From a money and banking point of view, the period from the Revolution to the Civil War in the United States was a fascinating one. There were numerous currencies in circulation. Both U.S. and foreign coins circulated during part of the period. Further, more than 2,400 note-issuing banks existed at one time or another with approximately 1,500 in existence when the War began. Approximately 900 of the banks that went into business did not last the entire period and about 400 failed with losses to note holders. The period was also notable in that some states introduced measures to protect note holders from losses. One such measure was government bond collateralized bank note issuance (“free banking”), which did not in many cases. Another such measure was safety funds or mutual guarantee schemes to protect bank creditors in case of bank failures. These also were only partially effective. The period also saw at least five bank panics and widespread suspension of payments.

The author of this book is Sharon Ann Murphy, a professor of history at Providence College. The intended audience appears to be someone without much economics training who is interested in obtaining a rudimentary understanding of money and banking in the antebellum period. The book will serve as good overview for such a reader. It is engagingly written. The prologue is a discussion of the Bank War between Andrew Jackson and Nicolas Biddle. This captures the reader's attention right from the outset. The book holds that attention with anecdotes—Chapter 3 begins with an anecdote amount a woman who encountered an armed robber on her way to exchange bank notes and Chapter 4 opens with a description of the actions of a swindler named Samuel Williams—and contemporary cartoons that have their contents and meaning thoroughly explained.

The book also helps a reader who might not be familiar with these basics of money and banking. It contains brief but useful explanations of why economies need and use money, of how commodity standards work, of how banks operate, and of why and how banking panics can occur. The book also discusses the views about banking of important historical figures such as Alexander Hamilton, James Madison, and Andrew Jackson and describes how their views influenced the banking institutions in place in the country during antebellum period.

The view of money and banking during this period that this book conveys is what might be considered the “conventional wisdom.” It does not recognize that significant parts of that wisdom have been fundamentally challenged in recent work by economic historians. One example is the conventional view that the Panic of 1857 was caused by the failure of the Ohio Life Insurance Company. Charles Calomiris and Larry Schweikart have convincingly shown that there were many other contributors to the Panic. Another example is the questioning of whether wildcat banks actually existed which has been done by Hugh Rockoff, Arthur Rolnick, and me.

In its penultimate chapter, the book contends that the “Civil War completely transformed the monetary and banking system of the country.” This contention is an overstatement. The structure of the national banking system was not new. It was similar to that of pre-Civil War free banks. Both had government bond collateralized bank note issuance—the only difference was that the bond collateral for national banks was federal government bonds rather than state bonds as it was for free banks. Further, there was not a large conversion of state banks to national banks when the National Banking Act was passed. State bank notes were not driven out of existence until state bank note issuance was heavily taxed beginning in 1866. Additionally, after the Civil War the United States retained a fractional reserve banking system with demand liabilities. As would be expected from such a system, runs and panics continued to happen. All that shifted was the liability on which the run occurred. Prior to the Civil War, runs were on bank notes; after it, runs were on deposits.

By far my biggest disappointment with the book, however, comes the biased picture that it gives of money and banking during the period. According to the blurb on the back cover “Money and banking in antebellum showed free-market capitalism run amok—unregulated, exuberant, and head pell-mell toward the next ‘panic’ of burst bubbles and hard times.” Were there people who lost from holding notes of banks that failed? Yes. Were there banking panics and economic depressions? Yes. Was the banking system perfect? Of course not. However, in my view the positives of banks outweighed the negatives. Bank notes made trade much easier and safer that it would have been if there had only been specie. Banks helped capital be allocated more efficiently by performing maturity transformation and monitoring. Real GDP growth from 1790 to 1860 averaged better than 4.25 percent. It is very doubtful that such strong growth would have occurred without banks.