The newest toy for banking historians dropped this week — a dataset that will help illustrate how the U.S. banking system developed after the Civil War.
The tool, developed by Federal Reserve researchers, will give historians and students a far easier way of examining national banks’ financial performance between 1867 and 1904.
The period is of massive historical importance, covering the early start of the reworked banking system that Abraham Lincoln imagined to help finance the war and strengthen the country’s monetary system.
The data set ends in 1904, when banks switched to a new reporting format. At the time, a series of financial crises had spurred calls for the formation of a central bank to limit painful credit crunches. The ensuing debate would soon culminate in the creation of today’s Fed, whose balance of national and regional powers reflected skepticism over a fully Washington-led institution.
“I think there’s going to be a multitude of rich projects that result from this going into the future,” said Providence College professor Sharon Ann Murphy, who focuses on pre-Civil War banking and is the author of a new book on banks’ role in the rapid growth of slavery. “So I’m excited.”
The data itself is not new. It consists of call reports that banks filed with the Office of the Comptroller of the Currency between 1867 and 1904.
What’s new is that two Fed researchers — Stephan Luck of the New York Fed and Sergio Correia of the Fed board — digitized each call report and published a free database that users can use to easily compare changes in banks’ lending, profits, deposits and other key metrics. Users can also focus on trends in specific states or cities, and examine how national banks popped up in the West in the late 19th century.
Undertaking those analyses has always been possible, but it previously required a substantial amount of manual typing of data to put everything in a usable format.
The tool will be particularly useful for graduate and undergraduate students, as it will make it far easier for them to conduct analyses, according to Charles Calomiris, a Columbia Business School professor and a former OCC chief economist.
“You’re going to be able to do just an unbelievable amount of things,” said Calomiris, the author of the book, “Fragile By Design: The Political Origins of Banking Crises and Scarce Credit.”
Calomiris likened the dataset to the Federal Reserve Bank of St. Louis’ efforts to increase the visibility of economic data and history. The St. Louis Fed’s FRED website includes hundreds of thousands of economic data points, while its FRASER site has historical industry and government documents.
The world of post-Civil War banking gives researchers a “great window” into the rapid growth of the U.S. economy and key political debates, Calomiris said. Given how fragmented the banking system was at the time, researchers can explore how events like droughts and the era’s several financial panics affected the economies of individual states.
The period was one of “significant financial instability,” with little regulation, no central bank, no federal deposit insurance and rampant speculation on Wall Street, said Sean Vanatta, a U.S. history professor at the University of Glasgow who studies banking.
He credited the Fed researchers for publishing the dataset, saying it and other digitized versions of historical banking data open up “a lot of new opportunities” for research.
“It gives you the life story of these banks,” said Vanatta, who, along with Peter Conti-Brown, is the co-author of the forthcoming book, “The Banker’s Thumb: A History of Bank Supervision in the United States.”
“You can see over time how banks’ businesses are changing and developing, and also you can position those banks in relation to their competitors in local markets and position them in relation to banks across the nation,” Vanatta said.
Still, Vanatta cautioned that researchers may have to dig beyond just the numbers.
In some cases, call reports from bank examiners in the post-Civil War era questioned the validity of bank-provided data, he said. Other cases may highlight the revolving door between banks and their supervisors in the 19th century.
Modern corporate accounting was developing at the time, particularly in the booming railroad industry, which itself was vulnerable to accounting manipulation.
In the banking industry, government examiners were the ones looking to standardize bank accounting, but Vanatta said there wasn’t “that much uniformity” in the early days.
“That, in and of itself, is an interesting story,” Vanatta said. “How do we get new categories of bank assets or bank liabilities? Who makes that decision? What makes it necessary to create these new categories?”