Tag Archives: paper money

The Wildcat Bank of Brest

The Bank of Brest in Michigan was one of the most infamous “wildcat” banks that sprang up amidst the more freewheeling economic environment that took hold during the Market Revolution in the United States. Wildcat banking encompassed a broad array of dubious practices that banks indulged in during the state-chartered era of banking. It most commonly referred to banks established in out of the way locations that flaunted regulation and issued bank notes in large quantities without any intention of ever redeeming them. Although there were state regulations and commissioners, enforcement was often lax and as we will see, wildcat banks constantly came up with creative ways to circumvent the law.

Map Of The Surveyed Part Of Michigan, 1847. David Rumsey Map Collection
Map Of The Surveyed Part Of Michigan, 1837.
David Rumsey Map Collection

Michigan was admitted into the Union on January 26, 1837, as the 26th state. There was a strong sentiment in the new state for “free banking,” which sought to extend the privilege of banking beyond the elite and politically connected. The legislature duly passed “An Act to Organize and Regulate Banking Associations” that significantly loosened requirements and oversight of banks. It allowed any twelve ‘freeholders’ who wanted to start a bank to simply notify the Secretary of State, open books for subscription, and commence operations when thirty percent of the capital stock had been paid in specie (in practice the bar was even lower).  The act was signed into law by the “Boy Governor,” 25-year old Stevens T. Mason, on March  15, 1837, and Michigan became a forerunner of the free banking experiment.

When the legislation passed there were sixteen chartered banks operating in Michigan; a year later there were more than fifty. This was due in part to the effects of the Panic of 1837, which among other things led people to hoard hard money and made it very difficult for banks to redeem their notes with specie. In June, the legislature passed a measure that allowed banks to suspend specie payments, i.e. they were no longer required to redeem paper notes with hard money (gold and silver). The loosening of specie requirements only encouraged more dodgy characters and banking ventures.

Library of Congress
Library of Congress

Among those joining the rush was the Bank of Brest, which announced its incorporation in September 1837 with a notice that appeared in papers around the state. Brest was a hamlet located about forty miles from Detroit on the shores of Lake Erie (present-day Newport, MI). The fact that Brest now had bank would have been rather surprising news to those in the know. In Banks and Banking in Michigan (1887), Theodore Hinchman sarcastically described the “city” as follows:

The City of Brest was on the lake road to Monroe, in that county. A trip in the fall of 1838, on horseback, discovered the palaces of ” rag barons ” to consist of a very small hotel, a store, and a bank building, costing $1,711. There were also included in this category hundreds of city lots for sale in currency of any kind. The population was myriads, consisting, unfortunately, of mosquitos. Large fires were built about the tavern to determine whether the guests should eat or be eaten, and whether the hum of the busy and musical denizens should disturb their sleep. They were the natural guardians of the untold gold that the bank vaults were supposed to contain. No one visited that place twice in pursuit of gold or a gold mine. At this date the city lots are not sold, and but for its banking history the city would be unknown.

Perhaps the biggest clue as to the bank’s true purpose was that it began issuing bank notes even before its notice of organization was filed with the Secretary of State. It was capitalized by a combination of paper assets (real estate, personal checks) and $10,000 in specie provided by Lewis Godard, something of a wildcat banking king who simply shifted this same reserve of specie to the many different institutions around the state he had a hand in. On this meager security, the Bank of Brest was able to issue over $200,000 in bank notes before state authorities caught up to the scheme. An audit in August 1838 that was part of a larger crack down on the orgy of speculation and chicanery led to the bank being shut down. By the end of 1839, there were just seven banks in operation throughout the state, but over a million dollars of worthless currency in circulation.

A good portion of that was from the Bank of Brest, which issued notes notes in $1, $2, $3, and $5 denominations. They were printed by Draper, Toppan, Longacre & Co. of Philadelphia, and they are rather attractive notes for their time. With well-cut vignettes, elaborate counters, and other security features, the bank notes at least conveyed an air of legitimacy.

ANS, 0000.999.16605
ANS, 0000.999.16605
ANS, 0000.999.16604
ANS, 0000.999.16604
ANS, 0000.999.16603
ANS, 0000.999.16603
ANS, 0000.999.16602
ANS, 0000.999.16602

All of the notes were pen numbered and dated, and signed by the cashier George H. Tracy and the president Henry S. Platt. Given the volume that the Bank of Brest printed over its short life and the fact that almost none of it was able to be redeemed, these are fairly common among collectors of obsolete bank notes. But they are also a wonderful bit of Americana, and a reminder of an era when banks ran wild in the Great Lakes State.

For more on the wildcat banking era in Michigan see, T. H. Hinchman, Banks and Banking in Michigan (1887); Gerald P. Dwyer Jr., “Wildcat Banking, Banking Panics, and Free Banking in the United States” (1996); Harold L. Bowen, State Bank Notes of Michigan (1956).

Matthew Wittmann

 

A Rare 1866 Obsolete Bank Note

The introduction of the ‘greenback’ in 1861 marked a turning point in the history of American currency. Greenback was the colloquial term for federal paper money issued during the Civil War, which consisted of both the Demand Notes of 1861 and the Legal Tender Issues that followed. Up until the 1860s, a patchwork of state-chartered banks and other entities were emitting a vast range of paper currency, much of it of dubious worth. This panoply of paper are now known as ‘Obsolete Bank Notes’ because they were superseded by federally issued currency as the government asserted control over the money supply during the 1860s. The creation of a common currency was part and parcel of the broader war effort, and the fact that it was backed not by specie, but only by the credibility of the United States government marked a momentous change.

As part of the federal government’s move to clean up the nation’s chaotic monetary situation, the wide range of existing bank notes in circulation needed to be dealt with. Senator John Sherman of Ohio led the charge against the confusing multitude of paper money in early 1863, calling for a tax on all notes not issued by the federal government and proposing much more rigorous regulation of banks. The resulting legislation passed in the form of the National Currency Act of 1863 (now known as the National Banking Act) on February 25. The act provided a framework for a new national banking system in which state banks had to apply for a charter from the federal government. If approved, the now “national” bank deposited funds with the Treasury Department and received some percentage of those funds back in the form of  “National Bank Notes.” All of these new notes were of the same design, but entered circulation under the imprinteur of a particular bank. See, for example, this $2 note (known as a “Lazy Duece” for the horizontal 2), which was printed for the Mad River National Bank of Springfield, Ohio in 1865.

ANS, 0000.999.56396
ANS, 0000.999.56396

The new federal bank system had its advantages, and the accompanying effort to standardize American paper money proved popular with the public, but some banks were reluctant or not financially sound enough to become national banks. As a result, state bank notes continued to circulate, much to the chagrin of Senator Sherman, Secretary of the Treasury Samuel P. Chase, and other advocates of federal paper currency. It was not until 1865 that the legislation that spelled the end of what we now know as the Obsolete Bank Note Era was passed. It arrived in the form of a ten percent tax on any notes issued by state banks paid out after July 1, 1866.  This particular tax is often erroneously credited to the “National Banking Act of 1865,” a piece of legislation that does not actually exist. The specific law was in fact part of the Internal Revenue Act of 1865, which you can find here. The law worked as intended as the looming penalty pushed state banks to either convert into National Banks and/or redeem their notes. Either route resulted in the withdrawal of the multitude of soon-to-be-taxed state bank notes from circulation.

ANS, 0000.999.11633
ANS, 0000.999.11633

Among the final state bank notes issued was this attractive two-dollar note by the Diamond State Bank of Seaford, Delaware. It was printed by the American Bank Note Company and features some fine vignettes, wonderfully detailed counters, and a red tint plate. With a penned-in date of February 15, 1866, it is has the latest date of any of the obsolete note in the collection of the American Numismatic Society.

0000.999.11633.detail

I suspect there’s more to the story of the Diamond State Bank than meets the eye. A report from a Pennsylvania newspaper in April 1866 shows that its notes were being rejected by banks in Philadelphia, so it does not seem to have been the most reliable institution. Whatever the case, this note seems to be one of the latest extant Obsolete Bank Notes, but perhaps our readers know of ones issued with later dates? If so, please let me know via email.

Matthew Wittmann

Counterfeiting Continental Currency

The Irish-American printer John Dunlap of Philadelphia produced this broadside in 1778/1779 at the direction of John Gibson, the auditor general for the Continental Congress. Dunlap’s most famous printing job was undoubtedly the Declaration of Independence, the first copies of which are colloquially known today as ‘Dunlap broadsides,’ but he was also the general printing contractor for the Continental Congress. This broadside is a single sheet measuring 8″ x 16″ and its heading gives a fairly precise indication of its purpose:

DESCRIPTION OF COUNTERFEIT BILLS,

Which were done in Imitation of the True Ones ordered by the Honorable

the CONTINENTAL CONGRESS,

Bearing Date 20th May, 1777, and 11th April, 1778. 

Library of Congress
Library of Congress

Financing the war against the British was a tricky proposition for the cash-strapped colonists, who ultimately simply printed their own paper money and embraced the convenient fiction that all of it was backed by specie. The market of course knew better, and the value of notes issued by the Continental Congress depreciated rapidly as more and more currency entered circulation. The relatively modest initial printing in May 1775 of $3,000,000 in Continental Currency was dwarfed by later emissions, like the $25,000,000 authorized by the Resolution of April 11, 1778. Continental Currency was also being devalued through the work of counterfeiters, who saw an opportunity to take advantage of the unprecedented volume of paper money circulating. For British forces and their Loyalist allies, counterfeiting was also seen as a weapon of war, as this infamous advertisement published in a newspaper from British-occupied New York City makes clear.

New York Gazette, April 14, 18777
New York Gazette, April 14, 1777

The advertisement promised “exactly executed” counterfeit “Congress notes” to any person traveling into the colonies, observing that a large amount had already been circulated and that there was “no Risque in getting them off.” To be fair, there were a variety of opportunists on both sides who were successfully counterfeiting Continental Currency, but British efforts were certainly more organized and systemic. How effective this was at undermining the currency and the larger American war effort remains an open question.

Part of the problem was not just how much paper money was being produced, but that it was so often poorly printed. The broadside mentions circulating counterfeits of a $6 bill dated May 20, 1777, and as you can see in the two specimens below, the genuine versions of this note were not exactly masterpieces in either design or execution. This was, notably, the first emission on which the appellation “UNITED STATES” appeared.

The so-called “nature printing” on these notes was a security feature based on the idea that the delicate lines of an impressed leaf were difficult to replicate, but here the effect is almost undetectable in the square block of ink on the reverses. The overall inconsistency of the print runs necessarily made counterfeits that much harder to detect. As the final paragraph of the broadside alludes to, letterforms were broken during the printing process, which raised alarms when comparing even genuine notes with one another. Adding quality counterfeits to the mix only sowed more confusion. Below is an animation of a transition between a genuine and counterfeit $8 note of May 20, 1777 mentioned in the broadside:

1777-$8

The broadside details how this counterfeit, which was engraved on a copper plate, was not quite able to replicate the quality and regularity of the letterforms in the genuine note, which was set by a printer using type. Still, as you can see, the counterfeit was certainly a reasonable facsimile of the original. While faking an eight dollar note was all well and good, a more attractive target were the higher denominations.

The $40 bill was the largest denomination of what are known as the Yorktown notes, since they were authorized by an April 11, 1778 resolution and printed in York, Pennsylvania, where the Continental Congress was temporarily residing. The broadside enumerates three separate fraudulent versions of the $40 note, which might have been the most counterfeited of the Revolutionary era. The problem was so serious that large numbers of these Yorktown notes were simply destroyed, and this is what makes them the rarest and most expensive notes for collectors today. The fiasco only further depreciated the already shaky Continental Currency, which at this point was worth only between a quarter to a third of its nominal value, i.e. one dollar of silver was worth three or four dollars of paper money. It only went downhill from there, and by the end of the war, “not worth a continental” had entered the lexicon for something regarded as worthless.

The handwritten annotation at the bottom of the broadside reads: “Permit no copy of these descriptions to be taken unless at the request of the Executive Authority of the State to be placed in confidential hands.” It was also singed by the auditor general of the Continental Congress, John Gibson, for whom counterfeit bills were clearly a pressing issue, but it’s unclear how great of an aid this rather simple but detailed descriptive list was in combating the problem. Still it does offer a fascinating window into the financial schemes that the American colonists relied on to fund the war and the machinations with which the British tried to thwart them.

For more on the paper money of the revolutionary period, see Eric P. Newman, The Early Paper Money of America (5th ed., 2008); Kenneth Scott, Counterfeiting in Colonial America (1957, reprint 2000); Philip L. Mossman, From Crime to Punishment: Counterfeit and Debased Currencies in Colonial and Pre-Federal America (2013).

Matthew Wittmann

Budding Bills Perplex Numismatists

© Alan Roche
© Alan Roche

Among the many joys of spring in the City is the annual money harvest in lower Manhattan along Wall Street. As the buds break open to reveal the new C-note splendor, money pickers gather to celebrate the bounty, which sadly lasts for only about 4 minutes before the IRS appears to haul it all away.

Numismatists on hand this morning to watch the annual event were perplexed by what they observed, however. Rather than the current redesigned Benjamins, the money trees were sprouting the 1996 series instead. The ANS curatorial team suspects that bad seed money is to blame.

Cutting Down Old Hickory

National Gallery
National Gallery

Following on my post last week about the campaign to replace Andrew Jackson on the twenty-dollar bill, Gail Collins had a column the New York Times making the case that it was past time for a change. She quotes my observation about the rather more equitable situation with regards to gender and currency in Australia. The forthcoming Jane Austen note from the Bank of England is another example that bears looking at. Why not rotate through a cast of historical figures? Regardless of issues concerning representation, it is hard to understand why US paper currency has been so slow to change. As far as I can tell the only relevant part of the law (31 U.S. Code § 5114 )that governs the actual design of US paper money specifies:

United States currency has the inscription “In God We Trust” in a place the Secretary [of the Treasury] decides is appropriate. Only the portrait of a deceased individual may appear on United States currency and securities. The name of the individual shall be inscribed below the portrait.

Beyond this it would seem that the Secretary of the Treasury and Bureau of Printing and Engraving have broad discretion to design the currency as they see fit, although consultation with Congress would undoubtedly be necessary for any major changes.

At any rate, given that the momentum to make a change seems to be building, and with Andrew Jackson lined up as the most likely target, the question of course turns to who should replace him. The New York Times has been hosting a lively discussion on the subject here. kspersGail Collins has me backing Amelia Earhart, which was a name I mentioned in the course of a larger discussion about possible candidates. Quite simply, I think Earhart would be a good choice because she seems able to garner broad popular support for what might devolve into a bruising political process. Whatever happens, we’ll keep updating and adding our two cents to this fascinating story.

Matthew Wittmann

Women On Twenties

ANS.1980.67.17
ANS.1980.67.17

Last week, I was quoted by the New Yorker in a piece on the campaign to replace Andrew Jackson on the $20 bill with an image of a significant woman from American history. In referring to Jackson as the “low-hanging fruit” of figures on US currency, I was alluding to the fact that his historical reputation has been much more volatile than his moneyed peers–George Washington ($1), Abraham Lincoln ($5), Alexander Hamilton ($10), Ulysses S. Grant ($50), and Benjamin Franklin ($100). Jackson came to power as an advocate of the “common man,” which has traditionally garnered him ire from those of a more conservative persuasion. From a different angle, his putative racism and support for Indian removal have proved problematic for those who would otherwise celebrate his democratic disposition. Fair or not, Jackson does seem like the easiest of the established paper money personalities to mobilize around replacing.

ANS, 0000.999.13288
ANS, 0000.999.13288

One of the ironies of all of this is that images of women were commonly featured on nineteenth-century bank notes, albeit not usually as individuals, but in the form of allegorical or idealized representations. In the obsolete bank note era, my guess is that Martha Washington (left) was the most prominently and frequently pictured individual woman (she also made a brief appearance on federal silver certificates in the 1890s). I know there were notes circulating that featured the Swedish singer-cum-celebrity Jenny Lind, but no other identifiable women spring immediately to mind as being regularly pictured (perhaps readers have suggestions). Whatever the case, the introduction of federal paper money initially continued the allegorical tradition, and the first twenty-dollar bill issued in 1863 featured a representation of Liberty holding a sword and shield at the center of its obverse. A bust of Alexander Hamilton saw Liberty pushed over to the right side of the bill a few years later:

ANS, 1980.67.23
ANS, 1980.67.23

Grover Cleveland subsequently graced the $20 Federal Reserve Note introduced in 1914, and the change to Andrew Jackson finally occurred  in 1929 when the small-size Federal Reserve Note we are familiar with today was put into circulation. Given that we are coming up on nine decades without a significant redesign, it might be time for a change and the WomenOn20s campaign certainly seems to be getting traction.

Whether or not this effort is successful, the big question is of course who should replace Jackson. WomenOn20s is presently having a vote on their website on a list of potential replacements. I was disappointed to see that Jane Addams, the noted social reformer and the first American woman to receive the Nobel Prize, somehow did not make the cut. Luckily, our capable assistant photographer Emma Pratte, was able to whip up a specimen note of my preferred candidate.

Emma Pratte
Emma Pratte

I am sure everyone has ideas about this, but it seems to me that one problem beyond the obvious lack of women on US currency is the narrow focus on political figures as the only kind worthy of inclusion.hundred-dollars-note
Australia, for one, not only equitably has a man and a woman on each of their circulating paper issues, they also draw from a broader range of historical personages, which includes poets and authors like Mary Gilmore and Banjo Paterson and soprano Dame Nellie Melba .

All of this got us wondering about potential candidates beyond the world of American politics, and going off a list of women that have already appeared on USPS stamps we came up with the following seven ‘cultural’ candidates:

[polldaddy poll=”8742714″]

Matthew Wittmann