Liberale Regulierung: die Gründung der deutschen Reichsbank und der Bank von Spanien als Zentralnotenbanken 1874/75

In 1874/75 both in Germany and Spain bank laws were issued that changed a formerly decentralised note-issuing system with regional monopolies to a centralised and hierarchical structure with a Central Bank at its top. Which political and economic interests, monetary theories, social and economic constraints qualified for the respective bank laws? What kind of institutional alternatives were at hand? Did a formerly decentralised system of regional
monopolies really fail? Which functions were both Central Banks ascribed to? Did legal norms guarantee that bank authorities managed money supply in due course? Answers are presented on behalf of a comprehensive institutional approach outlined by Curzio Giannini from the Bank of Italy. This approach combines property rights analysis, transactions costs, monetary theory and evolutionary economics. Legal norms are also checked by functional analysis. Evidence is presented as highly revealing documents of central decision-makers are presented for the first time.

The Reichsbank was founded in 1875 as a private equity company with an executive board that existed solely of government functionaries. This legal structure was only partly the result of a compromise out of private, public and fiscal interests. As a temporary Public-Private-Partnership model the Reichsbank was permitted a period of 15 years to prove its successful working. At the end of this transformation decision makers imagined a Central Bank with the monopoly to issue notes. Bank notes would also have to be replaced step by step by the use of cheques and current accounts. Decision-makers stipulated a set of strict norms in order to hold both the price level constant and the money supply elastic. These norms were a mixture of elements taken from contemporary Banking and Currency-School. Evidence is given that these norms should steer money supply steadily towards an equilibrium point – according to the principles of Newtonian Physics and the working of the railway system. The rules for money supply would leave the executive board of the Reichsbank with no discretionary
choice. Yet, the executive board managed to overcome these norms in order to satisfy money demand.

The Spanish note-issuing system was based on the legal norms of Banking-School and the French central bank system. In contrast to these models, in the Spanish central bank law security standards for monetary stability were purposely lowered. Banking norms were opened up to allow for almost unlimited government credit and were eased to maximise the private profit of bank owners. As this may be seen as a rather questionable means towards monetary stability and economic efficiency, the range of alternative decisions is discussed. A long term institutional perspective gives insight into government relations with the Bank of Spain in Madrid and regional banks whose issue of notes was envied by the Bank of Spain ever since. Informal networks illustrate the structure of decision-making within Spanish financial and fiscal oligarchy. Confidential reports of central decision-makers point to the possibility of alternative choices. Intense discussion within the board of the Bank of Spain itself shows which kind of experience and future expectation drove the majority of the
executive board finally towards accepting the new central bank law. Provincial note banks resisted in 1874 furiously to the fact that they were taken off their legal right to issue notes in their respective provinces. In response, the bank law could not be executed as imagined by its authors and had to be postponed several times. As legal norms and their effective implementation diverged immensely various kinds of transaction costs are localised in the wake of institutional change.