Prior to the American Civil War, state banks issued their own banknotes. 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. 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.
National banks were authorized to issue federal currency under their own names and bearing the signatures of local bank officers. Over 500 national banks in Iowa issued almost $300,000,000 worth of notes between 1863-1935. The Higgins Museum of National Bank Notes is located in Okoboji, Iowa. For more information, please visit http://www.thehigginsmuseum.org/
This note, along with a variety of other Story City related items, is a recent donation from Scott Hansen. We would like to thank Scott for his donation to the Historical Society.