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Project: Help Distinguishing State Vs. Independent Bank

 
 
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Valued Member
Canada
283 Posts
 Posted 04/18/2019  12:25 am Show Profile   Bookmark this topic Add eternallogan to your friends list Get a Link to this Message
Hello all,
I'm doing a project for an economics class on Independent banking and State Banks in the United States. What I'd like to be able to explain to the class is the roles of the different institutions, how they were founded differently, how their issued notes were redeemed, and why they ceased to exist. I have vague answers to some of these questions, but would like to learn more.
Here is an interesting note owned by the Mercantile Library in Saint Louis, featuring the confederate president, Jefferson Davis. I assume this had something to do with the fact newly elected governor Claiborne Fox Jackson had great southern leanings?



Here's another note from the same place, I have a few questions about this one. First, does the "ten percent interest rate" refer to the fact that in three years a 10% interest will be accrued in addition to $20 face upon redemption of this note? Also, what would these notes be redeemed for? Specie I assume.
Finally, what do the words Jefferson City on this note refer to? Where this note was printed (doubtful)? Or is this note an independent bank note from Jeff City (again, doubtful)?
I assume these are both state bank notes


Pillar of the Community
United States
2249 Posts
 Posted 04/18/2019  04:57 am  Show Profile   Bookmark this reply Add SteveInTampa to your friends list Get a Link to this Reply
I sent a link to this thread to a friend on a different forum. He's well versed in Missouri banks, especially St.Louis. Hopefully he can add some information.
Valued Member
Canada
283 Posts
 Posted 04/18/2019  12:24 pm  Show Profile   Bookmark this reply Add eternallogan to your friends list Get a Link to this Reply
Great Steve! I'd love to hear what he has to say!
Pillar of the Community
United States
644 Posts
 Posted 04/18/2019  4:00 pm  Show Profile   Bookmark this reply Add lettow to your friends list Get a Link to this Reply
Jefferson City is the capital of MO.

You need to define what you mean by state bank and independent bank. In the paper money world a state bank means a state chartered bank as aopposed to a national bank. The term independent bank is one I have not encountered in the collecting field.
Valued Member
Canada
283 Posts
 Posted 04/18/2019  8:26 pm  Show Profile   Bookmark this reply Add eternallogan to your friends list Get a Link to this Reply
@lettow
I'm aware Jeff City is the capital of MO, I live there. That doesn't completely explain why it was on the note.
During the period of 1837 to the Civil War, states passed "free bank laws," which allowed banks to operate under a much less onerous charter. These banks were known as free banking institutions or independent banks (independent from state chartered banks). While banks were regulated, they were relatively free to enter the business by depositing govt. bonds with state auditors. Independent banks were also required to redeem their notes on demand in specie.
As a result of free banking laws, hundreds of new banks opened their doors and free bank notes circulated around the country.
Below I've attached what I believe to be an independent bank note to give you an idea of what I'm referencing.

Pillar of the Community
United States
644 Posts
 Posted 04/19/2019  07:16 am  Show Profile   Bookmark this reply Add lettow to your friends list Get a Link to this Reply
Jefferson City appears on those two notes because they were issued by the state treasury not a bank.

Your distinction of independent vs. state bank is still not clear. Even during the obsolete era (that is what collectors call this period) all banks whether they issued notes or not had a state charter.

Some state treasuries (mostly in the south) issued notes also like the two MO notes you show. And there were private scrip issues that were circulated by businesses that were not banks.
Valued Member
Canada
283 Posts
 Posted 04/19/2019  2:10 pm  Show Profile   Bookmark this reply Add eternallogan to your friends list Get a Link to this Reply
Yes I agree with you that they still had a state charter, although a less onerous one. I also agree that it's likely that the Jeff City appears because they were issued by the state treasury. However the distinction is, I think, that private institutions also printed and issued their own unique notes,sometimes coming with a discount.
It's all an interesting part of history that I'm unable to find a ton of information about.
Pillar of the Community
United States
644 Posts
 Posted 04/19/2019  8:21 pm  Show Profile   Bookmark this reply Add lettow to your friends list Get a Link to this Reply
State trasury notes were also discounted. If you look in contemporary newspapers in large cities you will find tables of the discounts for bank notes.

Bank Note Reporter was also a contemporary publication that tracked obsolete currency.

I also recommend you look at Q. David Bowers book on obsolete currency.

Pillar of the Community
United States
4409 Posts
 Posted 04/23/2019  8:52 pm  Show Profile   Bookmark this reply Add MeadowviewCollector to your friends list Get a Link to this Reply

The reason obsolete banknotes ceased to exist was due to efforts by the federal government to have a more stable paper currency system.

When the government created national banks the legislation placed a tax on private and state banks' notes in circulation. Effectively these were driven out of use by 1866 or so.

Plus, nationals were still good regardless if the bank failed or went out of business.

-MV
I'm slowly building my numismatic library--106 works and counting

With assistance, trying to compile a listing of numismatic reference books & materials available to collectors http://goccf.com/t/174749
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