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“Recent studies by Rolnick and Weber (1983, 1984) have presented evidence challenging the conventional view of the Free Banking Era (1837-1863). The conventional view depicts a period of financial chaos in which lenient regulations gave rise to a plethora of banks, bank notes and coun-terfeit bank notes, unscrupulous “wildcat” bankers, and large noteholder losses. Rolnick and Weber do not deny that these problems occurred during the period; however, both assert that the conventional view misrepresents the overall per-formance of the banking market. Furthermore, they propose that the problems of the period are better explained by a sharp decline in asset prices than by the lack of regulation. The Rolnick and Weber contention, however, has not been tested utilizing all the available evidence. In their studies, they examined only four of the ten active free banking states. ‘ One of the largest states, Illinois, was not examined by Rol-nick and Weber. Illinois was second only to New York in the number of free banks it had in operation and has been considered by economic historians to have had a poor free banking experience. Therefore, an examination of the Illinois experience would be relevant to the free banking controversy. Such an ex-amination would confront both the accuracy of the conventional view as well as the findings presented by Rolnick and Weber.” Read more.

“Illinois Free Banking Experience”
Andrew J. Economopoulos
Journal of Money, Credit and Banking, Vol. 20, No. 2 (May, 1988), pp. 249-264

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