National Bank Note

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$10 National Bank Note, Series 1882. The vignette at left shows Benjamin Franklin conducting the famous Kite experiment. The 5359 in dark red ink is the issuing bank's national charter number, also shown in the note's border engraving.
The numeral 1 in the cartouche is the note's serial number.

National Bank Notes were United States currency banknotes issued by National banks chartered by the United States Government. The notes were usually backed by United States bonds the bank deposited with the United States Treasury. In addition, banks were required to maintain a redemption fund[1] amounting to five percent of any outstanding note balance, in gold or "lawful money". [2]

Background[edit]

Prior to the American Civil War, state banks issued their own banknotes. During the Civil War, in 1863, the National Banking Act established a system of National Banks which were empowered to issue National Bank Notes subject to federal oversight. The chartering of banks and administrative control over the issuance of National Bank Notes were the responsibility of the Office of the Comptroller of the Currency.[3] A 2% tax on state bank notes was authorized in 1864 to speed conversion to the new system, only to be increased the next year to 10, then 20%.

The Program[edit]

From 1863 to 1935, National Bank Notes were issued by banks throughout the country and in U.S. territories. Banks with a federal charter would deposit bonds in the U.S. Treasury. The banks then could print banknotes worth up to 90% of the value of the bonds. The federal government would back the value of the notes - the issuance of which created a demand for the government bonds needed to back them.

The program was a form of monetization of the Federal debt. Bonds eligible as collateral for posting to the Treasury were said to have the "circulation privilege" and the interest they bore provided seigniorage to the National Banks.

The Notes[edit]

Each National Bank Note bore the issuing bank's national charter number as well as the serial number assigned to the note by that bank. Low serial-numbered notes were often withdrawn as souvenirs by the bank officers who signed them.

Large Size Notes[edit]

Except for the last few years of issue, most National Bank Notes were large-sized.

Through much of their earlier history of issue, national banknotes used designs in which the issuing bank's name was prominently displayed,rather than "The United States Of America". One design used for many years featured a portrait on the obverse, near the left edge, and the bank's name printed in prominent shaded type in the middle. The historical figures seen on these notes usually were different from those on the same denominations of paper currency today.

The issuing bank's charter number was carefully positioned inside the engraved border, as well as overprinted elsewhere on the obverse.



The first issue of National Bank Notes[edit]

Complete type set (Original and Series 1875, mixed)
Value/series Bank title Banknote
$1 Original Series The First National Bank
Lebanon, Indiana
$2 Series 1875 The First National Bank
Emporia, Kansas
$2 National Bank Note
$5 Series 1875 The Vineland National Bank
Vineland, New Jersey
$10 Series 1875 The First National Bank
Bismarck, North Dakota
$10 National Bank Note
$20 Series 1875 The First National Bank
Butte, Montana
$20 National Bank Note
$50 Series 1875 The First National Bank
Cleveland, Ohio
$100 Original Series The Raleigh National Bank
Raleigh, North Carolina
$100 National Bank Note
$500 Original Series[nb 1] The Appleton National Bank
Lowell, Massachusetts
$500 National Bank Note
$1,000 Series 1875 (proof)[nb 2] The First National Bank
Salem, Massachusetts
Proof of a $1,000 National Bank Note

Small Size Notes[edit]

A small-size National Bank Note, series of 1929.

With the advent of small-size banknotes came significant design changes for all types of paper currency including National Bank Notes. As a result of the changes, each denomination now had the same portrait and, except for minor variations, the same decorative features that would characterize all types of United States currency from the late 1920s to the early 1990s. The elaborate rendition of the bank's name was omitted from engraved design, but was now simply over-stamped in black ink, just above the engraved lettering of the promise-to-pay. Similarly, the issuing bank's charter number was omitted from the engraved border, and now simply overprinted in dark ink.

Small size National Bank Notes look very similar to, but are distinctly different from, the emergency 1933 issue of the Federal Reserve Bank Notes. These were printed using National Bank Note plates with slight design changes. Both say "National Currency", but have different issuers. [4]

End of the program[edit]

National Bank Notes were retired as a currency type by the U.S. government in the 1930s during the great depression as currency in the U.S. was consolidated into Federal Reserve Notes, United States Notes, and silver certificates - and privately issued banknotes were eliminated. The passage of the Gold Reserve Act created an accounting gain for the Treasury, part of which was used to provide funds to retire all of the bonds against which National Banks Notes could be issued.

Sometimes these notes are called "hometown" notes, with their popularity deriving from the wide range of towns and cities that issued them. In the paper money hobby, especially in the U.S., these notes are avidly studied and collected. Some were issued in large numbers and remain inexpensive. Others include examples of rare banks, towns, states and combinations thereof and are quite valuable. For example, a note from Walla Walla, in what was then Washington Territory, sold for $161,000 in an auction held in June 2010 by Heritage Auctions.[5]

See also[edit]

Footnotes[edit]

  1. ^ Three notes are reported:two in government collections and one in a private collection.
  2. ^ No issued notes have been reported to exist.

Notes[edit]

  1. ^ "National Bank Note". Webster's new international dictionary of the English language. Second edition. 1949: G&C Merriam Company, Springfield, MA. p 1629
  2. ^ Most of the world's important monetary systems underwent far-reaching changes in the 1930s and 1940s, as a result of which banknotes ceased to be redeemable in gold, resulting therefore in the loss of any meaningful distinction between paper currency and "lawful money". The later printings of Webster's 2nd Edition were not updated to reflect these changes, and by 1949 the issuing of National Bank Notes and their redeemability in gold had long since ended.
  3. ^ http://www.moneyfactory.gov/document.cfm/5/44/112
  4. ^ National Bank Notes - Values and Pricing Information
  5. ^ Walla Walla, Washington Territory - $5 1875 Fr. 403 The First NB Ch. # 2380

References[edit]