Close this search box.

Table of Contents

Wildcat Banking


Wildcat banking refers to a speculative, high-risk type of banking that was prominent in the United States during the nineteenth century. It was associated with banks chartered under state law during the period 1810–1860, where institutions were only loosely regulated. These banks often issued their own paper currencies, ran unchecked, made unsecured loans, and failed frequently, leading to economic instability.


The phonetic transcription of “Wildcat Banking” is: /ˈwaɪldkæt ˈbæŋkɪŋ/

Key Takeaways

Main Takeaways About Wildcat Banking

  1. Wildcat Banking refers to the unregulated banking practices in the U.S. during the 19th century. These banks were usually established in remote or “wildcat” locations, making it difficult for note holders to redeem their notes or check the bank’s legitimacy.
  2. Many of these banks were sketchy in their operations and were often associated with fraudulent activities. They would issue banknotes far in excess of their actual capital reserves which often led to widespread bank failures, contributing to financial panics and recessions.
  3. The wildcat banking era led to a demand for banking reform and the eventual establishment of the national banking system and the Federal Reserve System, introducing regulation and supervision to the banking industry.


Wildcat Banking is a significant term in business/finance history due to its impact on the banking system in the United States during the 19th century. The term refers to the practices of state-chartered banks before the establishment of the U.S. Federal Reserve System. These banks were often established in remote or “wildcat” locations, hence the name. Not regulated by any centralized authority, they could issue banknotes without any significant gold or silver reserves, making the money supply unstable and obscure. The high risk and fraudulent operations often associated with these banks resulted in numerous bank failures and economic instability. Understanding Wildcat Banking is essential as it underscores the importance and need for regulation and stability in the banking system.


Wildcat banking served a distinct purpose in the American financial landscape during the period of 1837 to 1863, also known as the Free Banking Era. The term refers to the state-chartered, lightly regulated banks that were established across the American frontier during this time. Their main purpose was to address the acute need for local banking facilities in the rapidly growing and spreading America. The demand for credit facilities was increasing at a faster pace than traditional banking institutions could keep up. In response to this, state governments permitted virtually anyone to open a bank given they could meet the initial capital requirements. This unlocked financial opportunities that otherwise might have been out of reach in these underbanked regions. Despite their nickname, wildcat banks were not actually wild or unruly. They offered essential financial services such as issuing banknotes, extending loans and providing safe places for depositing money. Wildcat banks allowed the local communities to participate in the growing American economy by facilitating investments, offering credit to farmers and businesses, and supporting infrastructure development within their territories. These banks also played a significant role in facilitating settlement expansion across the American frontier by providing requisite financial services for those who wished to secure land and cultivate it. However, these banks were often criticized for their risky behaviors and frequent failures, due to the lack of effective regulations and oversight.


Wildcat Banking is a term used to describe the banking industry’s practices during the pre-civil war era in the United States. It refers to the issuing of banknotes by private banks that were not backed by enough capital or silver/gold reserves and were thus unreliable. Here are three examples:1. Michigan’s Free Banking Era (1837-1863) : Michigan was plagued with unregulated “wildcat” banks that issued banknotes without sufficient capital. They were called wildcat banks because they were said to exist in remote, unpopulated areas (like where wildcats lived in the forest) so that people could not easily redeem their banknotes for gold or silver.2. Free Banking in Minnesota (1858-1865) : Wildcat banking ran rampant in the state of Minnesota during this time. Banks would set up on the outskirts of towns or in remote regions and give out loans and banknotes that were not backed by enough assets, capital or reserves. The extreme case led to the collapse of many of these banks and substantial financial loss for the people of Minnesota.3. The Suffolk Bank System (1825-1858): Even though the Suffolk Bank in Boston, Massachusetts wasn’t a wildcat bank itself, it played a crucial role in controlling and regulating them. The Suffolk Bank created a network allowing rural banks to deposit their reserves and issue bank notes with Suffolk’s guarantee. This practice significantly reduced the risks associated with wildcat banking. Nevertheless, it was a reaction to the widespread occurrence of wildcat banking in the American Northeast during the early 19th century.

Frequently Asked Questions(FAQ)

What is Wildcat Banking?

Wildcat Banking refers to the banking practices during the Free Banking Era in United States history (1837-1863), where state-chartered banks were allowed to issue their own banknotes backed by gold or silver reserves. This period was characterized by minimal regulation, leading to unstable and risky banking conditions.

What is the origin of the term Wildcat Banking?

The term originated from banks that were alleged to operate in remote, unpopulated areas (like where wildcats roam), making it difficult for note-holders to redeem these notes for gold or silver.

What were the common issues associated with Wildcat Banking?

Wildcat Banking was associated with a lack of regulation, high-risk lending practices, frequent bank failures, and fluctuating currency value.

How did Wildcat Banking affect the economy?

The lack of regulation and oversight led to many unstable banks and unreliable currency. It resulted in episodic financial panics and significant economic disruptions.

How did Wildcat Banking come to an end?

Wildcat Banking was largely ended with the passage of the National Banking Act of 1863, which established the national banking system and brought stricter regulations and supervision.

What did the National Banking Act of 1863 do to mitigate the risks from Wildcat Banking?

The National Banking Act of 1863 created a national banking system, issued national banknotes, and put in place a system of bank supervision. This significantly reduced the extreme practices of Wildcat Banking.

Does Wildcat Banking still exist today?

No, modern banking systems are heavily regulated to prevent the equivalent of Wildcat Banking. However, risks associated with inadequate regulation and oversight can still occur as demonstrated by various financial crises.

What lessons have been learnt from the Wildcat Banking era?

The era has taught us the importance of regulation, policy stability, and prudent banking practices. It highlights the risks of unfettered banking and demonstrates the repercussions of allowing too much freedom without adequate safeguards.

Related Finance Terms

  • Specie Payment: This is hard currency like gold or silver coins. Used as a basis for trade during the era of wildcat banking.
  • Bank Notes: These are traditional currency notes issued by a bank, their value is associated with the bank’s reputation and trustworthiness during the era of wildcat banking.
  • Fractional Reserve Banking: A system where banks keep a fraction of the deposits as reserves and lend out the remaining amount. This principle was used loosely during wildcat banking periods.
  • Unregulated Banking: This refers to a system where banks are not governed by any strict rules or regulations, similar to the banking environment during the wildcat banking period.
  • Bank Failures: This refers to the situation where a bank cannot meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities. Bank failures were common during the wildcat banking era.

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More