Long before the Federal Reserve was established in 1913, private banking flourished in the United States, and entrepreneurs were a major reason why. Between 1837 and 1863, when private banking reached its apex, hundreds of private currencies circulated throughout the country. Entrepreneurs not only founded private banks, they also appraised private currencies—or banknotes—which helped to constrain banks from overissuing money.
Imagine you’re a traveling salesperson crossing state lines in the US circa 1850. You’re about to make a major business deal. The only problem: You aren’t sure whether you can sell your wares in exchange for an unknown, private currency. The bank that issues this currency could be printing excessive amounts of it in the hopes of making a quick profit. Private banks that sought to defraud their users by overissuing currency were often referred to as “wildcat banks.” These banks would often locate in remote and hard-to-reach places to prevent customers from redeeming their currency for gold or silver.