Wildcat banks were state-chartered financial institutions that operated in the United States from the early 1800s until the American Civil War (1861–65). They were known as wildcat banks for their free-lending policies and their issue of paper currency that could not be backed up by gold or silver (called specie). The Second National Bank of the United States operated between 1816 and 1836, during which time the federally controlled bank was able to restrain the wildcat institutions, which predominated in the West and South, requiring them to issue only what currency they could convert to coin. But when the charter of the Second National Bank of the United States was allowed to expire (in 1836), the wildcat banks resumed their unsound banking practices. Paper currency issue and lending went unregulated amidst a rush to buy lands on the frontier. The nation’s currency wildly fluctuated as the renegade financial institutions loosened and tightened the money supply to suit their own needs. Further, since there were so many banks issuing their own notes, another problem introduced itself: counterfeiting. No one could tell what was true bank currency and what was the product of a good counterfeiter.

With inflation rampant and land speculation at a new high, on July 11, 1836, President Andrew Jackson (1767–1845), intent on reining in the wildcat banks, issued the Specie Circular, an order that government agents accept nothing but gold or silver as payment for new lands. When prospective land buyers (particularly in the West) took their paper bills to the state-chartered banks to be converted to coin, they found the banks’ tills were empty, and the holders were therefore denied the face value of their notes. Bank after bank closed its doors, causing a financial panic in 1837. But many state banks remained in business, and the issue of regulating paper currency continued to trouble the nation.