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Essay / Research Paper Abstract
This 2.5-page paper examines the free banking era in the U.S. during the 19th century and discusses the concept of "wildcat banking," as well as distributional and exchange effects on banknotes. Bibliography lists 1 source.
Page Count:
2 pages (~225 words per page)
File: D0_MTfreban.rtf
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Unformatted sample text from the term paper:
The period between the 1830s and the 1860s was an interesting time in the United States as it pertained to banking. Unlike today,
when we have the Federal Reserve System to oversee all types of banking rules and regulations, during that period, the banking system could be considered somewhat chaotic. In this paper,
well examine some of the banking issues of the time. First, its important to realize that between 1837 and 1865, banks throughout
the United States issued currency that had no oversight of any kind by the federal government (Dwyer, 1996). This was termed "free banking," which meant there was no discretionary approval
of banking (Dwyer, 1996). For example, each bank had its own banknote, used for payments of transactions and redeemable at the
bank for a quantity of gold or silver (Dwyer, 1996). Basically, the guarantee of a banknotes value was the banks assets; which could be worth almost anything (Dwyer, 1996).
Free banking in the U.S. has also been called "wildcat banking," a term that some point out arose in Michigan during the 1830s
when the bankers there allegedly established free banks in hard-to-reach locations - locations "where the wildcats roamed" (Dwyer, 1996). These difficult locations benefited the banks because it made it difficult
for noteholder to redeem their notes; banks with more outstanding notes could hold less specie and generate a higher revenue for owners (Dwyer, 1996).
However, as can be expected, given the nature of the free banks, these institutions didnt always redeem their notes as promised (Dwyer, 1996). Part of this was because
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