“Broken Bank Notes” Prove to Be Valuable Collectibles

This week’s article continues with the topic of collecting paper money by addressing what are known as obsolete or “broken bank” notes. Generally speaking any currency issued from pre-colonial time through the early 1900s can be considered obsolete. But to the collector, those notes issued from 1782 through 1866 by various state banks are considered to fall into that collectible category.
Prior to the establishment of the Federal Reserve banking system, it wasn’t too difficult to get a state charter to open a bank. All that was required in general terms was a sufficient amount of hard currency (gold or silver) to back up any paper money that the bank would issue. This system functioned well until a bank would print more paper money than it had reserves to back the paper. A run on the bank by the paper holders would result in depleting all of the gold and silver. Anyone left with the paper money from that bank learned that the bank was “broke”, making the paper worthless. Hence the term “broken bank notes.”
In all, around three thousand banks issued currency during this period. Because each bank issued various denominations and also in some cases issued more than one series in different years, the result is there are thousands of different notes that are available to the collector. In most cases, the notes that the banks issued had attractive designs or, as they are known, vignettes. However the paper quality left something to be desired as most notes were printed on thin stock which didn’t hold up very well. In all cases each issued note was hand signed by officers of the bank as well as hand numbered. Many examples of unsigned, unnumbered remnants can be found as well as uncut sheets of multiple notes. These are leftovers that never were put in use by the bank.
Although there were many banks issuing notes during this period, only a few banks in our area existed that issued their own currency. The local cities with banks issuing currency were Egg Harbor City, Mays Landing, Cape May Court House, Millville, Bridgeton and Salem. Egg Harbor City is the commonest of the group and issued notes in $1, $2, $5 and $10 denominations. Acquiring an example from that bank would cost less than $100.
Anyone interested in pursuing a collection of Obsolete Currency would be advised to try to get a hold of a 4 volume set of books on the subject titled “United States Obsolete Bank Notes, 1782-1866” by James Haxby. It was published in 1988 and listed all known (at that time) notes issued by all banks. Although it is long out of print, it is recognized as the most authoritative reference on the subject.
Because record keeping was not always a high priority, there probably exist notes from banks that have not yet been identified or discovered. Finding such notes is what we collectors call “the trill of the hunt”.
–Douglas Keefe is the president of Beachcomber Coins, Inc. He and his wife Linda operate Beachcomber Coins and Collectibles in the Shore Mall as well as satellite offices in both Brigantine and Absecon. Between them they have over 70 years experience in the coin and precious metals business. They are members of The American Numismatic Association, The Industry Council of Tangible Assets, The Numismatic Guarantee Corporation and the Professional Coin Grading Service.