Bank failure is as American as apple pie. The first American failure took place in Rhode Island in 1809, when a bank capitalized at forty-five dollars issued eight hundred thousand dollars in bank notes, a sum equal to more than seventeen thousand times the resources behind it. The 182 years between have been marked by literally tens of thousands of bank failures. In sharp contrast, Great Britain, whence most of American banking theory and practice comes, has not had a major bank failure in well over a hundred years.
Why should the richest and most productive capitalist economy on earth have such a dismal record in safeguarding a system so central to capitalism? The answer lies in the peculiar nature of the business we call banking, in our national history as a federal republic of sovereign states, and in our politics.
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