After the closing of the second Bank of the United States in 1836, the federal government no longer regulated banking. Financial institutions were regulated by the states; some states required adequate reserves for issued bank notes and regular reports as to loans and deposits, and others were very lax, enabling bank officers to take great risks. [Stampp, America in 1857, 217] The Bogus Legislature had a choice, to join the strict states or the lax states in chartering its first banks.

The atmosphere for banks was not favorable. Some traditional Jacksonian Democrats advocated the abolition of all paper money and the exclusive use of "hard money," i.e. gold and silver, in all transactions. More radical Democrats would have abolished not only bank notes, but also the banks themselves. The Cincinnati Enquirer after the Panic of 1857 called banks "rickety, false and rotten edifices of financial fraud." [Stampp, America in 1857, 232] Moreover, as George Martin, secretary of the Kansas State Historical Society, pointed out, there was little need for banks in early Kansas:

"The man who came to Kansas in those days needed a few hundred dollars for a shanty, a plow and a yoke of cattle, and if he had enough for a year's provisions, it was considerable. It was the days of shinplaster money, and everybody was suspicious whether he had a cent or not..." [Martin, A Chapter, 359]

$5 Banknote on the Drovers Bank,
Leavenworth 1856

Nonetheless, two banks were chartered by the Bogus Legislature, one in Atchison and the other in Leavenworth. Speaker John Stringfellow yielded his chair to move the Atchison Bank Bill [House Journal, 223] It did not sail through like other Bogus Legislature bills. Amendments were offered and narrowly defeated that would have:

  1. Not allowed the bank to issue any note for less than $50
  2. Required individual property of shareholders be subject to claims for redemption of notes
  3. Required liability of individual shareholders for claims in proportion to the amount of stock owned
  4. Appointed three commissioners to examine the bank annually and report to the Legislature
  5. Required the bank report in writing to the Legislature as to paid-in stock, amount of specie and gold and silver on hand, and paper money in circulation as of the first of each month

Other amendments did pass by narrow margins:

  1. Not allowing the bank to issue any note nor put in circulation notes of other banks for denominations less than $5
  2. The President and Directors would annually publish a statement of condition of the bank, attested to by the Cashier.
  3. If the bank at any time should fail to redeem any of its notes, when presented at the bank, in specie, it would forfeit its charter.
  4. The bank could not charge more than 10% per annum on all loans.

In the end the Atchison bank bill was passed with substantial dissent. [House Journal, 257 ff]

The second bank chartered was the Leavenworth Bank on a motion by Hayden McMeekin. An amendment was offered prohibiting anyone who was a shareholder of another bank incorporated by the present session of the Legislature, i.e., the Atchison bank, being a shareholder in the Leavenworth bank. The amendment failed and the bank was chartered by a vote of 13 for, 10 against, and 2 absent. [House Journal, 242]

Neither bank was ever started. The first actual bank in Leavenworth was a private, non-chartered institution, the "Banking and Exchange Office of C. P. Bailey" in early 1856. As the hostile atmosphere between free-state and pro-slavery sides heated up in the summer, Bailey "soon pulled up stakes and returned to Ohio, bank and all." The City Bank of Leavenworth, also not chartered, started in the winter of 1856-1857, but failed in the Panic of 1857. [Martin, A Chapter, 363]

In the second session of the Bogus Legislature, meeting at Lecompton in 1857, all banks operating without a charter from the Legislature were made unlawful. The first bank authorized under the new act was the Kansas Valley Bank of Leavenworth, with five branches at Atchison, Lecompton, Doniphan, Fort Scott and Shawnee. The organizers were all prominent pro- slavery men, including legislator Frank Marshall. The Leavenworth bank was never formed, and the Atchison branch was the first to start under the act. [Martin, A Chapter, 364] Governor Walker, writing in reply to a request for commissioning the Atchison branch, expressed his Jacksonian doubts:

"...I cannot omit this opportunity to say that, if I had any discretion in the matter, I would not sanction the establishment of any bank of issue in the territory, especially one with chartered provisions so unwise and imperfectly guarded as those of the Kansas Valley Bank. By holding myself as nowise responsible for the consequences of the law, I have no alternative but to yield obedience to its command."[KHC 5: 443]

John Stringfellow, continuing his interest in banking, was one of the initial subscribers of the Atchison branch, but in 1858, free-state leader Samuel C. Pomeroy was made President of the bank. It later became the "Bank of Kansas" and continued until 1866, when its affairs were wound up, following heavy losses in the Overland Pony Express Company and the Pike's Peak Stage Company. [Martin, A Chapter, 366]

Charles Clark