A blurb on the dust jacket of Unsettled Account says that Richard Grossman's book “could not have appeared at a better time.” I beg to differ. Three or four years ago, before the latest banking crisis began in 2007 and became acute in 2008, would have been a better time. For at the heart of the book is a wide-ranging, even-handed discussion, covering the experience of the past two centuries, of the causes and consequences of banking crises; of the various ways that banks and banking systems have been rescued during crises; and of the various types of banking regulations that arose in the hope they would prevent banking crises and eliminate the need for having to rescue banks. All of this would have been useful information for bankers and policy makers in 2007 and 2008 as they considered various options for coping with the recent crisis.

Grossman's purpose, to be sure, is more than just to provide historical information that might have proven useful to contemporary crisis managers. His book is a survey and synthesis of banking history in today's most developed economies, those of Western Europe, North America, Australia, and Japan. His approach, in his own words (p. xviii), “is thematic, rather than geographic or chronological, focusing on four major elements that have contributed to banking evolution: crises, bailouts, merger movements, and regulation.” A chapter covering historical experience from roughly 1800 through the Great Depression of the 1930s is devoted to each of the four elements (chapters 3–6), with the final chapter 10 of the book on “Constrained and Deregulated Banking” bringing the four themes from the 1930s up to the present.

Between these four thematic chapters are three chapters that are essentially case studies of the evolution of banking in England, Sweden, and the United States, three countries with long banking histories. The purpose of these case studies is to show how crises, bailouts, mergers, and regulation interact with one another in a particular national context to determine how that nation's banking system changed over time.

Grossman's introductory chapter begins by making the point that without financial intermediation industrialization and modern economic “would seem impossible” (p. 1). Curiously, he follows this with a discussion of the large literature on the relationship between financial development and economic growth, and finds it inconclusive even though the weight of the evidence in the studies he cites, at least in my opinion, tends to support the notion that financial development indeed leads to greater economic growth. Perhaps Grossman's reluctance to take a stand on such issues can be explained by his recognition that banking is only one aspect of financial development, and his goal is to study determinants of the evolution of banking systems, not the broader issue of financial development as a promoter of, even a cause of, economic development and growth.

An argument of the book—Grossman even calls it the argument—is that crises, bailouts, mergers, and regulation combine to produce a typical life cycle of banking systems. That life cycle can be described as movement over time from an initially low number of banks or ratio of bank assets to GDP to a gradual increase and peak of both bank numbers and the bank asset-GDP ratio, followed by a decline in both metrics. Graphical evidence from a number of countries appears to confirm the widespread incidence of this pattern. The pattern is hardly surprising. Two centuries ago there were few banks, especially the corporate commercial banks on which Grossman focuses, in any country. Banking then became what might be called a growth industry, with rising numbers of institutions and a rising ratio of bank assets to GDP. Downturns after the peak in terms of bank numbers can be explained by mergers and consolidations into extensive branch systems. Declines in the bank asset-GDP ratio can be attributed to financial development apart from commercial banking taking market share in finance away from the commercial banking sector.

A second chapter, “The Origins of Banking,” provides a compact history of banking from ancient and medieval times up the modern era on which Grossman concentrates his study.

In appendices, Grossman dates and describes for various countries the origins of both commercial and central banking; dates and describes banking crises prior to 1929 and those of the 1930s; and dates and describes merger movements in banking before 1940. He also provides a 54-page bibliography.

This is a useful book. A specialist on banking or banking and financial history will want to have it on the shelf as a convenient reference and guide to the literature. Nonspecialists will find it to be a very good introduction to the history of banking in the developed world during the past two to three centuries.