The "Why" Of National Currency Notes?

Very interesting discussion of the conflict between the National Banking Act of 1863 and the US Constitution, Art. I, sec. 8. I believe that the Supreme Court quickly upheld the federal issuance of paper money under the "necessary and proper" clause, as it usually does in times of real or hyped-up emergency --- as it did in the 1940's giving its blessing to concentration camps for Japanese-Americans. The reference, however, still does not explain why a private bank would want to issue its own currency when the federal government took over that function under the Legal Tender Act of 1862. What would be the advantage to the bank -- advertising? getting a competitive edge over non-chartered banks? And why would the Federal Reserve Banks issue its own "National Currency"?

It is my understanding that... the constitution gives the government the right to make money. That is to produce a product (money) that has real value not imagined value. Then the government was persuaded to give this right away to the "Federal Reserve Bank" which is a Private bank. The government has some appointments to the board but it is not owned by the American people but by private bankers. Just as "Federal Express" is private company and not owned by the people.

The Private bankers have, over the years, provided paper currency to the Government, but that paper currency is no longer backed by silver or gold. It's just paper that people have put their trust in. Perhaps that is why they put "In God We Trust" because no one would trust a private banker or politicians.

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Originally posted by houston_guy462004

I believe that Federal Reserve Banks are not privately owned but are 12 agencies of the federal government created by the Federal Reserve Act of 1913, functioning like the National Bank creatyed in 1791 and again in 1816. The federal reserve system distributes coins and currency in each of the 12 regions, at the request of mem,ber banks, as the need for circulating money arises. My question is, back in 1863 when "wild cat" (privately-issued) banknotes were made obsolete by the National Currency Act, renamed the National Banking Act, why would any individual bank want to issue paper money in its own name when the federal government had already natonalized the currency with "greenbacks" (United States Notes) under the Legal Tender act of 1862? What was the benefit to the bank to have its name on a banknote? Did it re-assure the local citizenry of the bank's financial soundness? Did it give the bank a competitive edge over other non-chartered banks?

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National banks issued their own currency because they made money on the outstanding circulation. The US Government required each bank to purchase federal bonds and leave them on deposit with the US Treasurer. This was good for the US Government because it was a new supply of funds and good for the banks who received a safe return from the interest paid on the bonds. Now, with the bonds as backing, the US Gov't. printed currency and sent it to the bank, who promptly loaned it out creating more interest income. For the bank, they were getting interest twice on the same capital.

This was also a follow through from the obsolete bank note era. People were used to accepting currency with names of local banks, not these new US Notes (Legal Tender Notes) which weren't redeemable for anything but debts owed to the US. Now with the issue of nationals, people had an even better local currency, with the signatures of local community leaders, like the bank president and cashier, as before but with the Federal guarantee that if the bank failed, the US Government would pay the notes off with the proceeds of the bonds deposited in Washington.

"In God we Trust" was added to paper money during the 1950s as the result of an almost single-handed effort by a currency collector and deeply religious person named Matt Rothert. It first appeared on coins during the Civil War as the result of the efforts of another deeply religious person, a minister (I don't recall his name), who wrote to Salmon Chase who thought it was an excellent idea.

However, our founding fathers, particularly Jefferson who spoke of a "wall" between Church and State opposed the mention of "God" on our money. When our first coins were designed, many wanted Washington's portrait on them. Washington rejected this claiming this was too similar to European coins which depicted the king or queen. There was no king or queen in America and Washington recognized that the power to govern in a democracy was in it's people. Also rejected were the standard European legends which typically read "D.G. Rex" or similar which translated to "King by the grace of God", again because Americans believed that the power to rule didn't come from God but came from the people. Use of of "God" on our money was specifically rejected by our Founding Fathers for good reason.

"Liberty" was the word required on our money from the start of this Country, and to this day. This was shortened from "Liberty, Parent of Science and Industry". This was saying give the people freedom and liberty and science, advancement, industry and progress will result. Again, the emphasis is on the people making their own destiny as a result of opportunity, not God, not because it's our God-given right and a preordained destiny. The thinking of our Founding Fathers was downright inspirational. -Russell Kaye, Sellitstore