Wildcat banks were state-chartered financial institutions that operated in the United States from the early 1800s until the American Civil War (1861–1865). They were known as wildcat banks for their free lending policies and their issue of paper currency (called specie) that could not be backed up by gold or silver. A holder of the bank's paper currency could have it redeemed with specie by presenting the currency (bank notes) at the bank's office, which was located "where the wildcats" lived.
The Second National Bank of the United States (1816–1836), a federally controlled bank, was able to restrain the wildcat institutions, which predominated in the West and South, by requiring them to issue only the amount of currency they could convert to coin. But when the charter of the Second National Bank of the United States was allowed to expire (1836), the wildcat banks resumed their unsound banking practices. Paper currency issue and lending went unregulated amidst a rush to buy land 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. Furthermore, because 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. 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 land. 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. The holders were 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. During the American Civil War, Congress authorized the issue of 150 million dollars in national notes, called greenbacks. Through subsequent acts of Congress, including the creation of a national banking system (1863), the federal government eventually put the state banks out of business and replaced them with federally backed institutions. The nation's financial problems were not adequately addressed until 1913, when the Federal Reserve Act was passed to strengthen the federal control of the banking system and to bring about stabilization of currency.