Banks in early-nineteenth-century New England were very different from the banks we know today, and perhaps the best way to begin this study is to explain how. Currently the region's financial sector is dominated by a handful of very large institutions, headquartered in major cities, whose influence extends throughout the area as a result of branch offices and mergers. The largest early-nineteenth-century banks were also located in cities, but because branch banking was not allowed, their operations were confined mainly to their local communities. Each bank was an independent, separately incorporated entity that raised its own funds and retained full control over its own lending decisions. There were a great many of them, too – more than three hundred by the mid 1830s and more than five hundred on the eve of the Civil War. By that time most small towns in the region had several banks each, and cities like Boston and Providence had as many as forty apiece.

Despite their large numbers, early banks – unlike modern institutions – rarely provided financial services to ordinary households. Their customers consisted almost entirely of local businessmen whose borrowings took a very different form from what is common today. Typically, early-nineteenth-century businessmen brought notes (IOUs) to their banks to have them “discounted.” Banks would advance borrowers an amount equal to the face value of their notes less an interest charge, and borrowers were then liable for the full value of the notes at maturity.