Bank Notes were
United States currency
chartered by the
United States Government.
The notes were usually backed by
bank deposited with the
United States Treasury
Prior to the
American Civil War,
issued their own
During the Civil War, in 1863, the
National Banking Act
established a system of National Banks which were empowered to issue
National Bank Notes subject to federal oversight. The chartering of banks
and administrative control over the issuance of National Bank Notes were the
responsibility of the
Office of the Comptroller of the Currency
In 1865 the Congress enacted a 10% tax on state bank note issuance making it
unprofitable for state banks to issue notes, and thus restricting the
circulation of privately issued banknotes to the National Banks.
From 1863 to 1935, National Bank Notes were issued by banks throughout the
country and in U.S. territories. Banks with a federal charter would deposit
bonds in the U.S. Treasury. The banks then could print banknotes worth up to
90% of the value of the bonds. The federal government would back the value
of the notes - the issuance of which created a demand for the government
bonds needed to back them.
The program was a form of
of the Federal debt. Bonds eligible as collateral for posting to the
Treasury were said to have the "circulation privilege" and the interest they
to the National Banks.