The Federal Reserve has a reputation for being bad, but what was banking like before the Federal Reserve?

Follow me down the rabbit hole to find out.

The Hello, friends, and welcome back to the rabbit hole.

I'm your host, Danny, and today we are talking about banking before the Federal Reserve, which I feel like

gets overlooked a lot. So before the establishment of the Federal Reserve in 1913, the United

States experienced a varied and often chaotic banking system, particularly during the 19th

century. So the early U.S. banking system between like the 1790s and the 1830s

was kind of federally backed because they had an like an established centralized banking system

with the creation of the first bank of the United States in 1791.

This was established under the Treasury Secretary Alexander Hamilton.

However, the charter for the bank expired in 1811 and the country returned to a decentralized

system. The country's banking system during this time was a mix of state chartered banks and private institutions with very little federal oversight.

Each state had the authority to charter its own banks and banks issued their own banknotes, which were not universally accepted and were often worth way less than their face value.

So then in like the 1830s, we have this introduction of what's called Wildcat banking.

So this happened between like the 1830s and the 1860s. The term wildcat banking is used to describe the chaotic

and often like fraudulent banking practices that emerged during this time, especially in the

frontier regions. Wildcat banks were typically like small state chartered institutes with little to no capital reserves, so they would issue banknotes that were often backed by nothing.

And then these banks were often, like they would operate in isolated areas far from any established financial centers, which made it difficult for people to redeem their banknotes for silver or gold.

The term wildcat actually refers to the notion that these banks were as unpredictable and as unreliable as wildcats on the frontier.

These banks would often spring up quickly.

They would make a bunch of loans, issue paper money.

They would do all these things.

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