The Free Banking Era (oct 12, 1836 – jan 8, 1865)

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State-chartered banks and unchartered “free banks” took hold during this period, issuing their own notes,
redeemable in gold or specie. Banks also began offering demand deposits to enhance commerce. In response to
a rising volume of check transactions, the New York Clearinghouse Association was established in 1853 to
provide a way for the city’s banks to exchange checks and settle accounts. However, by the beginning of the
Civil War, more than 1600 banks were issuing more than 10,000 different kinds of paper currency. Many did not
have gold or silver backing, which was required. When people went to use their notes, merchants would often
reject them if they showed up on the bad currency list.

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