 1792957 
 
s.d. 464615.1   s.d. 1281718 
 
number 15   number 35 
   
  
  1827 mean 1242677 1854 mean 1771812 
 
s.d. 479225.3   s.d. 1248225 
 
number 15   number 36 
   
  
  1828 mean 1239926 1855 mean 1761727 
174 
 
  
s.d. 574660.3   s.d. 1205415 
 
number 16   number 37 
   
  
  1829 mean 1247806 1856 mean 1794232 
 
s.d. 541378.5   s.d. 1202538 
 
number 17   number 36 
   
  
  1830 mean 1271896 1857 mean 1639306 
 
s.d. 602596.9   s.d. 1105206 
 
number 17   number 36 
   
  
  1831 mean 1333800 1858 mean 1974044 
 
s.d. 639390.2   s.d. 1417525 
 
number 20   number 38 
   
  
  1832 mean 1273923 1859 mean 1806044 
 
s.d. 532738.3   s.d. 1196598 
 
number 22   number 41 
   
  
  1833 mean 1271455 1860 mean 1885729 
 
s.d. 592835.8   s.d. 1189209 
 
number 25   number 42 
   
  
  1834 mean 1291496 1861 mean 1852420 
 
s.d. 589387.2   s.d. 1236806 
 
number 26   number 44 
   
  
  1835 mean 1210505 Summary mean 1529940 
 
s.d. 550566   s.d. 1053929 
 number 28   number 1138 
 
 
 
175 
 
                    Table 5.15: Average Asset for Entering Banks 
Year   Asset Year Asset 
   
  
 1803 mean 1773210 1836 268081.9 
 
s.d. 911616.2   155699 
 
number 2   5 
   
  
 1804 mean 1656765 1837 862410.4 
 
s.d. .   38358.35 
 
number 1   2 
   
  
 1805 mean 455943 1846 386620.3 
 
s.d. .   . 
 
number 1   1 
   
  
 1812 mean 2011114 1847 913033.8 
 
s.d. .   . 
 
number 1   1 
   
  
 1814 mean 967826.3 1849 652728.4 
 
s.d. 477102.2   . 
 
number 2   1 
   
  
 1819 mean 751027.3 1850 1038316 
 
s.d. .   972069.5 
 
number 1   2 
   
  
 1822 mean 382842 1851 1174335 
 
s.d. 66291.79   . 
 
number 3   1 
   
  
 1825 mean 927585.7 1852 946094.5 
 
s.d. 493475.8   295417.7 
 
number 4   2 
   
  
 1826 mean 736523.3 1853 1206132 
 
s.d. .   828264.9 
 
number 1   3 
   
  
 1828 mean 396868.4 1854 440937.9 
 
s.d. .   342927.2 
 
number 1   2 
 
  
  
 1829 mean 162747.4 1855 747877.3 
 
s.d. .   . 
 
number 1   1 
176 
 
    
  
 1831 mean 923002.1 1858 1678255 
 
s.d. 230088.5   135817 
 
number 3   2 
   
  
 1832 mean 1096920 1859 1235389 
 
s.d. 366078.2   624593.3 
 
number 2   3 
   
  
 1833 mean 702885.4 1860 1595502 
 
s.d. 389662   . 
 
number 3   1 
   
  
 1834 mean 1052623 1861 376785.4 
 
s.d. .   93226.86 
 
number 1   2 
   
  
 1835 mean 920856.9 Summary 884455.8 
 
s.d. 238136.2   545625.8 
 number 2   58 
177 
 
                       Table 5.16: Average Assets for Banks Opened and Closed in Different Periods 
Year   
Banks Opened 
Before 1837 and 
Closed before 
1843 
Banks Opened before 1843 
and Operated after 1843 
Banks 
Opened 
after 1843 
Total 
    (1) (2) (3) (4) 
  
    
  
1803 mean  . 1773210 . 1773210 
  s.d. . 911,616.20 . 911,616.20 
  Number 0 2 0 2 
  
    
  
1804 mean  . 1392532.67 . 1392532.67 
  s.d. . 613,027.33 . 613,027.33 
  Number 0 3 0 3 
  
    
  
1805 mean  455,943.00 1264324.33 . 1062229 
  s.d. 0 566,753.19 . 614,418.05 
  Number 1 3 0 4 
  
    
  
1806 mean  522,964.00 1623997.33 . 1348739 
  s.d. 0 725,768.22 . 808,843.79 
  Number 1 3 0 4 
  
    
  
1807 mean  478,647.00 1504453 . 1248001.5 
  s.d. 0 737,754.89 . 791,153.80 
  Number 1 3 0 4 
  
    
  
178 
 
 1808 mean  430,418.00 1926004.15 . 1552107.61 
  s.d. 0 459,154.60 . 836,506.49 
  Number 1 3 0 4 
  
    
  
1809 mean  373,583.00 1915241.79 . 1529827.09 
  s.d. 0 429,390.65 . 846,814.92 
  Number 1 3 0 4 
  
    
  
1811 mean  . 2799256.83 . 2799256.83 
  s.d. . 165,267.21 . 165,267.21 
  Number 0 3 0 3 
  
    
  
1812 mean  . 2735784.59 . 2735784.59 
  s.d. . 739,565.54 . 739,565.54 
  Number 0 4 0 4 
  
    
  
1813 mean  . 3532422.33 . 3532422.33 
  s.d. . 1028419.26 . 1028419.26 
  Number 0 4 0 4 
  
    
  
1814 mean  . 2868872.88 . 2868872.88 
  s.d. . 1850337.83 . 1850337.83 
  Number 0 6 0 6 
  
    
  
1815 mean  . 2113684.68 . 2113684.68 
  s.d. . 900,793.54 . 900,793.54 
  Number 0 6 0 6 
  
    
  
1819 mean  . 1563917.37 . 1563917.37 
179 
 
   s.d. . 567,046.15 . 567,046.15 
  Number 0 7 0 7 
  
    
  
1820 mean  . 1646180.91 . 1646180.91 
  s.d. . 571,274.01 . 571,274.01 
  Number 0 7 0 7 
  
    
  
1822 mean  . 1141309.02 . 1141309.02 
  s.d. . 665,061.43 . 665,061.43 
  Number 0 10 0 10 
  
    
  
1823 mean  . 1217284.97 . 1217284.97 
  s.d. . 460,145.68 . 460,145.68 
  Number 0 10 0 10 
  
    
  
1825 mean  859,570.00 1316595.2 . 1251305.88 
  s.d. 62,509.84 582,799.16 . 561,466.30 
  Number 2 12 0 14 
  
    
  
1826 mean  875,684.63 1258398.84 . 1207370.28 
  s.d. 61,878.70 479,967.88 . 464,615.09 
  Number 2 13 0 15 
  
    
  
1827 mean  860,287.07 1301506.35 . 1242677.11 
  s.d. 62,429.23 489,375.76 . 479,225.32 
  Number 2 13 0 15 
  
    
  
1828 mean  1125880.94 1256218.69 . 1239926.47 
  s.d. 350,208.29 607,715.89 . 574,660.28 
180 
 
   Number 2 14 0 16 
  
    
  
1829 mean  872,843.92 1328154.72 . 1247805.75 
  s.d. 625,970.25 510,926.86 . 541,378.53 
  Number 3 14 0 17 
  
    
  
1830 mean  747,231.56 1384324.35 . 1271896.21 
  s.d. 477,405.57 578,549.62 . 602,596.88 
  Number 3 14 0 17 
  
    
  
1831 mean  738,837.55 1482540.44 . 1333799.86 
  s.d. 391,668.01 607,588.92 . 639,390.20 
  Number 4 16 0 20 
  
    
  
1832 mean  958,615.27 1366660.5 . 1273922.95 
  s.d. 400,358.81 540,576.38 . 532,738.33 
  Number 5 17 0 22 
  
    
  
1833 mean  979,594.81 1363621.21 . 1271454.88 
  s.d. 538,823.36 592,112.88 . 592,835.80 
  Number 6 19 0 25 
  
    
  
1834 mean  1064838.75 1375001.65 . 1291496.25 
  s.d. 446,860.18 623,352.14 . 589,387.19 
  Number 7 19 0 26 
  
    
  
1835 mean  862,928.96 1349535.78 . 1210505.26 
  s.d. 319,673.70 567,353.73 . 550,565.96 
  Number 8 20 0 28 
181 
 
   
    
  
1836 mean  1022687.81 1384116.76 . 1274592.84 
  s.d. 566,371.00 862,084.78 . 793,481.77 
  Number 10 23 0 33 
  
    
  
1837 mean  935,894.42 1395138.51 . 1260066.72 
  s.d. 399,033.57 861,917.84 . 778,665.27 
  Number 10 24 0 34 
  
    
  
1838 mean  830,342.87 1257423.97 . 1172007.75 
  s.d. 384,934.28 773,766.74 . 730,921.70 
  Number 12 48 0 60 
  
    
  
1839 mean  462,426.18 1135651.78 . 1060848.93 
  s.d. 212,996.59 748,790.39 . 738,896.20 
  Number 3 24 0 27 
  
    
  
1840 mean  642,022.12 1313535.77 . 1286675.22 
  s.d. 0 889,624.81 . 881,188.50 
  Number 1 24 0 25 
  
    
  
1841 mean  647,595.14 1347682.62 . 1319679.12 
  s.d. 0 930,377.44 . 921,488.10 
  Number 1 24 0 25 
  
    
  
1842 mean  658,784.42 1247702.89 . 1224146.15 
  s.d. 0 827,581.21 . 818,673.65 
  Number 1 24 0 25 
  
    
  
182 
 
 1843 mean  . 1619381.95 . 1619381.95 
  s.d. . 1374356.46 . 1374356.46 
  Number 0 24 0 24 
  
    
  
1844 mean  . 1576335.38 . 1576335.38 
  s.d. . 1287205.1 . 1287205.1 
  Number 0 24 0 24 
  
    
  
1845 mean  . 1656259.53 . 1656259.53 
  s.d. . 1384795.12 . 1384795.12 
  Number 0 24 0 24 
  
    
  
1846 mean  . 1594182.4 386,620.30 1545879.92 
  s.d. . 1244697.26 0 1242194.25 
  Number 0 24 1 25 
  
    
  
1847 mean  . 1748371.05 664,143.96 1664968.97 
  s.d. . 1347204.19 351,983.34 1327225.61 
  Number 0 24 2 26 
  
    
  
1848 mean  . 1452480.25 744,458.83 1398017.07 
  s.d. . 1057484.67 487,085.15 1036976.69 
  Number 0 24 2 26 
  
    
  
1849 mean  . 1538098.01 790,541.09 1455036.13 
  s.d. . 1068098.7 366,352.78 1037709.64 
  Number 0 24 3 27 
  
    
  
1850 mean  . 1642105.17 928,561.16 1519080.34 
183 
 
   s.d. . 1189131.81 583,428.28 1133754.1 
  Number 0 24 5 29 
  
    
  
1851 mean  . 1717595.86 1144631.99 1603003.09 
  s.d. . 1247578.97 749,941.42 1177171.76 
  Number 0 24 6 30 
  
    
  
1852 mean  . 1798430.77 1500633.14 1723981.36 
  s.d. . 1220356 1239961.53 1212140.39 
  Number 0 24 8 32 
  
    
  
1853 mean  . 1890945.13 1579164.43 1792956.91 
  s.d. . 1359264.28 1123709.41 1281717.99 
  Number 0 24 11 35 
  
    
  
1854 mean  . 1879583.66 1556270.02 1771812.45 
  s.d. . 1351598.07 1030413.33 1248225.26 
  Number 0 24 12 36 
  
    
  
1855 mean  . 1882467.09 1538821.53 1761726.76 
  s.d. . 1330783.46 938,989.88 1205414.58 
  Number 0 24 13 37 
  
    
  
1856 mean  . 1906124.2 1570448.9 1794232.43 
  s.d. . 1306695.93 974,236.66 1202537.54 
  Number 0 24 12 36 
  
    
  
1857 mean  . 1772816.26 1372285.07 1639305.86 
  s.d. . 1182672.6 919,387.32 1105206.36 
184 
 
   Number 0 24 12 36 
  
    
  
1858 mean  . 2157593.82 1659387.31 1974044.05 
  s.d. . 1579454.36 1066075.19 1417525.05 
  Number 0 24 14 38 
  
    
  
1859 mean  . 1994479.12 1540017.8 1806043.94 
  s.d. . 1363187.24 883,109.68 1196597.54 
  Number 0 24 17 41 
  
    
  
1860 mean  . 2050937.44 1665450.18 1885728.61 
  s.d. . 1343812.35 936,837.85 1189208.56 
  Number 0 24 18 42 
  
    
  
1861 mean  . 2151228.43 1493849.57 1852419.86 
  s.d. . 1400587.19 916,067.87 1236805.53 
  Number 0 24 20 44 
  
    
  
Total mean  867,052.21 1604376.36 1472573.51 1529940.12 
  s.d. 408,167.24 1092880.5 940,585.26 1053928.8 
  Number 87 895 156 1138 
 
185 
 
 Table 5.17: Average Bank Assets for Banks Chartered in Different Periods and Within 
Different Categories 
Year Banks Chartered after 1843 
  Leg.<=0.33 0.33<Leg.<=0.66 0.66<Leg. 
1846 
 
1               
  
386620               
    1847 
 
1 1 
  
415254 913034 
    1848 
 
2              
  
744459               
    1849 1 2              
 
652728 859447               
    1850 2 2 1 
 
517396 941170 1725673 
    1851 3 3              
 
1223699 1065565               
    1852 4 4              
 
1719958 1281309               
    1853 4 3 4 
 
1972381 1686130 1105723 
    1854 4 5 3 
 
1734271 1681893 1109563 
    1855 5 4 4 
 
1581968 1847671 1176039 
    1856 2 7 3 
 
2017029 1528551 1370491 
    1857 2 6 4 
 
2196976 1260539 1127559 
    1858 1 7 6 
 
1267914 1904512 1438654 
    
186 
 
 1859 2 10 5 
  1444799 1653607 1350927 
 
Note: Figure 5.17 present data of average bank assets for banks chartered in different 
categories and with different proportion of state directors as state legislators. 
Leg<=0.33 represents the proportion of bank directors as state legislators is smaller 
than or equal to 33%. 0.33<Leg<=0.66 represents the proportion of bank directors as 
state legislators is larger than 33% but smaller than or equal to 66%. 0.66<Leg 
represents the proportion of bank directors as state legislators is larger than 66%. 
 
 
187 
 
 Table A.1 Number of Legislators and Legislators with Party IDs, 1780-1859  
Term 
Year 
Number of 
Legislators 
Number of 
Legislators with 
Party IDs 
Share of Legislators 
with Party IDs 
1780 263 0 0 
1781 255 0 0 
1782 228 0 0 
1783 277 0 0 
1784 275 0 0 
1785 292 0 0 
1786 250 0 0 
1787 322 0 0 
1788 300 0 0 
1789 267 0 0 
1790 246 0 0 
1791 263 1 0.003802 
1792 314 1 0.003185 
1793 250 0 0 
1794 247 0 0 
1795 249 0 0 
1796 268 4 0.014925 
1797 240 178 0.741667 
1798 255 226 0.886275 
1799 253 221 0.873518 
1800 303 287 0.947195 
1801 337 320 0.949555 
1802 278 263 0.946043 
1803 300 293 0.976667 
1804 326 319 0.978528 
1805 388 386 0.994845 
1806 523 519 0.992352 
1807 424 422 0.995283 
1808 524 524 1 
1809 635 635 1 
1810 683 683 1 
1811 701 701 1 
1812 794 794 1 
1813 678 677 0.998525 
1814 556 555 0.998201 
1815 492 491 0.997968 
188 
 
 1816 581 578 0.994837 
1817 326 320 0.981595 
1818 266 256 0.962406 
1819 448 432 0.964286 
1820 227 183 0.806167 
1821 277 203 0.732852 
1822 200 154 0.77 
1823 337 185 0.548961 
1824 290 138 0.475862 
1825 241 24 0.099585 
1826 282 23 0.08156 
1827 393 18 0.045802 
1828 399 53 0.132832 
1829 548 38 0.069343 
1830 494 145 0.293522 
1831 522 522 1 
1832 569 565 0.99297 
1833 614 603 0.982085 
1834 611 609 0.996727 
1835 660 659 0.998485 
1836 665 665 1 
1837 675 675 1 
1838 520 517 0.994231 
1839 563 563 1 
1840 561 561 1 
1841 438 438 1 
1842 376 376 1 
1843 393 393 1 
1844 363 363 1 
1845 314 314 1 
1846 306 306 1 
1847 295 295 1 
1848 314 313 0.996815 
1849 303 302 0.9967 
1850 339 338 0.99705 
1851 445 445 1 
1852 442 442 1 
1853 330 330 1 
1854 350 350 1 
1855 420 419 0.997619 
1856 370 370 1 
189 
 
 1857 396 394 0.99495 
1858 284 284 1 
1859 286 283 0.989511 
1860 281 281 1 
1861 280 280 1 
1862 282 280 0.992908 
1863 279 279 1 
1864 283 282 0.996467 
1865 281 280 0.996441 
1866 283 283 1 
1867 281 279 0.992883 
1868 281 281 1 
1869 281 281 1 
1870 281 281 1 
1871 281 281 1 
1872 284 282 0.992958 
1873 280 280 1 
1874 282 282 1 
1875 283 283 1 
1876 280 280 1 
1877 281 281 1 
1878 283 283 1 
1879 283 283 1 
1880 282 282 1 
 
  
190 
 
  
 
Table A.2. Number of Bankers, Legislators, and Party IDs. 
Year 
Number 
of 
Bankers 
Number 
of Bankers 
who were 
Legislators 
Number of 
Bankers who 
were Legislators 
with Party IDs 
Share of 
Bankers who 
were 
Legislators 
1790 9 7 2 0.777778 
1791 9 7 2 0.777778 
1792 9 7 2 0.777778 
1793 39 29 8 0.74359 
1794 40 32 11 0.8 
1795 40 29 11 0.725 
1796 43 32 13 0.744186 
1797 37 28 14 0.756757 
1798 39 27 15 0.692308 
1799 39 27 17 0.692308 
1800 39 26 18 0.666667 
1801 19 14 11 0.736842 
1802 38 25 19 0.657895 
1803 65 42 29 0.646154 
1804 58 44 31 0.758621 
1805 64 45 31 0.703125 
1806 62 44 32 0.709677 
1807 63 45 32 0.714286 
1808 76 51 34 0.671053 
1809 60 42 31 0.7 
1810 64 44 33 0.6875 
1811 69 47 36 0.681159 
1812 80 64 51 0.8 
1813 77 56 49 0.727273 
1814 93 64 52 0.688172 
1815 93 64 52 0.688172 
1816 124 82 70 0.66129 
1817 101 65 57 0.643564 
1818 116 78 66 0.672414 
1819 132 82 69 0.621212 
1820 152 86 70 0.565789 
1821 144 82 69 0.569444 
1822 154 88 72 0.571429 
1823 184 102 87 0.554348 
191 
 
 1824 197 110 91 0.558376 
1825 235 121 96 0.514894 
1826 267 140 107 0.524345 
1827 280 145 108 0.517857 
1828 288 146 111 0.506944 
1829 320 157 123 0.490625 
1830 316 152 124 0.481013 
1831 302 148 117 0.490066 
1832 345 166 134 0.481159 
1833 419 198 163 0.472554 
1834 431 194 159 0.450116 
1835 423 183 153 0.432624 
1836 368 166 140 0.451087 
1837 339 136 122 0.40118 
1838 375 160 131 0.426667 
1839 311 134 116 0.430868 
1840 328 137 121 0.417683 
1841 322 135 118 0.419255 
1842 291 117 103 0.402062 
1843 263 108 95 0.410646 
1844 254 98 88 0.385827 
1845 251 95 86 0.378486 
1846 255 97 87 0.380392 
1847 254 97 87 0.38189 
1848 296 123 103 0.415541 
1849 303 123 102 0.405941 
1850 306 128 106 0.418301 
1851 322 138 117 0.428571 
1852 972 438 383 0.450617 
1853 979 448 397 0.45761 
1854 1088 495 445 0.454963 
1855 1209 556 506 0.459884 
1856 1229 568 520 0.462164 
1857 1239 570 525 0.460048 
1858 1205 562 519 0.46639 
1859 1231 565 527 0.458976 
 
 
     
192 
 
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