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ACCent: The Monthly Newsletter of the Anchorage Coin Club

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Membership Meeting 1st Wed. each month, 7 PM, Central Lutheran Church, 15th and Cordova

June 2012

Vol. 25  No. 6

US State Banknotes Part III

The Rise of Federal Currency
By Larry Nakata (Life Member #3)

    In my presentation and article last month, I ended with the Civil War which saw the demise of the State Bank Note system and the rise of Federal Currency.

North Carolina Note

    By the start of the civil war the public's mistrust of paper currency resulted in a hoarding of gold and silver coinage. In order to finance the Civil War both the Federal government (in the North) and the Confederate government (in the South) needed to take measures to stabilize their paper currencies.

Civil War Note

    In the South, the Confederate government continued to allow each state to print their own paper currency and even printed national Confederate currency. Both types of currencies were backed by bales of cotton. As a result, the South chose a decentralized monetary policy in which the Confederate government put faith in the public's willingness to support and honor its currency. This was OK in the early years of the Civil War, but destabilized as the Confederacy began losing the war.

    In the North, the Secretary of Treasury- Samuel Chase chose another approach...... a centralized policy of monetary control by the federal government on its currency.

    Secretary of Treasury Samuel Chase's first act was to require that banks in the North deposit 10% of the value of all their paper currency into the U.S. Federal Treasury. This deposit was made in the form of gold or silver. It was a brilliant maneuver that, in effect, implemented a 10% tax on the North's economy and also limited the amount of paper currency that could be issued by the State banks in the North.

    Samuel Chase was also instrumental in establishing the 14th Amendment to the U.S. Constitution that prohibited private issue of any coinage or paper currency as the primary monetary exchange of the country. As a result, the 14th Amendment gave the federal government a monopoly on issue of paper currency.... a right it still holds to this day.

    What followed was the demise of the State Bank Note system in the North during the Civil War. These fiscal policy changes were easier to implement in the North than in the South (where states rights were still an issue). It would prove to be a significant factor in why the North would win the Civil War.

    So, in effect, Samuel Chase thus created our U.S. Federal Currency (1862 to present times). In 1862, we see the issuance of the first U.S. federal currency. The first $1 issued Federal Note (1862) would show a picture of Samuel Chase.... Secretary of the Treasury. Samuel Chase would make sure he would be remembered.

    What soon followed would be a series of federal notes that were issued to bolster public confidence in our nation's paper currency. Among them were:

  1. Demand Notes (also called Interest Bearing Treasury Notes... or "Greenbacks"). In the beginning years of the Civil War.... the federal government was not in the paper currency printing business. It was subsequently necessary to contract out the printing of the early year notes to private sector printing companies...such as the American Bank Note Company and the National Bank Note Company. The creation of the federal government Bureau of Engraving and Printing (BEP) would soon change this.

  2. Compound Interest Treasury Notes and Interest Bearing Notes were also issued during the Civil War. These notes were used to fund the war effort and were redeemable for face value plus interest after a finite period of time. It was sort of like our savings bonds of today.

  3. The Demand and Interest Bearing Notes would give way to the Legal Tender Note (1862- 1969) which is the longest issue of U.S. paper currency. The Legal Tender Note paved the way for U.S. currency backed only by the credit of the U.S. Government.

  4. Silver Certificates (1878-1963) competed with Gold Certificates (1865-1928) and National Gold Bank Notes (1870-1878) when silver and gold mining interests were vying for use of their respective precious metals as the standard for backing of U.S. paper currency.

  5. National Bank Notes (1863-1935). With the demise of the State Bank Note system in the Civil War, there was still a desire for the local "hometown" bank to still have their bank's name printed on U.S. paper currency.

    In effect, it was a good form of advertising for the local bank and also showed financial stability of that bank. This sentimentality for putting one's bank name on the paper currency continued to prevail resulting in the federal government issuing National Bank Notes through the Bureau of Engraving and Printing (BEP).

    To be given this privilege such banks could only issue notes equivalent to 90% of the market value of U.S. bonds that were in deposit in the U.S. Treasury as security.

    In this period of time, some 14,000 banks participated in this program. Even in Alaska, records show that the First National Bank of Anchorage, First National Bank of Fairbanks, First National Bank of Juneau, First National Bank of Ketchikan, and the First National Bank of Seward issued notes in the early 1900s. These banks would evolve into today's FNBA (First National Bank of Alaska).

    There is also a reference to the Harriman National Bank of Alaska at Seward as having issued such notes. Such Alaskan notes are impossible to get. If you are lucky in finding such a note..... it's worth a lot of money.

    By 1935, this privilege was withdrawn in favor of the Federal Reserve System.

  6. In the early 20th Century, we see the creation of the 12 Federal Reserve Banks which are still in operation today. These federal banks would comprise today's Federal Reserve System. In 1915, Federal Reserve Bank Notes would be issued with the name of the issuing Federal Reserve Bank on that note. At about the same time (1914) one sees the Federal Reserve Note being issued. The Federal Reserve Note is the note that prevails today. Such notes would be backed by the Federal Reserve Banks..... OR, IN OTHER WORDS... THE GOOD CREDIT OF THE U.S. GOVERNMENT.

Modern Twenty

There are some interesting aspects of U.S. paper currency that I have not really covered. Among them:

*For much of U.S. history, most of the paper currency was printed as large currency notes. By 1928, U.S. paper currency transitioned to the smaller sized notes used today. Reason... easier

*During the Civil War, silver and gold coinage was in such short supply (due to hoarding) that it was necessary to issue fractional paper currency by the federal government. The early fractional currencies

*During WWII, we see use of the North African (Yellow Seal) and Hawaii (Brown Seal) Notes. This was currency used in North Africa and Hawaii during WWII with the idea that if the currency fell into the hands of the other side, it could not be used. In the case of Hawaii, there was a concern that if Hawaii was lost to Japan, the Brown seal notes could be demonetized.

* After WWII and up the Vietnam War, there was the use of military payment certificates (MPCs).

* And.... there was a period of time during the Depression of 1929, when money was in such short supply that we see the use of Depression Script.

But these are other stories that can make for some pretty good presentations in the future....... Larry


May 2nd Membership Meeting

Door prize: 1983 Lincoln Cent NGC AU58 Red. Won by: Tim Burke's wife.

Membership prize: 1964 Lincoln Cent NGC MS64 Red. Won by: Tom Hoffman.

    Glen Dean gave an update on our club's School Program to teach grade school children Coin Collecting. At this time Glen is gathering material with the intent of doing presentations when the schools start up in September. Glen is also talking to Boy Scout troops on a coin collecting merit badge program.

    Paul Nath brought up the idea of having the club put-together Coin/Currency exhibit sets for our club coin shows and for the School Program presentations. Matter moved to the Board for according action.

    Announcement that we have our club's Donation Coin Auction at our club summer picnic on Saturday / July 7th (12 noon through afternoon). We are accepting donation coins, and numismatic items at this time. Proceeds will go towards promoting Numismatics in Alaska.

    Raffle prizes to be drawn at our club's summer picnic on July 7th. Prizes were shown at club meeting with tickets going for $5/ticket.

    Announcements by Carl that members can now have their newsletters emailed to them as well as their mailed newsletter. Interested members were asked to provide their e-mail addresses and Facebook info.

    Presentation was then given by Larry Nakata on the subject of "Part 2- The Rise of U.S. Federal Currency."

Following presentation, final agenda item was the coin auction.






KOTEBANN -BANKNOTE: paper money.



May 16th Board Meeting

    Meeting called to order at 6:30 PM by Carl (President-Anchorage Coin Club). Meeting held at New Cauldron Restaurant.

    Following a review of correspondence, Stan Mead confirmed that everything OK for our club's Summer Picnic scheduled for Saturday July 7th from 12 noon thru the afternoon. Location will be the same as last year: Abbott Community Park on Elmore Street.

    Briefing by Larry Nakata. Need for donation lots for the July 7th Donation Coin Auction. Tim Burke submitted a number of lots. Need more. We'll be posting the donated lots in the next two newsletters.

    Briefing by John Larson. Need to promote more raffle ticket sales as we get closer to the July 7th date when the raffle prizes go. Prizes to be raffled are:

1906 $2 and 1/2 U.S. Liberty Gold ANACS AU58 certified.

1880 $20 Legal Tender U.S. Note PMG F15 certified.

1883 Hawaii (King Kalakaua) Half Dollar in VF+ condition.

    Discussion by Board on Paul Nath's proposal of the club putting together Coin/Currency exhibit sets for coin shows and school presentations. This will be a carryover discussion into club's June 6th membership meeting.

For June 6th Membership meeting:

Stan Mead just got back from the ANA Denver Show. He will be giving us a briefing on the show.

Food: Potluck event with the club providing chili dogs.

Board meeting adjourned at 7:05 PM..... Larry Nakata/Secretary.

Lots Submitted by Bill Fivaz for June 6th Meeting

1. 1918-P Lincoln Cent MS-63. Minimum Bid (MB) $15

2. 1937-SBU Lincoln Roll MB $195

3. Four (4) 1954-S Lincoln Cents Die Chip in "9" BU No Minimum

4. 1936-D Buffalo 5c Original MS-65 MB $ 72

5. 1936-S Buffalo 5c Original MS-65 MB $ 75

6. 1939-P Jefferson 5c Original Rainbow Toning Obv. / Rev. MS-64 MB $ 10

7. 1963-P Washington 25c Original Obv. / Rev. Toning MS-65 MB $ 15

8. 1855-O (with arrows) Seated Liberty 50c VF MB $ 40

9. 1938-D Walking Liberty 50c Fine MB $ 35

10. 1927-P Peace Dollar MS-63 MB $75

11. 1921 Alabama Commemorative 50c Fine MB $50

12. 1886-S Liberty $5 Gold ICG EF-40 MB $375

13. Five (5) Piece "American Heritage Collection" MB $35

1907 Lincoln Cent (EF),

1913 (T1) Buffalo 5c(AU),

1944-P Mercury 10c (MS-64),

1953-P Washington 25c (MS-64),

1944-P Walking Liberty 50c (MS-62)

14. 1956 U.S. Proof Set (in Capital Holder) MB $40

15. "End of the Millennium" Medal, by U.S. Mint engraver Don Everhart, No Minimum

16. Donation: Autographed copy of Bill Fivaz's Counterfeit Detection Book

17. Donation: Autographed copy of Bill Fivaz's Counterfeit Detection Book

July 7th Summer Picnic Donation Lots Submitted Thus far

1. Fifteen (15) Coin Set of Lincoln Cents in BU Condition

2. 1943-S Walking Liberty Half Dollar in XF Condition.

3. 1959-D Franklin Half Dollar in VF condition.

4. 1963-D Franklin Half Dollar in VF condition.

5. 1922 Peace Dollar in BU condition.

Note: Need to have more donated lots for our July 7th Summer picnic. Please see what you can do.



If you hunted down and found a note from your home town's national bank...

You are probably a numismatist...

And you should belong to the Anchorage Coin Club.






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DUES: Regular; Full membership for those living in Anchorage $25

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Send application and dues to :

Anchorage Coin Club
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Anchorage, Alaska 99523

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Quarter Eagle Reverse

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President: Carl Mujagic

Vice President: Robert Hughes

Secretary: Larry Nakata

Treasurer: Stan Mead

Board Seat #1: Loren Lucason

Board Seat #2: John Larson

Board Seat #3: Tim Burke

ACCent Editor: Loren Lucason