A Proposed Independent Study Research Project:
Public Banking In The United States - During The Antebellum Period
Background: Interest in creating public banks in the United States has increased dramatically in recent years. In 2021, legislation was introduced in six states to start a bank owned and operated by the state. For all six states – Illinois, Massachusetts, New Mexico, New York, Oregon and Washington, the legislation was re-introduced in 2022 or 2023. Similar legislation was enacted in 2019 by California for the creation of municipal banks. In July 2023, the inaugural policy Blueprint for Chicago’s new mayor proposed forming a task force “… to study the concept of, and develop recommendations on, the establishment of a Public Bank…” (Johnson, 2023, p. 40).
Public banking has been studied recently in two research papers. Chirinko (2022) examines the policy proposals advanced by the six U.S. states, as well as the legislation enacted in California, and reviews both sides of the debate through the 20th Century historical record of public banking. Chirinko (2024) studies the financial performance of the only state bank in the United States, the Bank of North Dakota. It has been in existence for over a century and has been very profitable in recent years. On the surface, these facts present a strong case for starting a state bank. Three factors are identified that lower reported profitability to the same level as comparable private banks. In the end, there is no ‘secret sauce’ associated with the Bank of North Dakota.
Project Goal: History can inform the current policy debate about public banks. During the Antebellum Period, public banks had been chartered by seven states – Alabama, Georgia, Illinois, Kentucky, South Carolina, Tennessee, and Vermont. The successes and failures of these seven banks provide a fresh source of information about the wisdom of creating a state bank. To begin to answer this expansive question, the researcher would perform the following tasks:
- Identify and collect source material describing each of the seven public banks. This will likely involve making InterLibraryLoan requests.
- Based on the collected documents, write a summary for each public bank describing,
o the conditions that lead to the creation of the public bank;
o the political or economic factors that influenced the creation and management of the public bank;
o the factors that contributed to the successes and failures of the public bank;
o financial data quantifying the profitability and operation of the public bank (though these data may be difficult to obtain).
- Based on the seven summary documents, identify lessons that inform the current debate about starting a public bank.
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Learning Goals: The student will obtain an appreciation of how a financial economics research project is initiated, executed, and completed. Additionally, the student will obtain expertise about an important and topical policy issue, one that may well have implications for the State of Illinois and the City of Chicago.
Requirements and Timetable: The research would be undertaken during the Fall 2024 semester as an independent study. The effort required is equivalent to a normal three credit course. The written and collected documents would be due at the end of the Fall 2024 semester but, if needed, the deadline could be extended to the beginning of the Spring 2025 semester.
References:
Chirinko, Robert S., “Is A State Bank A Useful Economic Development Tool In The USA?,” CESifo Economic Studies 68 (December 2022), 391–413.
_____, “The ‘Secret Sauce’?: Understanding The Success Of The Bank Of North
Dakota,” UIC Working Paper (January 2024).
Johnson, Brandon, Chicago For The People (City of Chicago, July 2023).
Bob Chirinko
Department of Finance, UIC
601 S. Morgan St, 2333 University Hall, MC 168
Chicago, IL 60607
(312) 355-1262 office http://business.uic.edu/faculty/robert-chirinko
EMAIL: chirinko@uic.edu
