The Little Markets: The Story of Unit Banks

Abstract

The controversy between branch banking and unit banking in the United States is a very old one, essentially dating back to the drawing up and ratification of the Constitution. Branch banking means that the same bank can open multiple branches, either within a particular state or across state lines. Unit banking means that one bank can only have one branch, leading to a proliferation in the number of banks. The Hamiltonians were in favor of a strong federal government along with federal and state banks with multiple branches; only large banks could provide the finances that were required to bring the Industrial Revolution to the young nation. The Jeffersonians, on the other hand, favored a more decentralized power structure. Not only were they in favor of greater political rights being given to the states, but this devolution would also extend to the financial system; banks that were many in number and smaller in size were seen as the best setup for serving the agricultural interests of the country.