rules cannot substitute for character. in virtually all transactions, whether with customers or with colleagues, we rely on the word of those with whom we do business. if we could not do so, goods and services could not be exchanged efficiently. even when followed to the letter, rules guide only a small number of the day - to - day decisions required of corporate management. the rest are governed by whatever personal code of values corporate managers bring to the table. market transactions are inhibited if counterparties cannot rely on the accuracy of information. the ability to trust the word of a stranger still is an integral part of any sophisticated economy. a reputation for honest dealings within a corporation is critical for effective corporate governance. even more important is the reputation of the corporation itself as seen through the eyes of outsiders. it is an exceptionally important market value that in principle is capitalized on a balance sheet as goodwill. reputation and trust were particularly valued assets in freewheeling nineteenth - century america. throughout much of that century, laissez - faire reigned and caveat emptor was the prevailing prescription for guarding against the wide - open trading practices of those years. a reputation for honest dealings was thus a particularly valued asset. even those inclined to be less than scrupulous in their private dealings were forced to adhere to a more ethical standard in their market transactions, or they risked being driven out of business. to be sure, the history of business is strewn with fisks, goulds, and numerous others treading on, or over, the edge of legality. but they were a distinct minority. if the situation had been otherwise, the united states at the end of the nineteenth century would never have been poised to displace great britain as the world ’ s leading economy. reputation was especially important to early u. s. bankers. it is not by chance that in the nineteenth century many bankers could effectively issue uncollateralized currency. they worked hard to develop and maintain a reputation that their word was their bond. for these institutions to succeed and prosper, people had to trust their promise of redemption in specie. the notion that “ wildcat banking ” was rampant before the civil war is an exaggeration. certainly, crooks existed in banking as in every business. some banks that issued currency made redemption inconvenient, if not impossible. but they were fly - by - night operators and rarely endured beyond the first swindle. in fact, most bankers competed vigorously

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