Wildcat Banking


Also found in: Wikipedia.

Wildcat Banking

A period in the United States between 1816 and 1863 in which there was no federal regulation of banks. Currency was issued by private banks, which were only regulated by the individual states. These currencies were often backed by the debt the banks held and were often unstable, which frequently caused the currencies to become worthless. See also: National Bank Act of 1863.
References in periodicals archive ?
Wildcat banking refers to the unusual practice of banks chartered under state law during the period of non-federally regulated state banking in the U.
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.
Their hypothesis was that it was not wildcat banking but declines in bond prices that led to bank failures.
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).