refers to the unusual practice of banks chartered under state law during the period of non-federally regulated state banking in the U.S., 1816 to 1863, also known as the Free Banking Era.
Was wildcat banking the main cause of bank failures?
Let me explain how wildcat banking was profitable under par valuation of bonds.
The argument that wildcat banking was the main cause of bank failures was based on two observations.
Increased competition due to free entry made wildcat banking more attractive in states that allowed par valuation of bonds when the market prices of bonds were significantly below the par value.
Under a concentrated banking system, wildcat banking would have been less attractive in states that allowed par valuation of bonds.
On the positive side, freer entry enhanced competition, and the "stories about wildcat banking
" that some historians took to be the natural consequence, "although not baseless, were exaggerated." In New York and some other early-adopting states, the system "work ed well," which explains why it spread to more and more states.
Evoking the so-called "wildcat banking
" period in the mid-19th century, when American banks were only regulated by state governments, the book's title refers to the burgeoning system of digital currencies proliferating in virtual worlds.
Dwyer Jr., "Wildcat Banking, Banking Panics, and Free Banking in the United States;" viewed 11 Oct.
Dwyer Jr., "Wildcat Banking, Banking Panics, and Free Banking in the United States," Federal Reserve Bank of Atlanta Economic Review 81 (Dec.
(7) Dwyer, "Wildcat Banking, Banking Panics, and Free Banking in the United States."
Although the law seemed to increase the margin of security on non-Illinois bonds, it also opened the door to wildcat banking opportunities" (see Economopoulos, "Illinois Free Banking Experience," 253-54).