Download Insider Lending: Banks, Personal Connections, and Economic by Naomi R. Lamoreaux PDF

By Naomi R. Lamoreaux

At the present time the time period "insider lending" conveys an charisma of abuse and corruption, of unethical, if no longer unlawful, habit. In early 19th century New England, in spite of the fact that, insider lending used to be an fundamental element of the banking process. not just was once the perform an authorised truth of financial existence, yet, as Naomi R. Lamoreaux argues, it enabled banks (at least during this specific historic context) to play an enormous function in financing fiscal improvement. because the banking procedure advanced over the process the century, in spite of the fact that, lending practices turned extra impersonal undefined.

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24 Although the records do not indicate who (other than the society) purchased the Pawtuxet Bank's issues, minutes of stockholders' meetings reveal that by the early 1840s the Rhodes brothers were voting only 10 to 12 percent of the bank's outstanding shares, and even this figure probably included some proxies. Yet, as we have already seen, during the early 1840s the brothers obtained more than 50 percent of the bank's total loans. 3. 3,500 of stock in 1834, but their holdings probably declined after that.

14 Not all banks engaged in high levels of insider lending. '5 granted to their own directors, but these figures were typically so understated as to be virtually worthless as indexes of insider lending. In the first place, vague reporting requirements and a lack of standardized accounting procedures allowed banks considerable latitude in compiling their reports. Second, the totals did not include loans made to directors' relatives or business associates. Nor did they include any loans to corporations with which the directors were associated.

The Blake and Stetson families were so closely identified with the management of the Merchants Bank in Bangor, Maine, that for 30. , 1881), vol. 1, 213-14; vol. 2, 311-12; Rhode Island vol. 9, 128-9, I3(>> R. G. Dun &c Co. Collection, Baker Library, Harvard University Graduate School of Business Administration. 31. I am indebted for this information to my research assistant Ellie " oddard, who painstakingly reconstructed the genealogy of this kinship gruup from records at the Rhode Island Historical Society Library.

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