Personal Finance

Wildcat Bank

What is Wildcat Bank?

Wildcat banking refers to banking in parts of the United States from 1837 to 1865, when banks were established in remote and inaccessible places. During this time, the bank was chartered by state law without any federal oversight. Less stringent regulation of the banking industry at the time led to this period, also known as the era of free banking.

key takeaways

  • Wildcat banking refers to banking in parts of the United States from 1837 to 1865, when banks were established in remote and inaccessible places.
  • Wildcat banks aren’t completely unregulated; they’re just not federally regulated. Wildcat Bank is chartered under applicable state laws and regulated at the state level. So, in the era of liberal banking, banking regulations varied from state to state.
  • It is speculated that the term “wildcat bank” originated in Michigan in the 1830s, and it is believed that bankers set up banks in such remote areas that wild cats roamed there. Others say the term originated from an early bank that issued a currency with an image of a wild cat.

Learn about Wildcat Banking

Wildcat banks aren’t completely unregulated; they’re just not federally regulated. Wildcat Bank is chartered under applicable state laws and regulated at the state level. So, in the era of liberal banking, banking regulations varied from state to state. The era of free banking ended with the passage of the National Bank Act of 1863, which implemented federal regulations governing banks, established the U.S. national banking system, and encouraged the development of a national currency backed by the U.S. Treasury and issued by the Office of the Comptroller of the Currency.

Origin of the Term “Wildcat Bank”

It is speculated that the term “wildcat bank” originated in Michigan in the 1830s, and it is believed that bankers set up banks in such remote areas that wild cats roamed there. Others say the term originated from an early bank that issued a currency with an image of a wild cat.

As early as 1812, wildcats were used to refer to impetuous or reckless speculators. By 1838, the term applied to any business deemed unsound or dangerous. the term “wild cat” Then, when applied to banks, it means unstable banks at risk of failure, and it is for this reason that wildcat banks are portrayed as such among Westerners. For example, some Westerners portray feral cat bankers as leaving their vaults open for depositors to view barrels of cash. However, the buckets are actually filled with nails, flour, or other similarly worthless items, with a layer of cash on them to fool savers.

Currency issued by Wildcat Bank

Regardless of the origin of the term, Wildcat Banks issued their own currency until the National Banking Act of 1863 prohibited the practice. These bank locations are sometimes the only places where bank notes can be redeemed, creating huge barriers to redemption for note holders and giving unscrupulous bankers an unfair advantage.

Currency issued by wildcat bankers has traditionally been considered worthless, and the securities used to back wildcat currency have historically been questionable. While some wildcat banks use coins to back the currency they issue, others use bonds or mortgages. Different currencies issued by different banks are traded at different discounts compared to their face value. The published list is used to distinguish legitimate banknotes from counterfeit banknotes and to help bankers and currency traders evaluate wildcat currency.

Before the establishment of the Federal Reserve System in 1913, banks issued notes to provide loans to their customers. An individual can bring his or her own paper money or money order to the card-issuing bank and transact at a discount to the cash value. Borrowers will receive bank notes backed by government bonds or species. Such notes give their holders a claim on assets held by banks that, in the era of liberal banking, were required by many states to be backed by state bonds.

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