In his piece “Panic on Wall Street: A brief history of fear,” Fortune contributing editor Jerry Useem gets off to a bad start – and goes downhill from there.

Writes Useem:

Andrew Jackson rid the nation of a central bank in 1836, which helped produce the Panic of 1837. An unforeseen effect of his policies - a host of barely regulated banks flooding the nation with paper money - produced bad results as well as some innovations: Reserve requirements could be met, for instance, by adding a layer of gold coins over a much bigger pile of tenpenny (or subprime) nails.

This is a slapdash account. In fact Andrew Jackson rid the nation of the 2nd Bank of the United States, which was not a full-fledged central bank, but rather a large commercial bank with the exclusive privilege to branch across state lines. Of the five key central bank roles, it played only one: it was a banker’s bank in the limited sense that state-chartered banks held its notes as reserves for the benefit of traveling customers. It did not have a monopoly of note-issue, as state-chartered banks issued most of the currency. It did not regulate other banks. It did not act as a lender of last resort. It did not deliberately vary the nation’s money stock in pursuit of macroeconomic goals.

The demise of the 2nd Bank of the United States was not responsible for the Panic of 1837. Nor did it unleash “a host of barely regulated banks flooding the nation with paper money”. The BUS2 never regulated the state-chartered banks to begin with. The state governments did -- mostly in ways that weakened the banks, like restricting their branching. The state-chartered banks did not “flood[ ] the nation with paper money”. The gold standard restrained them. Bank stability actually improved after 1837, as an increasing number of states enacted “free banking” laws, ushering in freer competition. Sound banks could now enter local markets where previously only unsound banks were available. Stories about banks meeting their reserve requirements fraudulently are colorful, but are not representative.

For a review of academic research on “free banking” episodes in the United States and elsewhere, Useem should begin with Briones and Rockoff. For a debunking of the standard myths about banking panics he should read Selgin.

HT: Bob Murphy