Summary of the Paper
‘The Evolution of Bank Supervision: Evidence from U.S. States’ by Kris James Mitchener and Matthew Jaremski provides valuable work as far as unveiling the history and reason behind the evolution of bank supervisory institutions in the various states. The paper has not only conducted an assessment on the same subject but also quantitatively and from a long-term approach. The evolution of bank supervision institutions is a social, societal phenomenon whose knowledge is important to a considerable number of members of the society. This creates the paper’s necessity as it would be unfeasible to conduct research on a subject that no one is interested. In developing the paper, Mitchener and Jaremski (2014), drew their evidence from the states of the US. The final provision of the research work is a novel like data set that has detailed information relating to the history and factors that led to the creation of formal banks supervisory institutions.
Main Comments and Suggestions
Theoretical Arguments for Supervision
In their attempt to unveil the history and the factors behind the evolution of bank supervisory institutions in the United States, the authors conducted a reflection on the theoretical arguments that are related to the subject. Theories identified are seen to cut across the public and private interest theories of regulation, efficiency transfer of savings from lenders to borrowers, welfare enhancement, incentive compatible contracts and the needs for a general overseer for banking institutions. As much as they cut across the wide range of areas relating to the topic of discussion, they do not entirely provide a satisfactory theoretical argument for the development and existence of bank supervisory institutions.
The theoretical sections of papers like this one are composed of the various theoretical models and frameworks that can be used to explain the main topic. This lacks in Mitchener and Jaremski’s (2014) paper as it is seen to provide more of the reasons or necessity for the bank supervisory institutions as opposed to the theoretical frameworks and models that provide a proper basis for the subject. For instance, the paper sites efficient transfer of savings from lenders to borrowers as a second public-private theoretical argument for the evolution of bank supervisory institutions. As much as it could form one of the reasons for their existence, it entirely fails to satisfy the section as the section’s content should be theoretical frameworks as opposed to reasons. Further, the authors could have developed a conceptual framework for this section with dependent and independent variables in a bid to compel a clear understanding of the proposed work.
History of Bank Supervision in the US
It is unarguable that the details provided relating to the history of banking institutions in the United States are well detailed, substantial, convincing and well aligned with the facts. Mitchener and Jaremski (2014) begin the historical discussion from the era of special bank charters and the young republic to the free banking era through to the era of dual banking. Detailed information relating to the evolution of banking in the US through this period and the shift from one era to the other has been discussed in details. Something is, however, wrong with the development of this discussion. It is good to note that the previously mentioned eras relate to the entire banking sector and not supervisory institutions in the sector.
The section is, however, not to be entirely criticized because some of its provisions are relevant to the topic of discussion. For instance, after an irrelevant discussion on the history of the general banking sector, the paper narrows to that of the bank supervisory institutions with the provision that they began in New York and Massachusetts which were the only states with the supervisory institutions before 1830.
Factors Droving the Adoption of Formal Bank Supervision'
The development of state bank supervisory institutions took a considerably long period. As pointed out in the paper, the bank supervisory institutions had to evolve first taking a period of more than one century. This implies that the factors that drove the development and adoption of bank supervisory institutions are historical in nature, and they developed from one evolution era to the other. In other words, factors that drove the adoption of banking institutions did not arise at once, but the need arose with time. Each factor compelled the need for the development of bank supervision each at its own time. In developing a discussion relating to the factors that drove the adoption of formal bank supervisory institutions, it is important for the authors to highlight the timelines and the conditions surrounding such timelines.
In the paper, the timelines have been discussed in their section while the factors necessitating the development of bank supervisory institutions are discussed in their section as well. This leads to lack of clarity as an independent variable proposed as a factor driving the development of formal bank supervision cannot be substantiated with the prevailing political conditions that could be derived from the timelines. The discussion relating to the development of formal bank supervisory institutions is, therefore, not satisfactory. Further, just like in the theoretical arguments for supervision, the authors should have provided a conceptual framework to clear the air on the dependent and independent variables.
The first part of the paper, assumed to be the introductory section, is a mix-up of a group of ideas that end up rendering the whole section void. The ideological mix-up leads to the loss of the introductory flow. It is likely that most of the readers will find the introductory part of this paper cumbersome and complicated to comprehend as a result of the ideological mix-up. It is in the introduction part that we have the legal provisions and acts that relate to the evolution of bank supervision institutions discussed. It is essential to have such legal provisions, acts and any amendments relating to the topic of discussion discussed in this section. However, it is important to ensure that the discussion is rightfully placed and that it does not interfere with the paper’s flow.
It is considerably important to ensure that the reader’s attention is captured at the beginning of the paper, and nothing complicates or interferes with their interest in the paper. Any complications or interference compels them to avoid the whole paper. Any discussion that does not primarily intended to introduce the reader on the paper should be avoided unless it is directly integrated and aligned with the introduction. The best format is to place such discussions in a subtopic just below the introduction rather than mixing it up with the introduction. It is, however, important to note that providing such information to the introductory part is not entirely wrong. It becomes wrong when such provisions hamper’s the reader’s ability to read and understand the introduction as it is the case in this paper.
Minor Points and Suggestions
One of the most identifiable minor issues is the fact that there is not introductory subtopic. It is expected that a paper like this one should begin with the introduction section with its subtopic. The mistake is fueled by the fact that the section that follows the untitled section is labeled ‘II’ implying that it is the second subtopic. This is, however, not the case since there is no subtopic labeled ‘I’. This mistake, as minor as it may seem, causes major symbolic communication complications between the authors and the reader.
The paper’s abstract is not a sufficient representation of the contents of the paper as it is too brief. A typical abstract provides the research focus of the paper, in brief, the data sources, the data reconstruction methods, results, and findings, the main conclusions of the papers and the recommendations. All of the requirements above in brief. The abstract provided in this paper fails to satisfy these basic requirements.
Sentence one in the last paragraph on page 19 is unclear. The authors provide: ‘We include a variety of controls to capture other state and region specific factors that may have also influenced the decision to create state banking departments’ (Mitchener and Jaremski, 19). It is not clear what the authors intended to mean when composing this sentence.
It is also recommended that the authors check on the footnote numbering.
Mitchener, Kris, and Matthew Jaremski. The Evolution of Bank' Supervisions: Evidence from U.S. States. 1st ed. Cambridge, MA 02138: NBER Publishers, 2014. Print.