A profit-maximizing theory of national bank behavior

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1982
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Virginia Polytechnic Institute and State University
Abstract

The National Banking System operated during the 50 year period between 1863 and 1913. It was believed at the time of its conception that individuals seeking a national bank charter would do so for the privilege of issuing national bank notes. Paradoxically, for the majority of the National Banking System's existence note issue was of ยท relatively minor importance. The one exception where note issue was an important aspect of national bank behavior was the period between 1867 and 1873.

The purpose of this dissertation is to examine this period when national bank note issue was an important aspect of national bank behavior and determine why note issue was so important. In order to determine this, a straightforward profit maximizing model is developed and various predictions are made concerning national bank behavior. These predictions are then tested and evaluated using actual national bank balance sheet data to determine if actual national bank behavior conforms to the predictions of the model.

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