Back in the early 19th century, all banks in the United States (with the exception of the First National and Second National Banks) were State Chartered Banks. Out on the Frontier States, some of these banks were called "Wildcat Banks." Wildcat bankers were men of unscrupulous means who would obtain a State Bank Charter, issue notes and spend them, and then do everything possible to keep from having to redeem them. Sometimes they would hide out in small unheard of towns at the edge of the frontier with the wild animals, hence the name "wildcat" bank. Usually, these bankers did not last long and were merely annoyances to the rest of the sound bankers.
There was always a group of men who were pushing for Federal chartering of banks, and they never missed a chance to try to discredit the State chartered wildcat banks. Despite their accusations, most banks handled their money quite well. Most kept the twenty percent or so gold reserves, as recommended by Thomas Paine. The banks all issued their own notes on their own engraved plates. There were a multitude of different designs, sizes and denominations. Most banks circulated their notes in their immediate area and would fully redeem them at any time.
Of course, there were those few banks that over printed notes and circulated them at a distance on purposed where redemption would be difficult. The further the bank note traveled from the issuing bank the more it was discounted.
Publications called "reporters" or "detectors" were printed listing descriptions of notes from failed banks or even descriptions of counterfeit notes for the benefit of merchants and bankers who were asked to accept out of town notes unfamiliar to them. The more obscure the issuing bank and the further away it was the more the note was discounted.
Only the notes from the great Citizen's Bank of Louisiana in New Orleans were accepted at full value anywhere in the country. The Citizen's Bank of Louisiana issued, among others, the famous ten-dollar notes printed in English on one side and French on the other. These ten dollar notes in French had a prominent "DIX" for ten on one side and were know as "dixes." New Orleans and the surrounding area became know as "dixes-land." The first verse of Dixie was originally, "I wish I was in the land of dixes."
Whenever merchants had several unfamiliar notes, they went to a "shaver" who purchased the notes at a discount, loaded them in a carpetbag and traveled to the bank for full redemption. I recently read a story about a shaver and the Bank of Morocco.
It seems that a certain banker had obtained several bank charters from the Indiana State Legislature. He developed a list of obscure towns that had been recently platted in remote county courthouses and set up banks in each of them. One such town that nobody had ever heard of was Morocco, Indiana where he set up one of his banks. A certain shaver received issued from the Bank of Morocco and set about to redeem them. He visited the State auditor's office and they could only tell him that the Town of Morocco was in Newton County. He traveled by train, stagecoach and rented horse. At dark, he finally happened onto a small settlement in Newton County that only contained a few cabins and a blacksmith shop. The shaver asked for directions to Morocco and was informed by the smithy that he was there. The shaver asked for directions to the bank and the blacksmith became defensive. Finally, after much verbal fencing, it was determined that the blacksmith was the banker, but that the bank was closed for the day and would not reopen until the next morning. The shaver ate dinner with the blacksmith and his family, but had to spend the night on the open plain to await the bank opening the next morning. The next morning the blacksmith led him to a small cabin and they went inside. The shaver was then told they were inside the Bank of Morocco and to state his business. The shaver then pulled out the $1,000 worth of bank notes and asked for redemption in gold. The blacksmith carefully counted out the notes and then went over to a potato barrel and carefully removed the potatoes and put them in a basket. From the bottom of the "vault" he pulled up a bag labeled $?,000 and then counted out fifty gold double eagles. Afterwards, he placed the notes in the bag along with the remaining gold and carefully placed it back in the barrel, and then placed the potatoes back on top (thus locking the vault). The shaver thanked the banker and asked if he could pay for his meal the night before. The blacksmith/banker told him that he was the only customer ever to find the bank and that if he did not reveal the location to anyone else that his meal the night before would be free.
The Bank of Morocco was never heard from again.
(Sounds sort of like our modern day junk bonds and some IPOs!)
Larry LaBorde
Silver Trading Company
