National Bank Notes were United States currency banknotes issued by National banks chartered by the United States Government. The notes were usually backed by United States bonds the bank deposited with the United States Treasury. In addition, banks were required to maintain a redemption fund amounting to five percent of any outstanding note balance, in gold or “lawful money”. 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 issue 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 monetization of the Federal debt. Bonds eligible as collateral for posting to the Treasury were said to have the “circulation privilege” and the interest they bore provided the difference between the value of money and the cost to produce and distribute it.
The Higgins Museum houses the largest collection of National Bank Note issues on permanent exhibit anywhere in the country. It displays “the most complete state collection of National Bank Note issues ever assembled for a major state, with 278 of the state’s 300 communities of issue represented.” The Museum opened in 1978, its stated purpose being the acquisition, preservation and display of the notes, related artifacts and pertinent reference materials relating to the National Bank Note issuance era for educational purposes. The Higgins Museum is located at 1507 Sanborn Ave in Okoboji Iowa, so if you want to take a trip and see some really nice National Bank Notes head to Okoboji and take a look.