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Wildcat banking, banking panics, and free banking in the United States

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  • Gerald P. Dwyer

Abstract

Banks in the United States issued currency with no oversight of any kind by the federal goverment from 1837 to 1865. Many of these banks were part of \"free banking\" systems with no discretionary approval of entry into banking, and these banks issued notes that were used for payments in transactions just as Federal Reserve notes are today. There was no central bank or goverment insurance, and the ultimate guarantee of the value of a bank's notes was the value of the bank's assets. As the author indicates, these banknotes have similarities to some forms of electronic money. ; Free banking in the United States sometimes has been equated with wildcat banking, a name that suggests that opening a bank has much in common with drilling an oil well. The author examines notorious instances of supposed wilcat banking and finds little evidence that free banks were imprudent, let alone financially reckless. Instead, episodic difficulties faced by free banks occurred because of developments outside the banking systems.

Suggested Citation

  • Gerald P. Dwyer, 1996. "Wildcat banking, banking panics, and free banking in the United States," Economic Review, Federal Reserve Bank of Atlanta, vol. 81(Dec), pages 1-20.
    • Handle: RePEc:fip:fedaer:y:1996:i:dec:p:1-20:n:v.81no3-6
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    File URL: https://www.frbatlanta.org/-/media/documents/research/publications/economic-review/1996/vol81nos3-6_dwyer.pdf
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    References listed on IDEAS

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    1. Timberlake, Richard H., 1993. "Monetary Policy in the United States," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226803845, September.
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    Cited by:

    1. Dwyer Jr., Gerald P. & Samartín, Margarita, 2009. "Why do banks promise to pay par on demand?," Journal of Financial Stability, Elsevier, vol. 5(2), pages 147-169, June.
    2. William Roberds, 1997. "What's really new about the new forms of retail payment?," Economic Review, Federal Reserve Bank of Atlanta, vol. 82(Q 1), pages 32-45.
    3. Jeremy Atack & Matthew S. Jaremski & Peter L. Rousseau, 2014. "Did Railroads Make Antebellum U.S. Banks More Sound?," NBER Chapters, in: Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, pages 149-178, National Bureau of Economic Research, Inc.
    4. Hajime Tomura, 2020. "A Model of Bank-Note Runs," Working Papers 1922, Waseda University, Faculty of Political Science and Economics.
    5. Gerald P. Dwyer & Rik Hafer, 2001. "Bank failures in banking panics: Risky banks or road kill?," FRB Atlanta Working Paper 2001-13, Federal Reserve Bank of Atlanta.
    6. Robert L. Hetzel, 2009. "Should increased regulation of bank risk-taking come from regulators or from the market?," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 95(Spr), pages 161-200.
    7. Holthausen, Cornelia & Monnet, Cyril, 2003. "Money and payments: a modern perspective," Working Paper Series 245, European Central Bank.
    8. APATACHIOAE, Adina, 2014. "Free Banking – Possible Solution To The Recent Crisis?," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 1(1), pages 66-72.
    9. Pistor, Katharina, 2013. "A legal theory of finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 315-330.

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