I am researching how banking was performed in the 1860s in the Territory of Colorado. I know its a bit unsual, but my son asked me some questions that I could not find answers too about the banking practices. Thank you.
I tried looking it up myself, and found no answers. Your best bet is going to the library. Sorry that I could not be of much help :(
Back then, most people used Masons Bank. That is a jar with a snap on lid, and then buried out back where no one could find it. There wasn't any Federal Depositors Insurance Corporation to protect peoples savings back then. If the bank got robbed or made bad loans, the depositors lost their savings. Based on that, most people did not trust banks. For the people who did deposit money in the banks, the process was much like it is today, except there wasn't any checks or credit cards. You had to come in an sign paper to get a loan to buy something. If the loan was approved, the borrower got cash to go make the purchase.
Before the Federal Reserve was put in charge of regulating the monetary system there was no national regulatory control of banks. States had some laws, but legislatures can be swayed and manipulated by those with money. In those days, the financial power of a bank was based on the actual money it had on deposit, and usually backed by the gold in it's physical possession. There was no deposit insurance, and if the banker turned out to be a crook, or the bank experienced a run, where the depositors lost confidence in the institution and withdrew their money, the other depositors were just out of luck. Try the Federal Reserve website, and the Federal Deposit Insurance Corporation for your data. They used to publish comic books to educate schoolchildren about subjects such as this.
