This document summarizes the banking laws and systems of various US states during the Free Banking Era from 1837 to 1863. It provides details on the capital requirements, eligible bonds, note security requirements, liability structures, and dissolution procedures for each state that had free banking systems and allowed for privately-issued bank notes. The majority of states required bonds as note security, capitalization over $50,000, specie reserves for notes in circulation, and gave noteholders preference over other creditors in dissolution proceedings. A few states had no free banking system or privately-issued notes. In total, over 400 free banks operated across these states during this period.

1. Summary of the Banking Law Systems During the Free Banking Era, 1837-1863
States (Free Bank
Laws Passed and
Amendments)
Number
of Free
Banks
Capital
Requirement
Bonds Eligible to
Secure Notes
Accepte
d Bond
Value
Additional Note
Security
Specie
Requirement
Share-
holders
Liability
Noteholders
Distribution
Preference (rank)
Dissolution Proceedings Rules Closed
&
failed
Banks
Number
of
persons
to start
Closed
Below
Par
Notice -
Grace
Period
End Redemption
Penalty
States With Full Free Banks
Alabama (1849) 7 $100,000 to
$500,000
U.S bonds or any
bonds issued or
endorsed by the
state of Alabama
Par
value
25% of the
outstanding notes
in specie
Double Noteholders had
preference over
all other bank
creditors
20 days closed 15% year 1 Min
1
0
Connecticut
(1852)
14 $50,000 to $1
Million
U.S bonds, New
England states
bonds, New York
bonds, Ohio bonds,
Pa bonds, Va bonds,
Kentucky bonds, any
state of CT
incorporated
corporation bonds,
city of Providence
bonds
Not over
par
value
10% of the
outstanding notes
in specie
Single Noteholders had
preference over
all other bank
creditors
10 days
before
court
Closed 12% 1 Min
25
4!
Florida (1853) 2 Over $100,000 U.S bonds, Florida
bond, any others
State of the Union
which regularly paid
the interest accruing
and convertible into
cash. Added-railroad
bonds also accepted
(1856)
Not over
par
value or
market
value
silent? Not
personally
liable
Noteholders
might have had
preference over
all other bank
creditors
60 days closed 14% 0 Min
1
0
Georgia (1838) 11 Over $100,000 US. Bonds, Ga state
securities, or other
states of the US
securities as was
approved by the said
comptroller or
commissioner
Par
value
Was supposed to
have on hand at
their place of
business more
than 25% in
specie on the
amount of the
bills or notes in
circulation as
money
Not
personally
liable
Noteholders
might have had
preference over
all other bank
creditors
60 days closed 18% 5 Min
1
0
Illinois (1851) 132 Over $50,000 U.S bonds, Illinois
bonds or any state
bonds on which full
interest was annually
paid.
Not over
par or
market
value to
not over
par
value
Must keep a
sufficient amount
of specie to
redeem all such
bills or notes as
they was
presented
Double Noteholders had
preference over
all other bank
creditors
10 days closed 12.5% a year
to 12% per
annum
31 Min
1
8!
Indiana (1852) 96 Over $50,000 US, IN and states
paying interests
amended to IN
bonds only, 95%.
Not over
par or
market
value
1855, circulation
of any one bank
limited to
$200,000; all
banks total
limited to $6
Million
12.5% of
outstanding notes
in specie,
Amended to be
omitted in 1855
Single, Noteholders had
preference over
all other bank
creditors motsly
no preference in
the payment shall
be given to
None closed None
amended to
10% a year in
1855
78 Min
11
24

2. protested over
non protected
Iowa (1858) 1 Over $50,000
then over
$25,000
US bonds, or any
state on which full
interest was paid
Was supposed to
have sufficient
amount of species
to redeem all
such bills or notes
and equal to 25%
of the amount of
species deposits.
single Noteholders had
preference over
all other bank
creditors and not
preference
among creditors
10 days closed 12.5% 0 Min
5
0
Louisiana (1853) 6 Over $100,000 U.S bonds, bonds of
Louisiana or bonds of
the consolidated
debt of the city of
New Orleans
Not over
par or
market
value
Was to supposed
to have on hand
at all time species
an amount equal
to 1/3 of all cash
liabilities and 2/3
of said liabilities.
double Noteholders had
preference over
all other bank
creditors
3 days Seek
judge
action
then 10
day
notice
12% 0 Min
1
0
Massachusetts
(1851)
4 $100,000 and
$1 Million
US bonds, city or
town in this
Commonwealth or
by either of the
states of
Massachusetts,
Maine, New
Hampshire,
Vermont,
Connecticut, Rhode
Island or New York
Not over
par and
market
value
Was supposed
to be requested
Noteholders had
preference over
all other bank
creditors
10 days closed 0 Min
50 to 10
0
Michigan (1837
to 1857)
38 $50,000 to
$300,000 TO
over $50,000
Any public bonds, MI
mortgages, other
personal bonds TO
US, MI, NY, New
England states, PA,
IN, Illinois, OH or
Kentucky
At par 0.5% of capital
paid into
security fund,
semi-annual
Notes, loans and
discounts under
2.5 times capital
stock
Single Noteholders had
preference over
all other bank
creditors
60 days
TO 20
days
closed 20% TO 14% 37 Min
1
30est.
Minnesota (1858) 16 Over $25,000 U.S bonds or any
State of the US on
which full interest
was semi-annually
paid; amended to US
bonds in 1861
Not over
par
value
25% of notes or
10% more
stocks than
circulating notes
silent Double Noteholders had
preference over
all other bank
creditors
40 days Closed,
liquidati
on after
30 days
None 11 Min
1
12
New Jersey
(1850)
26 $50,000 to
$500,000
U.S, NJ, and MA
bonds or mortgages
Not over
par or
market
value
Amount of
outstanding
notes was
supposed not to
exceed 3 Million
of dollars
Single Noteholders had
preference over
all other bank
creditors
10 days
(after
first 3
days
notificat
ion to
the
media)
Closed
12%
18 Min
2
2!
New York (1838) 423 Over $100,000 US, NY or any state
bonds or NY
mortgages, amended
in 1840 to NY bonds
only and Mortgage;
100%; minimum of
market
Not over
par
value
12.5% of
outstanding notes
in specie,
Repealed in 1840
Not
personally
liable or
limited,
Amended
to
individuals
responsible
for all
banks debts
Noteholders had
preference over
all other bank
creditors
10 days Closed 14%
Amended to
20% in 1840
140
(180?)
Min
1
34

3. Ohio (1851) 14 $25,000 to
$500,000
U.S or OH bonds TO
MA, NY, MD, PA, KY,
IN, Ill, MI, OH and
U.S bonds
Not over
par or
market
value
Notes was not
supposed to be
3 times capital
or less than 3rd
of liabilities
30% of
outstanding notes
in specie
Single Noteholders had
preference over
all other bank
creditors
20 days Closed
(10
consecutive
days
publication
to sale)
15% 2 Min
3
1!
Pennsylvania
(1860)
1 $50,000 to $1
Million
US or PA bonds Not over
par
value
25% of
outstanding notes
in specie
Double? Noteholders had
preference over
all other bank
creditors
20 days closed 0 Min
5
0
Tennessee (1852) 2 Over $50,000
($100,000
subscribed and
paid by free
bank to start
business)
U.S bonds, TN bonds,
incorporated and TN
endorsed corporate
bonds
Not over
par
value
A least ¾ of the
securities
deposited was
supposed to be
bonds of the
state of TN
10% of
outstanding notes
specie
Noteholders had
preference over
all other bank
creditors
10 days closed 12% 1 Min
10
stockhol
ders for
free
bank
1
Vermont (1851) 1 $50,000 to
$500,000
U.S bonds, DC bonds
guaranteed by the
U.S, State of
Vermont bonds,
state of Maine
bonds, State of NY
bonds or state of
Ohio bonds
Not over
par
value or
market
value
Note
personally
liable
Noteholders had
preference over
all other bank
creditors
10 days closed 12% 0 Min
5
1!
Wisconsin (1852) 143 $25,000 to
$500,000
Any public bonds and
Wisconsin railroad
bonds; amended to
US bonds and WI
bonds if selling at
above par
Not over
par or
market
value
Amended to
limited to
capital stock
paid in 1861
Silent Single NONE 10 days closed 5% 79
(31?)
Min
1
37
States With Bond Secured Note-Issues
Kentucky (1858) 0
Missouri (1858) 0
Virginia (1851) 0
States Without Free Banks
Arkansas 0
Delaware 0
Kansas 0
Maine 0
Maryland 0
Mississippi 0
Nebraska 0
New Hampshire 0
North Carolina 0
Rhode Island 0
South Carolina 0
Total 937 404
(412?)