On December 23, 1863, a man walked into the First National Bank in Washington, D.C. and pushed across the counter this check for $50, drawn from his own account but curiously made out to "New Notes," and received in exchange ten crisp $5 bank notes.
New notes, indeed they were. The man was Senator John Sherman, the politician who was most responsible for making a brand new nationalized American banking system a reality, a system that proved to be the foundation for the future financial power of the United States, if not modern capitalism itself. And, the "New Notes" he requested were the new National Bank Notes, which had been issued only two days earlier.
The first national bank note to be produced was the $5 denomination and the first 2,000 notes were delivered exclusively to the First National Bank in Washington on Monday, December 21st, 1863. John Sherman certainly was given ten $5 notes from this first delivery for this "New Notes" check two days later, as no other denominations were yet available.
I like to imagine him admiring them there, tangible evidence he could hold in his hand that he had changed the world in a very big way. This check is a wonderful souvenir of that moment, a mundane document that yet is so intimately tied to a great turning point in financial history.
How John Sherman sold the nationalized banking system
America's new national banking system was designed to cope with the challenge of financing the Northern war effort in the face of a collapsing and disjointed state banking system and a desire to avoid wartime dependency upon foreign loan arrangements. It was Secretary of the Treasury Salmon P. Chase who recommended a system of federally chartered national banks with the power to issue standardized national bank notes based on United States bonds held by the banks.
But, it was John Sherman who was the main reason it became a reality. The series of legislations Sherman introduced to the Senate passed by the narrowest of margins after bitter debate, his appeals to anti-secessionist sentiment to justify a nationalized banking system carrying the day:
"The policy of this country ought to be to make everything national as far as possible; to nationalize our country, so that we shall love our country. If we are dependent on the United States for a currency and a medium of exchange, we shall have a broader and more generous nationality. The lack of such nationality, I believe, is one of the great evils of the times. It has been that principle of states rights, that bad sentiment that has elevated state authority above national authority, that has been the main instrument by which our government is sought to be overthrown."
- Senator John Sherman, speech in Congress on the new banking and currency systems, February 10, 1863
Sherman's National Currency Act was passed by Congress and signed into law by the President on February 25, 1863, and the process of chartering National Banks began immediately.