Country Store to Commercial Banker: The Evolution of the Texas Banking Industry

This thesis corrects some fairly prevalent misunderstandings about the impact on the economic development of Texas of the anti-banking provisions of the 1845 Texas constitution. The Texas constitution provided that no corporate body could be created with banking privileges, nor could any individual issue checks, promissory note or paper to circulate as money. This anti-banking sentiment prevailed until 1905 when Texas began chartering banks. Some economic historians have incorrectly concluded that the Texas economy suffered from inadequate credit facilities because of these articles in the Texas constitution. My research reveals that, in reality, the anti-banking legislation, was, for the most part, inconsequential. It did not prevent the creation of thousands of small, private, unincorporated banks. These private banks blanketed the state from 1836 to 1905, and performed all the customary banking functions. They made loans, accepted deposits, cleared checks, created money, and were able to accumulate large amounts of capital. These banks represented the only viable form of banking in the frontier economy and they adequately provided for the credit needs of the developing Texas economy. (sdw)