Abstract: The Debate over US Banking Regulations from 1896 to 1978: How Changing Environments Influence Corporate Political Activity
In this paper, I examine the historical debates over liberalization and restriction of US state-level branching regulations from 1896-1978 and how the success of multi-unit and single-unit banks in changing laws is modified by shifting historical conditions. I argue that both the motivation to work to change laws and banks' success in doing so are contingent on aspects of these organizations' economic, technical, and political environments. I conducted historical analyses of meeting minutes of national, regional, and state banking associations to understand why, when, and how banks organize their political activities. Based on these findings and existing theory, I offer a number of hypotheses about when banks are likely to be successful in changing state laws. I test these hypotheses using event history analyses on a database of legal changes in the 48 contiguous US states between 1896 and 1978. As expected, the stronger the presence of multi-unit banks, the more likely it is that states pass more liberal laws; as well, the stronger the presence of single-unit banks, the more likely that states pass more restrictive laws. These effects are accentuated by the economic, technical, and political environments of the states. As state wealth and transportation infrastructure increase, the effect of multi-unit banks on state-level liberalization is enhanced. Conversely, for single-unit banks, the most important factor contributing to restrictive state-level changes is the degree to which neighboring states have restrictive branching laws.