OHIO STATEWIDE FILES - Know your Ohio: Money at Home--- Banking in Ohio [3] *********************************************************************** OHGENWEB NOTICE: All distribution rights to this electronic data are reserved by the submitter. Reproduction or re-presentation of copyrighted material will require the permission of the copyright owner. The submitter has given permission to the USGenWeb Archives to store the file permanently for free access. *********************************************************************** File contributed for use in USGenWeb Archives by Darlene E. Kelley http://www.genrecords.net/emailregistry/vols/00026.html#0006374 December 20, 1999 *********************************************************************** Historical Collections of Ohio Diaries of S. J. Kelly Plains Dealer Know Your Ohio by Darlene E. Kelley *********************************************************************** Money at Home -- Banking in Ohio Creation of National Currency -- pt 3. In 1840 Alfred Kelley was appointed State Fund Commissioner. In 1841 and 1842 a formidale party arose in the legislature and state, which advocated the non-payment of the maturing interest on the State debt, and the repudiation of the debt itself. The finances of the State had become so badly deranged, that fears were entertained that its obligations could not be met. Mr. Kelley went to New York and was able to raise nearly a quarter of a million of dollars on his own personal security, by which means the interest was paid at maturity and the State of Ohio saved from repudiation. He was esteemed by all as the savior of the honor of the state. Judge Swan bore testimony to Alfred Kelley's services in this crisis as follows; " Great as the debt undoubtedly is, which the citizens of the State owe to Mr. Kelley for his long and faithful legislative labors, it is small, even insignificiant, in comparison to that due him for other services, services of which no evidence is preserved in the public archives, and which are only known, in their full extent, to a limted number of his survivors. It is a fact, however, still susceptible of proof by living witnesses, that his exertions and personal sacrifices, with but little aid from others, saved the State from repudiation." In May, 1842, Mr Kelley, went to Europe for the purpose of floating securities, necessary to relieve the still embarressed finances of the State, and continued to serve as a member of the Fund Commission until March, 1843, when the board was re-organized by a law then passed. In 1844 he was elected to the State Senate from Franklin Co., and was re-elected again in 1845. It was during this time that he organized the bill to organize the State Bank of Ohio and other banking companies, which was generally admitted by bankers and financiers to be the best banking law afterwards passed, of which many portions are most literally copied from Ohio law. National Currency-- The First National Bank of Washington, D.C. ( charter # 20 ) was the first bank to receive and circulate Nationals. The first shipment consisted of 1000 sheets of four $5 notes, and was made by the U.S. Comptroller of the Currency, Washington, D.C. on December 21,1863. Other notable "Firsts" were : The First National Bank of Davenport, Iowa. the first national bank to open for business ( June 29, 1863); and the First National Bank of Philadelpia, Pennsylvannia, which received its charter # 1 on June 20,1863. Between 1864 and 1935, national bank notes constituated an important part of the U.S. paper currency. Like demand notes, United States Notes and Interest Bearing Notes, nationals were issued initially to increase the nation's money supply during the Civil War years and, like the U.S. Notes, they continued to remain in circulatuion for many decades after the conflict ended. Until the early years of the 20th century the amount of National bank notes in circulation approximated that of the U.S. Notes. During the next three decades significantly more Nationals were sent into circulation. These two series were joined by other types of currency such as Gold Certificates, Silver Certificates and Federal Reserve notes. The physical size of National notes changed over time, providing an obvious way to distinquish between " groups." Prior to July 1929 National Bank notes and other forms of paper money were large size, with dimensions approximately 7.5 inches by 3 inches. In July 1929 the dimension of United States paper money were reduced to the current size of approximately 6.3 inches by 2.6 inches and are referred to small size notes. The total face value of all NBN's issued was abot $17 billion. Of this total, about $14.2 billion was in large size notes issued up to the summer of 1929, while small size NBN.s ( all series 1929 ) were issued for a total face value of about $ 2.8 billion between 1929 and the summer of 1935. In the meantime , State chartered bank notes, whose quality was often dubious, were taxed out of existance by the act of March 3, 1865, which levied a annual tax of 10% on all state bank noes in circulation after July 1, 1866. They ceased to be a factor in the nation's currency supply after 1866. Many state-chartered banks, however, chose to continue in business, but in order to remain their state charters they had to forfeit their right to issue notes. The creation of national banks did in fact, allow for a substantial expansion of the currency supply, but this legislation also contained a number of flaws. No provision was made either for branch banking or for interstate banking, and the capital requirements for establishing a national bank was for only $ 50,000. In 1900, this capitol requirement was reduced to only $25,000 for banks in small towns with populations under 3,000. This virtually guaranteed failure of many smaller institutions when times of adverse economic conditions arrived. The National Currency Act of 1863 gave birth to a strong banking system and to a secure National Currancy. The importance of National Bank Notes reached its zenith in 1913 when a record 1.1 billion dollars worth of Nationals were in circulation. In 1913 the United States was fast becoming a industrial giant. The explosive growth of the American economy demanded a more a more flexible banking system. and they proved they could do it. **********************************************