National Bank Note
Encyclopedia
National Bank Notes were United States currency banknotes issued by National bank
s chartered by the United States Government. The notes were usually backed by United States
bonds
the bank deposited with the United States Treasury.
, state bank
s 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
. In 1865 the Congress enacted a 10% tax on state bank note issuance making it unprofitable for state banks to issue notes, and thus restricting the circulation of privately issued banknotes to the National Banks.
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.
This changed during the last years of national banknote issues. After small-size notes came into use, national banknotes now began to be issued using the same designs as most of the other types still in use at the time--Federal Reserve Notes, United States Notes, Silver Certificates, and the last Gold Certificate issues. The issuing commercial bank's name and promise to pay was now over-stamped in plain black type to the left of the now centered portrait. By this time, also, the portraits depicted the same Presidents and other historical figures that we see today.
s - 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 examples of rare banks, towns, states and combinations thereof 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
.
National bank
In banking, the term national bank carries several meanings:* especially in developing countries, a bank owned by the state* an ordinary private bank which operates nationally...
s chartered by the United States Government. The notes were usually backed by United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
the bank deposited with the United States Treasury.
Background
Prior to the American Civil WarAmerican Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
, state bank
State bank
A state bank is generally a financial institution that is chartered by a state. It differs from a reserve bank in that it does not necessarily control monetary policy , but instead usually offers only retail and commercial services.A state bank that has been in operation for five years or less is...
s issued their own banknotes. During the Civil War, in 1863, the National Banking Act
National Banking Act
The National Banking Acts of 1863 and 1864 were two United States federal laws that established a system of national charters for banks, and created the United States National Banking System. They encouraged development of a national currency backed by bank holdings of U.S...
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
Office of the Comptroller of the Currency
The Office of the Comptroller of the Currency is a US federal agency established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States...
. In 1865 the Congress enacted a 10% tax on state bank note issuance making it unprofitable for state banks to issue notes, and thus restricting the circulation of privately issued banknotes to the National Banks.
The Program
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
Monetization
Monetization is the process of converting or establishing something into legal tender. It usually refers to the coining of currency or the printing of banknotes by central banks...
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
Seigniorage
Seigniorage can have the following two meanings:* Seigniorage derived from specie—metal coins, is a tax, added to the total price of a coin , that a customer of the mint had to pay to the mint, and that was sent to the sovereign of the political area.* Seigniorage derived from notes is more...
to the National Banks.
The Notes
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 portrayed did not usually correspond to those seen on similar denominations today. For example, one design for the five-dollar denomination has President Benjamin Harrison's portrait rather than that of Abraham Lincoln.This changed during the last years of national banknote issues. After small-size notes came into use, national banknotes now began to be issued using the same designs as most of the other types still in use at the time--Federal Reserve Notes, United States Notes, Silver Certificates, and the last Gold Certificate issues. The issuing commercial bank's name and promise to pay was now over-stamped in plain black type to the left of the now centered portrait. By this time, also, the portraits depicted the same Presidents and other historical figures that we see today.
End of the Program
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 CertificateSilver Certificate
Silver Certificates are a type of representative money printed from 1878 to 1964 in the United States as part of its circulation of paper currency. They were produced in response to silver agitation by citizens who were angered by the Fourth Coinage Act, which had effectively placed the United...
s - and privately issued banknotes were eliminated. The passage of the Gold Reserve Act
Gold Reserve Act
The United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury....
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 examples of rare banks, towns, states and combinations thereof 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
Heritage Auctions
Heritage Auction Galleries is the world's largest collectibles auctioneer and the third largest auction house, with over $700 million in annual sales and 600,000 online bidder-members...
.