This article investigates U.S. interbank relationships before the Civil War using previously unknown data for Pennsylvania banks from 1851 to 1859 that disaggregate the amounts due from other banks by debtor bank. It finds that country banks, banks outside of Philadelphia and Pittsburgh, dealt almost exclusively with financial center banks. Most had a large, highly stable relationship with a single correspondent bank. The location of a country bank’s correspondent was consistent with trade patterns, particularly railroad and canal linkages. Philadelphia banks, in contrast, did not establish correspondent-type banking relationships. Further, Philadelphia’s correspondent banking market was not highly concentrated, and entry was easy.
This article is reprinted, with permission, from the _Journal of Monetary Economics_ (Vol. 50, No. 2, March 2003, pp. 455-474). Copyright 2003 by Elsevier Science B.V. All rights reserved.This article was edited for publication in the _Federal Reserve Bank of Minneapolis Quarterly Review_. https://doi.org/10.1016/S0304-3932(03)00008-4