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The History of U.S. National Bank Notes


Most Americans have lived their entire lives using the standard American currency we all recognize. They might be surprised to learn that in its earlier years the American money system was the opposite of standard. The genesis of our modern currency was the National Bank Act which President Lincoln signed into law in 1863. This created the United States National Banking System, a prototype of what we use today:

“The National Banking Act (ch. 58, 12 Stat. 665; February 25, 1863), originally known as the National Currency Act, and was passed in the Senate by a narrow 23–21 vote. The main goal of this act was to create a single national currency and to eradicate the problem of notes from multiple banks circulating all at once. The Act established national banks that could issue notes which were backed by the United States Treasury and printed by the government itself. The quantity of notes that a bank was allowed to issue was proportional to the bank's level of capital deposited with the Comptroller of the Currency at the Treasury. To further control the currency, the Act taxed notes issued by state and local banks, essentially pushing non-federally issued paper out of circulation.”

The U.S. Government Begins the Use of National Bank Notes

Prior to this, local and state banks issued their own banknotes which were backed by reserve currency. However, insufficient oversight over these banks resulted in many instances of fraud and people losing their savings. To both solve this problem and monetize the federal debt, the U.S. government authorized a tax on state bank notes. This tax was 2 percent at first, then 10 percent, and finally 20 percent to incentivize banks to move towards using national bank notes

The national bank note system worked like this: Banks with a federal charter would deposit bonds in the U.S. Treasury. They were allowed to issue bank notes for up to 90 percent of the value of the deposited bonds. The U.S. government then backed the notes. These notes were issued from 1863 until 1935. 

Bank notes were larger than modern paper currency. They had different designs that featured the bank’s name instead of “The United States of America” and references to history that were often specialized and local. The notes bore the national charter number of the bank as well as the serial number that the bank assigned each note. There were two serial numbers, in fact: the U.S. Treasury serial number which indicated the total number of notes in that series and denomination nationally and the bank’s own serial number.

Each large note also had four signatures. Two of these were of U.S. officials and were printed on the note as part of its design. The remaining were the signatures of the issuing bank’s president and cashier. The Treasury shipped the notes in uncut sheets, and the bank officials signed them in bulk and then cut them from the sheets with scissors. For collectors, this means that the signatures are unique with parts of the signatures either cut off or included from other notes because the cutting was often uneven.

In the above image of this Old National Bank of Grand Rapids note, you can see that the charter number of the bank, 2890, is printed on the obverse twice as well as included in the engraved border. The M stands for Midwest. Later notes came with letters that designated geographical areas of the country to help Treasury workers sort the banknotes. 

Smaller Bank Notes Appear

In later years, smaller national banknotes were printed and were more standard with a uniform portrait and decorative features. These notes were similar to the currency Americans were used to seeing until the 1990s. The name of the issuing bank was omitted from the note’s design and stamped in black ink instead. The charter number was no longer included in the engraved border. In the last issues of these small notes, called Type 2 notes, the charter number appeared in brown ink twice in line with the note's serial numbers.

National bank notes disappeared as a currency type during the Great Depression as all the currency in the United States became consolidated into United States notes, Federal Reserve notes, and silver certificates. When that happened, these local notes became collectibles. There are so many different towns and cities that issued them as well as different types of notes. This makes national bank notes enjoyable to collect, and, as you may expect, some of them are quite valuable. 

If you are interested in collecting U.S. national bank notes or specific types of notes, please browse our inventory of available currency or give us a call at 616-378-0240. We would be happy to help you find the notes you are looking for. 

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