Adco, allow me to clear things up for you as there seems to be great confusion here as to the differences between three very different types of US currency, National Bank Notes, Federal Reserve Notes, and Federal Reserve Bank Notes.
The Federal Reserve Bank Note (FRBN) is what you have pictured. There is no such thing as type 1 or type 2. They are all the same.
What Whytlash described is not an FRBN, but what is known as a National Bank Note (NBN). Although FRBN and NBN share a very similar appearance, they are very different animals. (Like comparing Silver Certificates to United States Notes). I will try to explain the best I can:
National Bank Notes were first issued (via charter) in 1863 (as large size notes) under the National Banking Act of that same year. The notes were printed by the US government and issued to private banks across the nation. These private banks were required to deposit government bonds with the Treasury in order to be issued NBNs. The bank could then circulate NBNs up to 90% of the face value of the bonds that they had on deposit at the Treasury. If a bank were to fail, and many did, the NBN became an obligation of the US Government rather than the failed bank (however, the failed bank lost all interest in its bond on deposit). This relationship between the government and the private banks continued until the government no longer renewed the charters with these private banks after 1929.
In 1913, another government act known as the Federal Reserve Act became law, and the Federal government set up 12 Federal Reserve Banks across the nation. They remain today in the same capacity of issuance as they were then. The government prints the money, ships it to each of these twelve Federal Reserve Banks, and the FRBs distribute the notes into circulation. The first Federal Reserve Notes were printed and issued in 1914 as large size notes.
The Federal Reserve Act was created to get a handle on the nation's currency crisis which in essence was a tidal wave of failing private banks (broken banks). Rather than currency floating around with the name of a bank that no longer existed, the Federal government would issue the money (Federal Reserve Notes) directly from its own banks (the 12 FRBs). By 1918, the FRNs accounted for the vast majority of all bank notes in circulation (including National Bank Notes, United States Notes, Silver Certificates, Gold Certificates, etc).
Federal Reserve Bank Notes or FRBNs (also authorized by the Federal Reserve Act of 1913), were intended to be the replacement for the National Bank notes, and were first issued in 1915, and again in 1918.
The price of silver rose significantly in 1918 however, and it became far more profitable for the government to melt down silver dollars and sell the silver abroad. Since the Silver Certificates circulating at that time were backed by silver dollars, if the silver dollars were melted, the silver certificates had to be removed from circulation. Hence the Pitman Act of 1918. Three hundred and seventy million silver certificates were removed from circulation (to correspond to that number of silver dollars melted) and were replaced with FRBN. (The death of the National Bank Notes would have to wait).
In 1921, silver prices fell, and silver dollars were back in production big time at the mints, and so were silver certificates to back them up. By the mid 1920s, the FRBNs had served their purpose and were pretty much out of circulation. In 1928, the change over from large size notes to small size notes took place.
Although all small sized FRBN are dated 1929, they were not actually printed until four years later as a form of emergency money. All FRBN were hastily printed in March 1933, in response to a 'heads up' concerning the US departure from the gold standard. All gold coins and Gold certificates were recalled in the spring of 1933. The small sized FRBN now served the purpose of replacing gold certificates, and as the Treasury saw it, the FRBN had the advantage of not requiring the 40% gold cover that the FRN of that era did. (Look at your 1928 FRN gold clause).
Being a rush job of emergency notes, there was not sufficient time to design and develop new plates to print the small size FRBN, and the Treasury did not want the FRN's gold clause to be an obligation of this note as the current FRNs would also have to be removed from circulation as well, so the most practical thing to do was to use what was handy, and that was the plates of the 1929 NBN.
So many FRBN were printed in March of 1933 however, that many of them were not actually issued until the WWII years of 1942 and 1943.
I know that was long and dry, even though I really did try to condense a major block of US history there, so if clarification is required, just say so.
Large size FRBN
Small size FRBN (lowest known serial on a Chicago $100)
Posted 05/08/2010 03:32 am
