Custom and Innovation in Postwar American Banking: How Credit Cards, Certificates of Deposit, and Eurodollars Transformed Finance

Conrad Jacober, Johns Hopkins University

In 1986, the Nobel-laureate economist Merton Miller wrote a retrospective on the preceding decades of financial innovation, remarking, “Can any twenty-year period in recorded history have witnessed even a tenth as much new development?” This phase of rapid innovation laid the foundation for a merger and acquisition wave that transformed American finance: between 1984 and 2008, the number of commercial banks in the United States halved, falling from 14,400 to 7,175. The cause of this concentration of banking and finance has been attributed to financial deregulation, which allowed banking across state lines and bank mergers despite anti-trust concerns. Although such deregulations are proximate causes of the concentration of American finance, its origins are in the concerted efforts of commercial banks to create innovative financial products that circumvented the New Deal’s financial regulatory apparatus. In this paper, I seek to explain the cluster of financial innovations in the postwar period and explore its consequences for financial concentration. Using archival data on leading American bankers, I reconstruct the development of three key financial innovations – the credit card, the certificate of deposit, and the Eurodollar market – to demonstrate how American commercial banks innovated to break customary banking arrangements, route regulatory barriers to competition, initiate a merger and acquisition wave, and reconstitute finance towards a global, financialized regime of accumulation.

No extended abstract or paper available

 Presented in Session 100. Innovation, Law, and Value in Global Capitalism