Banking came around, i think, 19 70 or so. Why didn't that coalition unravel sooner? We have braks. The states had authority over the deciding what the rules of the game of engagement for banking were going to be within their states. And also they had the thority to restrict out of state banks from participating. If you were in letsa kansas or illinois, if the agricultural interests there wanted to maintain unit banking, they just had to win the battle at the state level.
Charles Calomiris of Columbia University and Stephen Haber of Stanford University, co-authors of Fragile by Design: The Political Origins of Banking Crises and Scarce Credit, talk with EconTalk host Russ Roberts about their book. The conversation focuses on how politics and economics interact to give some countries such as Canada a remarkably stable financial system while others such as the United States have a much less stable system. The two authors discuss the political forces that explain the persistence of seemingly bad financial regulation. The conversation includes a discussion of the financial crisis of 2008.