Banking in the Early West: Monopoly, Prohibition, and Laissez Faire

In 1852 the Secretary of the Treasury reported that there were “no incorporated banks in regular and active operation” in Arkansas, California, Florida, Illinois, Iowa, Texas, and Wisconsin—seven of the thirty-one states then in existence—in the District of Columbia, nor in the two organized territories, Minnesota and Oregon. In most of these jurisdictions corporate banking was constitutionally prohibited; in others it was kept out by current opposition. At the same time it was a state-controlled monopoly in Indiana and Missouri, as it was a little later in Iowa. Going to the opposite extreme, Michigan in 1838 made banking free. Her experiment was eventually repeated by Illinois, by Wisconsin, and by Indiana. Meanwhile, there were unincorporated banks throughout the region, though their creation of credit was probably small compared with that of incorporated banks.