The institutional foundations of personal finance: Innovation in U.S. savings banks, 1880s-1920s

Abstract

The system of personal fi nance that developed in the United States was more fragmented than comparative arrangements in most industrializing countries, where savings banks had become large, diversifi ed fi nancial institutions. The federalist political structure of the U.S., combined with lobbying by existing intermediaries, inhibited the establishment of a centralized public provider of fi nancial services for households such as emerged elsewhere. Moreover, the United States did not develop strong, diversifi ed savings institutions at the local level, due in part to regulations that stifl ed innovation by savings banks and in part to the risk-averse organizational culture of the banks themselves. These factors enabled the proliferation of specialized intermediaries that aggressively marketed new fi nancial services to households and facilitated the growth of new patterns of fi nancial behavior among ordinary Americans. © 2011 The President and Fellows of Harvard College.