How often do you run across older bills that are stamped "counterfeit" by the bank? I'm not talking modern paper currency but colonial and pre-civil war. I understand when banks issued their own currency, neighboring state banks who recieved out of state bills, did this as a common practice in order to get their own currency into the local market. Also, with many bank failings, the local banks would do this when an unfamilar bank note came through their bank? So some bills stamped counterfeit were done so as a precaution and for business purposes, even on legitmate paper currency. Is this fact or just fiction?
Correct, the bank would not accept them but many of these were part of merchant deposits. The tellers would accept the deposit but in the back room cashiering operations, later in the day, larger banks did stamp them counterfeit and a credit issued against the merchants' deposit. The note was then returned to the merchant. The merchant could either address the issue with the customer involved (in the original trasaction), or if not available, he had to travel to the city or state where the issuing bank was located to make good on it. It was that or eat the loss. All this added to the reasons why the federal government eventually produced its own currency and stopped banks from issuing their own notes. This is what I am trying to ascertain. It was part of the history and description given by an auction house I obtained the bill from. I was just wondering if this happend quite often and was this a common practice? (or a highly imaginative description for the note by the auction house.)
I am going to go with a highly imaginative description. The process described in your post does not make any sense. The teller was the line of defense against counterfeiting. Once a note was received by the bank it was the bank's problem if it was counterfeit. "The back room cashiering operation" (whatever that means) would have no idea who deposited a particular note. A teller with a counterfeit note in their till at the end of the day had no need to come to work the next. The more common practice was for the receiving bank to take up notes from "good banks" and pay out notes from "bad banks". Whether a bank's notes were good or bad was based on the discount applied to a bank's notes. Discount tables were frequently published in newspapers of the day. The bank's would send the notes from good banks to the banks for redemption or for clearance against their own notes received by the other bank. Most banks circulation privileges were based on a combination of one of two things -- capitalization and deposits. Marking genuine notes of other banks as counterfeit would diminish the amount of deposits. If a bank wanted to ruin a competitor, the usual method was to gather up as many of the competitor's notes as possible and present them at one time for redemption putting a stress on that banks reserve of specie. This was usually done in a very public manner to cause depositors of the targeted bank to make a run on deposits.
lettow: This makes much more sence to me. I was doing some reading and site searches and could not find the same information. I could take issue with the auction house but in my opinion I didn't overpay for the note to begin with. I always include some narative in my spread sheets regarding the purchase and I always try to be accurate. Thanks for your reply. Now I'm wondering who did stamp the note this way and how did it get back out in the market?
