Wildcat banking
Wildcat banking is when banks in the olden days didn't have to follow strict rules like they do now. It's like when you play a game with your friends, and sometimes you make up your own rules as you go along.
Back then, banks could lend out more money than they really had. It's like if you had 10 dollars and you told your friend you could lend them 20 dollars. The bank would do this because they thought they could make more money by charging people interest on the loans.
But sometimes, things didn't work out like they planned. If lots of people wanted their money back all at once, the bank might not have enough money to give them. It's like if you promised your friends that you would give them all 50 cents, but then they all asked for their money back at the same time, and you only had 20 cents.
This caused problems because people would lose their money and the bank would have to close. This made it really hard for people to trust banks, and the government had to make rules to stop banks from doing this. Now, banks have to follow strict rules to make sure they have enough money to give to people who want it back.
Back then, banks could lend out more money than they really had. It's like if you had 10 dollars and you told your friend you could lend them 20 dollars. The bank would do this because they thought they could make more money by charging people interest on the loans.
But sometimes, things didn't work out like they planned. If lots of people wanted their money back all at once, the bank might not have enough money to give them. It's like if you promised your friends that you would give them all 50 cents, but then they all asked for their money back at the same time, and you only had 20 cents.
This caused problems because people would lose their money and the bank would have to close. This made it really hard for people to trust banks, and the government had to make rules to stop banks from doing this. Now, banks have to follow strict rules to make sure they have enough money to give to people who want it back.