The Madisonian

The Stuff of Historic Madison Indiana

Madison Money ~ National Bank Notes

First National Bank of Madison ~ Circa 1902 ~ Front

First National Bank of Madison ~ click to enlarge

National Bank Notes were United States currency banknotes issued by banks chartered by the United States Government. The notes were backed by United States bonds the bank deposited with the United States Treasury.

Background
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. 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 Notes
National banknotes were similar in overall appearance to most of the Federal Reserve Notes that circulated from 1929 through the 1990s, with one important exception: the “title” (name) of the issuing “national bank”, as well as the name of the town and state where the bank was located were printed on the notes. These notes also bore the signatures of that bank’s president and cashier.

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 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 examples of rare banks, towns, states and combinations thereof are quite valuable.

First National Bank of Madison ~ Circa 1902 ~ Back

First National Bank of Madison ~ click to enlarge

Share