Circulation Of National Bank Notes - Coin Community Forum

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Ynnad Pillar of the Community United States 691 Posts	Posted 03/05/2023 10:40 am I would like to learn more about the circulation of National Bank Notes. Although I am mostly interested in the small size National Bank Notes, discussion of the earlier large size National Bank Notes is welcome. 1. Did National Bank Notes tend to circulate in areas close to their bank of issue or did their use in commerce quickly disperse them all across the United States? Would someone in a small town in Arizona find it unusual to be given a National Bank Note from some small town in Maine? Did ordinary people even pay any attention to the bank of issue? 2. The small size notes stated "The [name of bank] will pay to the bearer on demand [amount] dollars" and "Redeemable for lawful money of the United States at the United States Treasury or the bank of issue." Large size notes had the same or similar text. Was there a formal procedure for redeeming notes, either at the bank of issue or at the treasury? I don't see why that would be necessary. A bank or treasury employee could simply say, "Sure Mr. Bearer, I just happen to have [amount] dollars right here." and give the bearer the same note right back. 3. What happened when an issuing bank closed? What was the process for withdrawing the notes from circulation? I would guess they would eventually have to make their way back to the United States Treasury. Was there a process to expedite their way back to the treasury? Would this even be necessary? 4. How did Gresham's Law affect circulation of National Bank Notes? If the average person had a wallet full of Federal Reserve Notes, Federal Reserve Bank Notes, United States Notes, Gold Certificates, Silver Certificates, and National Bank Notes, which would he or she try to get rid of, i.e. spend, first? Would the average person even think about that? 5. Were some people more reluctant to accept National Bank Notes than other paper money? Of course, there were and still are people who don't like any form of paper money. 6. Were any particular national banks somehow considered to be "bad luck", "good luck", or "special" and therefore their bank notes received special attention? 7. How long after their discontinuance in the 1930s did the notes regularly appear in circulation? Report this Post to the Staff

nick10 Pillar of the Community United States 3207 Posts	Posted 03/05/2023 5:00 pm interesting questions, would probably take a book to discuss all of them in depth I would suspect they circulated much like the notes of today, though at a lower velocity since on average people did not travel as far during the National Bank Note era AFAIK redeemable for lawful momey generally meant redeemable for gold or silver Report this Post to the Staff
Ynnad Pillar of the Community United States 691 Posts	Posted 03/05/2023 5:43 pm It is my understanding that "lawful money" is whatever the U.S. Congress says it is. The mention of "... make any Thing but gold and silver Coin a Tender ..." in Article 1, Section 10 of the Constitution is a limitation on the powers of the states and not a limitation on the powers of the federal government. Report this Post to the Staff
nick10 Pillar of the Community United States 3207 Posts	Posted 03/05/2023 6:21 pm so what did Congress say lawful money was during the National Bank Note era? Report this Post to the Staff
Ynnad Pillar of the Community United States 691 Posts	Posted 03/05/2023 9:05 pm As far as I know, Congress has never explicitly defined the term "lawful money." As all federal coins, notes, and certificates, were issued pursuant to laws enacted by Congress, they are implicitly "lawful money." The Trade dollars are a possible exception but even those were theoretically made legal tender by the Coinage Act of 1965. There are several federal court cases that recognize Federal Reserve Notes, United States Notes, and perhaps others as "lawful money." If you are really interested, I can give you cites for those cases later if you wish but not tonight. It's almost my bedtime and I still have to cook supper. National Bank Notes were not necessarily legal tender until a law passed by Congress in 1933. However, in my opinion, that does not mean they were not "lawful money" before that law was passed. "Lawful money" and "legal tender" are closely related but distinct concepts. Edited by Ynnad 03/05/2023 9:08 pm Report this Post to the Staff
DoubleEagle20 Pillar of the Community United States 1748 Posts	Posted 03/06/2023 3:08 pm From what one old article I read implied is that the majority of national bank notes you would get in change were regional. I.e. it would be no big deal if you received a Chicago note in Minnesota or North Dakota. That is still the case even with FRN's today, under the Federal Reserve District system. As far as a bank failure, some national banks would assume the circulating notes of a failed bank. There was no rush otherwise to pull the notes from circulation, as the backing still remained at the Treasury until bank redemption or retirement of the note. In 1935, national banks actively pulled their notes from circulation and received FRN's back in exchange when the program was discontinued. If a NBN were to wander into circulation today, it would have the same legal tender status as a FRN of same denomination. I'm sure most people didn't care about what notes they possessed, but I know my preference if given a choice would have been gold certificates. Since they were directly redeemable in gold. Next preference would have been for pre-1934 FRN's, since they were redeemable in gold as well. I read once that many banks kept gold in a special drawer, separate from other forms of money. Edited by DoubleEagle20 03/06/2023 3:23 pm Report this Post to the Staff
Ynnad Pillar of the Community United States 691 Posts	Posted 03/06/2023 3:43 pm Just to be really, really pedantic, I believe that before the "Riegle Community Development and Regulatory Improvement Act" of 1994 (which relieved the Treasury from the obligation of maintaining United States Notes), obsolete National Bank Notes were redeemed with United States Notes as required by section 3 of "an Act fixing the amount of United States Notes, providing for redistribution of the national bank currency and for other purposes" of 1874 and not Federal Reserve Notes as DoubleEagle20 has stated. Report this Post to the Staff
Jamericon New Member United States 5 Posts	Posted 03/06/2023 8:14 pm The answers to your questions can be found in the Huntoon-Shiva NBN Encyclopedia. Check the chapters in Sections A and B. https://content.spmc.org/wiki/Encyc..._of_Contents Report this Post to the Staff
Sap Moderator Australia 16817 Posts	Posted 03/07/2023 12:19 am 1. People moved around a lot less back then. But when people did move around, they tended to take "local money" with them, for use and/or depositing in a bank at their destination. It was only relevant if there were a banking crisis of some kind, and you suddenly found yourself holding "worthless" notes nobody would accept because getting them changed into a more stable form of money required travelling to the redemption point on the far side of the country. 2. "Lawful money" at the time would have been: - Coins; - Coin-substitute notes (gold certificates and silver certificates); - US Treasury notes; - Federal Reserve Notes. 4. The "average person" would not have had a "wallet full" of various mixed-denomination notes. $10 was a lot of money back then. To get those notes, you'd have had to go down to the local bank, and be given whatever form of paper money the bank happened to have on hand. But in the hypothetical scenario where someone did have a large amount of mixed currency on hand and they only wanted to spend/bank just some of them, then the coin-substitute notes would probably have been most keepable, and National Bank notes from remote locations least keepable, with all other forms roughly equal in between. But anybody hoarding money would have probably preferred to acquire actual coins, rather than any form of paper money, simply because coins are more durable and less likely to be destroyed by fire, water, mould or other agents while in storage. Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis Report this Post to the Staff
DoubleEagle20 Pillar of the Community United States 1748 Posts	Posted 03/08/2023 8:28 pm Could be, ynnad. I read somewhere it was FRN's. It may not have been right. Report this Post to the Staff
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