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I read an interesting paper recently (State Banks and the National Banking Acts: A Tale of Creative Destruction, written by Prof. Matthew Jaremski of Vanderbilt University) whose essential thrust was that a shift in capital regulations between the pre-Civil War state banking laws and the post-Civil War national banking laws led to the centralization of banking activity into urban centers along what would become the 'manufacturing belt' of the American Northeast. Essentially, smaller, more rural areas could not bring together the necessary bank capital to convert existing state banks into national banks, so when Congress passed a prohibitive tax on state bank notes in order to incentivize the shift from state bank charters to national ones, many state banks in these areas simply closed up shop on note issue and either converted to pure banks of deposit or just ceased doing business period.

His suggestion is that this led to a decline of important banking activities in these areas and, eventually, to the capital and liquidity scarcity problems that drove the populist movement later on in the 19th century. Since big city banks could not create branches in rural areas in most states, bank capital concentrated into cities, leaving rural and smaller towns starved of the stuff.

Ignoring, for the moment, the butterflies from the Federal government having to find some other way of financing itself during the Civil War, what implications might this have for late 19th century American history? How might an American Upper Mid-West and Northeast more dominated by a succession of medium sized cities, instead of the OTL trend of a contrast between the massive industrial metropolises and their network of feeder cities and the much smaller ruler towns and villages, alter American history? What kind of politics evolve in a North America with less in the way of late 19th century Populism? If bank currency is more widely available, for instance, I can only imagine the Free Silver movement has a lot less impetus behind it.

There is a very striking diagram from the paper, showing areas where banks closed during the Civil War and where they reappeared. I would like to share it but it seems my old lean-on for free file hosting, imageshack, has turned rogue on me and I don't really know of alternatives that you don't need an account for. Anyone have any suggestions?

Another interesting dynamic the diagram shows, unrelated to the question in this topic, is how utterly the Civil War devastated the South's financial system. The South, especially the Upper South, goes from having a banking network that, if not quite as dense as that of important parts of the North, is still obviously present and capable. After the Civil War, there are maybe a dozen counties with banks left. Chilling.
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