For the past century and a half, the rules governing the banking and financial professions have been shaped by the rivalry between two types of banks – banks that are relatively more exposed to market competition and banks that are somewhat sheltered from it. Exposed banks cannot afford to own risky or non-marketable assets, lest their financial costs rise, their profitability drops, and their share value suffers. Sheltered banks, in contrast, can afford to hold riskier or less marketable assets either because they benefit from a government guarantee or because they need not worry about maximizing profitability. What has varied over time is the membership of each group. Before World War I, the exposed group was made up of center banks, the sheltered group of local banks and postal savings. During the contraction of the middle century, state intervention added to the sheltered group a new category of bank – the special (state-run) credit bank. Today, the deregulation of finance has reduced the sheltered group to local banks again.

During the period under consideration in this study, the relative size of the exposed and sheltered sectors was a reflection of the relative power of their respective clients – large and high-growth firms on the exposed side; agrarians, small firms, and traditional industries on the sheltered side. The anti-competitive coalition was comparatively stronger in decentralized states, where they could rely on local governments to monopolize access to investment information and extract protection for local banks.