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Full-Text Articles in Economic History
Did Antebellum Illinois Free Banks Take Undue Risk With Their Bond Portfolios?: An Analysis Of Decision-Making Prior To The Civil War, Scott N. Clayman
Did Antebellum Illinois Free Banks Take Undue Risk With Their Bond Portfolios?: An Analysis Of Decision-Making Prior To The Civil War, Scott N. Clayman
Business and Economics Honors Papers
Free banks in Illinois could issue bank notes backed by state or U.S. bond collateral. A decline in bond prices as the Civil War approached resulted in banks being unable to redeem their noteholders in gold specie and subsequently resulted in bank failures. Previously economic historians believed that failures of free banks were due to wildcat banking rather than the portfolio allocation of free banks. Over time, other researchers have found that banks that took greater ex ante risk prior to the failure were more likely to fail. There were other price declines during the 1850s, in particular the Panic …