Indeed, one of the major contributors to bank failures during the Great Depression was the National Banking Act of 1864. That law, according to monetary historian Jeff Hummel, an economist at San Jose State University, banned any branching (interstate or intrastate) by nationally chartered banks, except for a few grandfathered banks. Because banks during the Great Depression were so small, they were undiversified. So when the agriculture sector went under, in part because of the Smoot-Hawley Act that attacked free trade, many rural banks failed. Call it “too small, so we failed.”

This is from my article, “Making Banks Too Small to Succeed,” published yesterday on AOL-Sphere.

The following paragraph was cut:

Obama’s plan amounts to regulatory whack-a-mole: Take wild swipes at the problem and hope that it won’t rear its ugly head again. His plans, in this area and others, would involve the federal government even more in our lives. But the federal government is simply too far removed, has no incentive to do it well, and is too big to plan for us. Let’s hope Obama changes.