Free banking and bank entry in nineteenth-century new york

"Previous studies of entry under New York's free banking law of 1838 have generated conflicting results. This article shows that different measures of entry lead to different conclusions about the competitive effects of free banking. Measured by the entry of new banks, New York's free banking law led to increased rates of entry relative to both other states and New York before 1838. New York's free banking law, however, did not generate significant increases in per capita bank capital relative to other states or to New York prior to 1838. This discrepancy results from the practical effect of New York's law, which led to the entry of many small banks. Thus bond collateral requirements created effective barriers to entry comparable to the costs associated with obtaining a legislative charter"--National Bureau of Economic Research web site.