Bank Notes and Shinplasters

In Bank Notes and Shinplasters, Joshua R. Greenberg shows how Americans accumulated and wielded monetary information in order to navigate the early republic's chaotic bank note system. He demonstrates that the shift to federally authorized paper money in the Civil War era eliminated the public's need for detailed financial knowledge.

Bank Notes and Shinplasters
The Rage for Paper Money in the Early Republic

Joshua R. Greenberg

Jun 2020 | 264 pages | Cloth $34.95
American History
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Table of Contents

Introduction. From Madison to Monroe

Part I. Circulation
Chapter 1. Passing the Buck
Chapter 2. Face-to-Face Value

Part II. Material Culture
Chapter 3. Dollars and Senses
Chapter 4. Bank Notes and Queries

Part III. Political Economy
Chapter 5. Getting Money into Politics
Chapter 6. Legal Tender Mercies

Epilogue. We Don't Need No Monetary Education

Notes
Index
Acknowledgments


Excerpt [uncorrected, not for citation]

Introduction
From Madison to Monroe

In his 1815 satire The History of a Little Frenchman and His Bank Notes: "Rags! Rags! Rags!," James Kirke Paulding told the story of a newly arrived and thoroughly confused French visitor as he navigated the unique American paper money system. The Frenchman landed in Savannah from Cuba and deposited $8,000 in gold in a local bank. However, they offered only bank notes when he tried to withdraw the funds. He assumed that, like Banque de France notes, the bills were a convenient stand-in for gold or silver and circulated at face value. So, "ignorant of the depreciation of paper money, arising from the refusal to pay specie [coined gold or silver], and from the erection of such an infinite number of petty banks in every obscure village without capital or character, he took the worthless rags" and set out for Boston.

Each of the Frenchman's subsequent transactions exposed the foreigner's inexperience with bank notes and shinplasters—paper money issued by nonbank entities like merchants or municipal corporations—because he could not discern which notes were good and which were worthless. In one typical episode, he offered to pay for a drink in a Bristol, Pennsylvania, tavern with a bill issued by the landlord of a Philadelphia hotel where he had previously stayed. His traveling companion explained that the hotelier, "in order to be in fashion, had also commenced Banker among the rest." Yet the Bristol landlord refused outright to accept the bill. The rejection upset the Frenchman; how was he to understand the difference between a note issued by a hotel operator or local postmaster and one from the Planters Bank of the State of Georgia?

The problem for the Frenchman was that he did not have enough monetary knowledge to understand how bank notes and shinplasters actually worked, so he blindly received all of them equally. American paper money was more complicated than that. Though at first glance different bills might appear similar, some circulated at face value, others passed only with a discount, and a final group were accepted as currency only by their issuer. When someone finally explained the difference between a tavernkeeper's shinplaster and a depreciated bank note, the bewildered Frenchman asked, "Does the legislature of your country permit this system of swindling, this inhospitable custom, which falls so heavily on the traveler and stranger, to pass without censure or punishment?" If banks or merchants issued notes that only circulated with large discounts or failed to pass at all, how did anyone know which paper money was good and which was bad?

The Frenchman's companion offered a tongue-in-cheek response about the way Americans approached bank note transactions. He explained that "it is supposed that every body knows the value of every species of bank paper as well as the credit of every individual who issues notes, and to be ignorant of such things, is only to suffer those consequences which naturally spring from ignorance in every circumstance." The bank note and shinplaster system persisted, but only because everyone supposedly maintained a comprehensive knowledge of all bills and their producers. This was too much for the Frenchman to accept. He threw up his hands and exclaimed, "Le diable est aux vaches!" (There is the devil to pay!). More than just a satire of perilous market transactions, Paulding's story astutely identified several key aspects of early republic currency: the diversity of circulating paper money, the advantage bankers possessed when they issued notes, the ineffective role of government regulation, and especially the amount of monetary knowledge needed to keep up in the paper money market.

In this book, I investigate the state bank note system that thrived over the nation's first seventy-five years as well as the legal tender monetary culture that replaced it during the Civil War era. Early republic paper currency needs to be unpacked because it bears so little resemblance to the modern circulation of Federal Reserve notes—sometimes called greenbacks—that are printed by the United States government and legal tender for all transactions, public and private. Previous attempts to describe early republic paper currency usually devolve into institutional narratives of banking where the public's daily experiences play little part; cultural histories of capitalism often sidestep the minutiae of monetary policy. This study instead examines how professional bankers, brokers, and carpetbaggers constructed the bank note system to maximize personal gain and how all Americans materially, culturally, and politically utilized that system to navigate the market. The cash economy was not merely imposed on the population, it was negotiated by everyone who used early republic paper money.

Early republic Americans' lived experience with paper money forms the narrative and conceptual core of this book. We see how the general public accumulated and wielded the monetary information needed to navigate interpersonal bank note transactions that were influenced by both the quality of their money and their demographic standing in society. Essential to this experience was the material culture of paper money, including the seemingly endless collection of vignettes and symbols on the notes themselves. Noteholders did not, however, just accept bills as they were produced; they manipulated their cash by ripping it, burning it, and scribbling all over it.

While Part I and Part II provide a social and cultural history of paper money to detail Americans' daily encounters with bank notes, Part III of the book shows how such lived experiences affected the nation's politics and illuminates the process that created the federal legal tender system that we have today. It was a process that not only altered the nation's political economy but also profoundly changed the public's relationship with their currency and their need for financial knowledge. The book concludes with a brief epilogue that reflects on modern Americans' loss of this monetary intelligence and what that meant in the wake of the banking crisis of 2008 and the rise of cryptocurrencies like Bitcoin.

Paper money first appeared in British North America in 1690 when Puritan officials, including Cotton Mather, tried to prop up the Massachusetts economy and pay soldiers who had just returned from a failed invasion of Quebec. Over the next seventy-five years, this proved to be no isolated event. Supposedly curtailed by Parliament in the Currency Acts of 1751 and 1764, a lack of specie prevented paper money from disappearing entirely. Paper money became the dominant currency in the 1770s as Americans used unprecedented amounts to pay for their revolution and finance their new nation.

Residents of the new United States probably had more familiarity with paper money than anyone else in the Atlantic world, but their experiences were not necessarily positive. Under the Articles of Confederation, Congress's incapacity to collect direct taxes severely limited its ability to redeem past or future notes, diminishing public confidence in its paper promises. By April 1781, Continental notes had declined in value to near zero and were no longer in wide circulation. Even before the Revolutionary War ended, the phrase "not worth a continental" signified the delicate relationship between the aspiring nation's political fortunes and the reputation of its paper currency. Peacetime meant that state governments could use their tax authority to back their own currencies and better protect their face value, but state legislators confronted direct pressure from voters who demanded debt relief through an increased money supply. Creditors opposed such moves and argued that too much paper currency led to dangerous inflation that robbed them of their fair investment. In an era of combustible politics between debtors and creditors, a focal point of the disagreement became how to stabilize the value of paper money.

The problem was acute across New England. A newly elected pro-paper currency administration in Rhode Island issued huge quantities of state notes in 1786 that fell in value to eight cents on the dollar not long after they were printed. Moral questions arose about debts paid off with the bad money and even led Baptists to discipline members who tried to repay their creditors with paper bills rather than specie. The state government's response was to hold creditors liable if they did not accept paper money as legal tender and remove trial by jury or appeal for those violating the law. However, none of this propped up the bills. The state court finally overturned the regulations as an attack on due process in the landmark Trevett v. Weeden case.

The situation became even more heated when state governments chose not to print paper currency. Just days after the Trevett v. Weeden decision, hundreds of armed New Hampshire farmers confronted the state legislature to demand a new issue of paper notes. Governor John Patterson called out the militia to round up the farmers and the protest subsided. Neighboring Massachusetts badly miscalculated when it simultaneously raised taxes, pushed through tax collecting reform, and opted not to print any paper money of their own. An increased tax burden was hard enough for farmers in the western part of the commonwealth, but the defaults quickly piled up without a ready supply of currency to make payments. The lack of paper money was not the only cause of the uprising that followed, but regional monetary policies certainly helped inspire Shays' Rebellion.

It was in this context that representatives met at the Constitutional Convention in 1787. The proliferation of poor-quality state-issued bills and the public's demand for paper money preoccupied the framers. On the first day of the convention, Edmund Randolph noted that when the Articles of Confederation were drafted, "the havoc of paper money" had not been foreseen. Others expressed their alarm at democratically elected officials' willingness to satisfy constituents' currency demands even if it upset local credit markets. Noah Webster was worried that "a rage for paper money, bordering on madness" had occurred when the Maryland House of Delegates gave in to popular pressure on monetary policy. James Madison summed up these fears when he warned in the conclusion of Federalist #10 that "a rage for paper money" would likely infect factions within the society. Such concerns informed constitutional debate on a federally issued national currency, but what resulted in the final draft was silence on federal paper in lieu of the explicit power to "coin Money" and a formal declaration that "No State shall . . . coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a tender in Payment of Debts." Article 1, Section 10 removed the problem of state-issued notes to the applause of Federalists who deemed it one of the most vital parts of the Constitution, but the lack of direction on other types of paper money left a gaping hole in the new nation's currency supply.

Following the lead of Alexander Hamilton, the government chartered the First (1791-1811) and later Second (1816-1836) Bank of the United States (BUS) to print bank notes and oversee money markets, but it provided only a fraction of the nation's currency supply before the Civil War. At the height of its issues in the mid-1830s, the BUS only had $17 million in circulation at a time when the American economy was utilizing over $100 million in paper bills. So, where did the rest of the money come from? Between the 1790s and 1860s, the nation's paper currency derived largely from bank notes circulated by state-chartered or state-regulated institutions. When the Constitution was ratified only three banks existed in the United States, but the number rose swiftly: 24 by 1800, 181 by 1815, 320 by 1830, and 596 by 1845. More than 2,000 banks opened between 1782 and 1860 and on the eve of the Civil War almost 1,400 banks remained in operation across twenty-nine states, one territory, and the District of Columbia. This meant that before the National Currency Act of 1863 and National Bank Act of 1864 enforced uniform paper currency, Americans endured a chaotic monetary landscape made up of nearly ten thousand unique bank notes issued by hundreds of banks under numerous competing and sometimes contradictory state regulations. These legal bills did not even include the countless quasi-legal shinplasters issued by merchants, corporations, or municipal governments.

What complicated the early republic paper money system was that bank notes could be traded at par (face value) near the institution that issued them or at varied discounted rates based on their perceived market worth as they physically traveled away from their point of origin. Discounts also occurred if the public lost faith in the bank's ability to redeem them for specie. Legally, each institution was responsible for redeeming its bills when they were presented at the counter, but notes often traveled great distances away from home as they circulated. This meant that each bank note transaction ultimately hinged on an interpersonal discussion over the note's value, an often manipulative process separate from any haggling over the price of goods or services for sale. So Americans (or visitors like the little Frenchman) required financial information to properly use bank notes, but monetary knowledge was not equally distributed throughout the population. Some individuals possessed more than others. With so many moving parts in the circulation of antebellum currency, ample opportunity existed to honestly or dishonestly use such negotiations for one's own benefit.

Anyone who bought or sold in the market encountered bank notes and developed strategies for their complicated use, but for many people this process occurred exclusively during commercial transactions and not within the lobbies of financial institutions. Only a small percentage of antebellum Americans had savings accounts or took out commercial bank loans, so if an individual needed to obtain or exchange bank notes, every town had brokers or an informal money market where local and out-of-town bills could be bought and sold based on fluctuating rates. In order to best traverse these markets, the public attained and maintained monetary knowledge and tracked which banks and notes should be offered confidence and how they should be valued. Many early nineteenth-century Americans learned to recognize subtle differences in bank note vignettes, identify which banking institutions printed trustworthy bills, and conduct sophisticated paper money transactions even if they had never entered a bank.

Without legal tender bills or a guarantee that paper money would circulate at face value, each transaction required the employment of financial and monetary knowledge on a microlevel. Participation in the market economy created a need to understand how to buy and sell goods and services and how to wield the tools of the trade. The mechanics of the paper money system were not easy to master and whether someone was a middle-class clerk, poor white farmer, enslaved African American woman, or a government official, everyone had to learn the difference between a solid bank note that could trade at par, an uncurrent bill that could only be traded at a discount, and a questionably legal shinplaster issued by a local business. Individuals of all sorts engaged the early republic paper money system, accumulated the monetary knowledge necessary for bank note transactions, and exercised that information in market and political settings. Vigilance was necessary because money market inefficiencies and state banking-regulation inconsistencies meant that bank note quality varied widely. Using almost any out-of-town or out-of-state bank note meant the need to negotiate its purchasing power, rather than just assuming it would be granted face value.

Observers might assume that an economy with so much bad currency could not function, especially if they have heard of Gresham's Law. This economic principle, named after the sixteenth-century English financier Thomas Gresham, insists that bad money causes market participants to consciously pull good money out of the economy. So it might be expected that merchants hoarded specie and notes issued by stronger banks and left a marketplace filled exclusively with bills issued by defunct banks, shinplasters, and even counterfeit currency. But that is not what happened.

Authoritative economics scholarship on how honesty and information influenced used-car sales suggests how this jumble of good and bad money actually functioned on the ground, arguing that a used-car dealer has ample opportunity and incentive to misrepresent the quality of their product. In such transactions, the seller has more knowledge about the car's quality than the buyer, which creates an asymmetry of information. Without equal access to information, Gresham's Law does not hold, either for cars or for early republic bank notes. Moreover, in paper money transactions, neither buyer nor seller could always discern quality. So, even though both good (face value) and bad (uncurrent) bank notes flowed throughout the economy, one type did not necessarily replace the other. Even an uncurrent bill could be considered valuable if someone obtained it cheaply and passed it at a higher rate. Instead, persistent questions about the quality of the bills ensured that they could only transfer from party to party if buyers and sellers agreed to the same terms. Unfortunately, such bank note negotiations commonly employed asymmetrical information where confidence was earned through dishonesty or manipulation; money market engagement was a precarious endeavor.

Perhaps the easiest way to understand how this system worked in practice is to examine the experience of one small community and the various kinds of paper money that circulated locally. During the 1830s, Monroe, Michigan, was a frontier boomtown with a lack of good cash and ineffective banking regulations where residents clamored for whatever currency they could get into their hands. Monroe's persistent cash shortage meant that as residents chose how much value and confidence to grant each unique bill in front of them, they also attempted to forge a workable paper money system with enough overall purchasing power to fund their rapidly growing economy. They tried notes backed by gold, backed by land, or backed purely by faith that someone would take whatever they were handed, but the overall result was years of currency instability.

The experiences of Nathaniel (Nat) Saltonstall Howe and Richard Varnum—cousins from an influential family of politicians, bankers, and merchants who had moved to Monroe from Haverhill, Massachusetts—highlight the difficulty that Monroe residents faced as they sought to conduct business as part of a national marketplace. When they lived back east, they had enjoyed as much monetary stability as was possible in the bank note era under the guidance of the Suffolk Bank system. The Suffolk was a private arrangement, begun in 1824, which ensured that most bills from Boston-area banks circulated locally at face value. However, once they entered the chaotic world of Monroe, the boys had to contend with paper currency issued by questionable institutions which fluctuated wildly in value.

Nat and Richard concocted a scheme to invest family funds in Michigan, but the plan did not work out well. Their uncle Nathaniel Saltonstall back in Salem was "decidedly against" the idea because any money they would draw from Massachusetts would be converted into poor-quality local paper money. He explained to them that the "premium of 10 per cent for Eastern funds (Specie) should be no inducement, unless you had some ulterior plans to dispose of the Michigan Money immediately—such as the purchase of land." At all costs, he reiterated, avoid "any dealings in Michigan Bank paper, or Notes, payable in that currency" or "you will stand a good chance of loosing your Money." The advice was clear: if you want to keep your money, do not deal in Michigan bank notes. Saltonstall reasoned that even with a 10 percent premium granted eastern money as it moved west, the quality of Monroe bank notes was so poor that it was impossible to retain their value in local currency. Nat heard the advice and planned instead "to shave small Notes," but Uncle Nathaniel objected that it was a "very hazardous and troublesome business." Great profit could be made by those who shaved, or traded on the rapidly fluctuating exchange rates of questionable paper money, but it was risky and required a lot of local and national monetary knowledge.

Why did Nathaniel Saltonstall have such a low opinion of Monroe bank notes? At different points in the 1830s, Monroe had two chartered banks, the Bank of Monroe and the Bank of River Raisin, as well as the Merchants & Mechanics Bank, which operated without a formal charter and under a loose set of regulations passed as part of Michigan's 1837 free banking laws. Collectively, these banks issued hundreds of thousands of dollars in paper, but they struggled to convince anyone outside of town that the notes should be received at face value. It was not from a lack of effort. The artwork on village bank notes projected the image of a prosperous western boomtown with ample economic opportunities. Bank of Monroe five-dollar bills featured a majestic view of the town designed by famed engraver Peter Maverick, and its two-dollar notes included a vignette of Lewis Cass, the territorial governor of Michigan, as he negotiated the Treaty of Fort Meigs. The bank specifically chose the image because Cass personally embodied expansion in the upper Midwest and the treaty symbolized the seemingly orderly process by which native land was freed up for white settlement. Other Bank of Monroe bills linked the community to a more national sense of growth and unity; they juxtaposed local commercial imagery with a portrait of the town's namesake, former president James Monroe.

Such visual gestures obscured the fundamental inability of these banks to convince the public that their paper money was as good as gold; crusty New Englanders like Uncle Nathaniel suspected that the banks did not hold enough specie in reserve to meet their obligations. Monroe bank notes traded back east between 2 and 10 percent below par for much of the 1830s, but particular circumstances resulted in higher discounts or listings as "broken," "uncurrent," "stopped," or "no sale." The newspaper listings with these designations revealed something important about how such paper notes circulated even apart from their price fluctuations. The overall dearth of cash in the 1830s American economy meant that whether it had a discount of 10 percent or came from a broken institution, there was still a market for poor-quality paper money. Discerning customers might try to avoid notes from Michigan, but there was always someone willing to obtain a ready supply of bills for the right price. A public desperate for any cash to pay for goods and services continued to circulate bank notes even when there was general agreement that they were worth anything but face value.

Take, for example, the Bank of Monroe. Originally chartered in 1827, it closed in 1830 after a series of bad investments only to reemerge in 1835 to capitalize on a new land boom in town. However, bank note reporters—newspapers that publicized and helped set currency exchange rates—continued to list Monroe notes as "uncurrent" or 'broken" between 1830 and 1834. The fact that bills stayed on the bank note table for years after the institution ceased operations highlights something vital about how people actually used this money. Once they entered circulation, bank notes took on a life of their own apart from the banks that issued them. Even if newspaper price lists told readers that a bill was uncurrent, the cash-poor public might still infuse notes with some small value on their own terms and separate from the health or even the operational nature of the issuing institution.

The circulation of repurposed, uncurrent notes did not mean that public confidence in financial institutions was meaningless. The reopened Bank of Monroe came under fire in 1836 from the eastern press as part of a campaign against fraudulent western banks, which these newspapers labeled "wild cat" institutions. The term referred to banks that flooded the market with bad paper money and prevented note redemption by being located in areas so remote that only wildcats lived nearby. The New York Herald warned readers not to accept any notes from Michigan banks and celebrated what it saw as the imminent demise of the Bank of Monroe as a representative of the "insolent" wildcat banks, "which flood this city with paper rags [and] have reached the end of their reign." It also remarked that money brokers in Philadelphia no longer accepted any notes from the Bank of Monroe, even at a steep discount. Bank officials understood the need to retain public confidence, so they protested that they had more than enough specie to cover their bills in circulation and Monroe residents issued statements about the bank's solvency. The local outcry kept the bank afloat, but in early 1837 its board members sought outside investors. That is when the Mormon Church came knocking.

Joseph Smith and the Mormon Church had just heard that the Ohio assembly had turned down the charter application for their Kirtland Safety Society Bank and they scrambled to legalize bank notes they had already printed. They simultaneously reorganized the institution as a joint stock company, added a stamp over the word "BANK" on their notes to transform it into an "ANTI-BANKING Co.," and began to look for a legitimate partner. Smith, just ahead of an indictment for illegal banking, traveled with church leaders to Michigan to negotiate a formal relationship between the Kirtland and Monroe institutions. While this was seemingly a slapdash plan to cover up the fraught Ohio banking scheme, Joseph Smith indicated that the financial project had a providential design. Warren Parrish, a Kirtland Safety Society officer before he left the Mormon Church, explained that Smith "declared that the audible voice of God, instructed him to establish a Banking Anti-Banking institution, which like Aaron's rod should swallow up all other Banks (the Bank of Monroe excepted,) and grow and flourish and spread from the rivers to the ends of the earth." In this statement, the Bank of Monroe stood alongside the Mormon's Kirtland bank as a righteous institution singled out for triumph as all others failed. In reality, the Mormons probably selected their partner based on church leader N. K. Whitney's close ties with Henry Smith, the president of the Bank of Monroe, with whom he had served during the War of 1812. By the end of February 1837, the Mormon Church owned a controlling interest in the Bank of Monroe; a church member, Oliver Cowdery, was a bank director and vice president who personally pledged his reputation by signing their bank notes. No other church members served as bank officers, but Cowdery, who was Joseph Smith's scribe during the translation of the Book of Mormon, represented an important link.

How was this convoluted story of money and Mormons relevant to Monroe residents like Nat Saltonstall Howe and Richard Varnum? Participation in the bank note economy required constant vigilance about the quality of bills in circulation, so any development that might affect the standing of a local institution needed to be watched carefully. If the Bank of Monroe hoped to solve its public confidence problems through a deal with the Mormon Church, it did not pick the right partner. Kirtland banking anti-banking notes traded at 12.5 percent off face value and even the benign pastoral images on their one-dollar bills served as fodder for anti-Mormon jokes. One newspaper mocked that "Joe Smith's Kirtland Bank Notes have the appropriate vignette of a sheperd [sic] shearing his flock." When the Bank of Monroe president Henry Smith resigned a month after the merger, the anti-Mormon Cleveland Daily Gazette launched a new wave of doubt about the stability of the institution and claimed that it had $122,000 in circulation with only $1,200 in specie in its vaults.

The decision by the bank to partner with the Mormon Church also raised red flags for banking regulators. The Michigan Bank Commission officially questioned "the character of the Bank of Monroe" and inquired about repealing its charter. Under public pressure, the bank suspended redemption and temporarily closed its doors. The Painesville Telegraph gleefully announced that the "Monroe Mormon Bank closed its doors against all demands for specie, after having for its presiding officer about three weeks the wonderful and noted Oliver Cowdery, one of the fathers and translators of the Golden Bible." Even these religious, financial, and regulatory controversies did not end the circulation of Bank of Monroe notes. The thirst for cash of any quality in the frontier community meant that the same Monroe Times issue that disclosed the bank's temporary suspension of payment also included an announcement from a local businessman, Jefferson S. Bond, that he would accept their bills at par. Such actions allowed the Bank of Monroe to limp along into 1838 before it fully suspended operations and lost its charter in 1842.

Since aspiring Monroe merchants like Richard Varnum could not place their confidence in poorly capitalized local banks, they sought other means to create stable currency. Richard planned to set up his own trading firm and reached out to relatives for advice. His uncle, Representative Leverett Saltonstall of Massachusetts, was wary of the plan for a new store in Monroe given the "wretched currency as Michigan is suited with." Fisher Howe, a New York merchant in the family, also suggested that Varnum postpone his plans because of the "miserable conditions of your monied institutions in Michigan" which "had the influence to destroy all confidence in western merchants." Just as in Uncle Nathaniel's letter quoted above, Fisher suggested that Richard invest in land instead of goods because "if you get Michigan funds, they are likely to be very much under par for a long time to come." Even as more conservative eastern relatives warned of the quality of Michigan bank notes, they seemed open to dealing in Michigan's ample real estate.

Local, state, and federal officials agreed with this analysis and made numerous attempts to transform Monroe's land sales into a strong paper currency. The second federal land office in Michigan opened in Monroe in 1823 and, by 1835, it had sold more land and collected more money than any office in the Northwest. Attempts to convert this land into paper value took two forms in these years: town-issued paper shinplasters and military land scrip. After 1827, the village of Monroe printed municipal bills in denominations that represented money received by the town for lots of land "in the new Plat of Village Lots & Farms which is to be called the City of Monroe." Notes circulated as worth one lot, or $5, and a third of a lot, or $1.67. Intended to physically resemble bank notes, the shinplasters featured vignettes by the New York engravers Capewell & Kimmel of white women sitting in chariots and on haystacks as well as a Native American woman, evoking the tamed beauty of the West. Supposedly issued by the village as receipts for land sales, the bills represented a conscious attempt to produce bank note-like paper that functioned as a locally circulating currency. In a community with little specie and only one questionable bank in the late 1820s and early 1830s, town officials responded by using the value of recently sold land to create a usable and familiar paper medium. Monroe's land bills served as a local currency until around 1835, when more banks opened in town in response to a land boom that prompted a wide variety of settlers and speculators to visit the federal land office.

Land-starved new arrivals to Monroe made use of a wide variety of currency during the height of the boom; in addition to specie, bank notes, and municipal shinplasters, another type of paper money floating around Monroe was military land scrip. Issued by the federal government and the Commonwealth of Virginia to veterans of conflicts from the Revolutionary War to the War of 1812, military land scrip enabled the purchase of specific tracts of land reserved for certificate holders. Initially limited to use in parts of Ohio, Indiana, and Illinois, an 1832 federal law made military scrip receivable at any land office in the nation. Land sales rose quickly in the years that followed before they slowed to a trickle in the aftermath of the Panic of 1837. Military land scrip never accounted for a majority of payments received in Monroe, but tens of thousands of dollars in scrip moved through the town's federal land office in a few short years.

Military land scrip became more important in Monroe in July 1836 after the Treasury Department's announcement of the Specie Circular (or Specie Clause), which declared that, with few exceptions, federal lands could only be purchased with specie. Though this action seemed drastic, the effect of the circular was supposedly tempered by the Distribution Act, passed just weeks earlier, which moved surplus government specie into state-chartered banks around the nation. While the deposit institutions, like the Bank of River Raisin in Monroe, were supposed to hold the federal funds until the government needed them, they acted as if their own capital holdings had radically expanded and used them for long-term loans or other projects that expanded the region's credit. Both the Specie Circular and the Distribution Act played significant roles in Monroe, with a federal land office that took in over $850,000 in the mid-1830s and the Bank of River Raisin which received $80,000 in federal deposits. The circular called for new land purchases solely in specie, with two exceptions: military land scrip and, until December 15, 1836, bank notes that could be used by "bona fide" settlers who purchased under 320 acres.

A separate act preventing the federal government from collecting any paper money that originated from banks which issued small-denomination notes under five dollars complicated this rule. Given that both Monroe banks in 1836 issued denominations between one and five dollars and Michigan did not allow out-of-state notes under five dollars at all, this act drastically limited the ability of settlers to use any bank notes in the fall of 1836. With these laws in effect, all that remained for purchasing federal land was specie and military land scrip. The cascading set of regulations that governed the currency supply in 1830s Monroe was endlessly complicated. However, just as residents engaged in the bank note economy needed to monitor banking activities to keep abreast of changes to the money market, they also had to be aware of legal changes that governed what types of paper money would and would not circulate.

Like most paper currency, land scrip was not tied to its initial recipient, so if the veteran holder had no desire to move west or speculate, he could sell his bills at discounted rates in the nation's money markets. Newspapers like Thompson's Bank Note Reporter listed the purchase rates for land scrip alongside bank note values, so potential customers could monitor price changes and make educated decisions about their bills. Discount rates for land scrip, like bank notes, varied greatly based on national monetary and land policies. Land scrip sometimes traded at par or alternatively at 30 or 40 percent off current land prices. When the Specie Circular curtailed demand for other types of paper money in Monroe, the market for military land scrip heated up. Brokers and speculators placed ads to purchase scrip for the highest cash price. However, the mid-1830s boom did not last and, in the wake of the financial Panic of 1837, property values tumbled.

The collapse of property values was particularly troubling for residents of Monroe because, earlier that year, state officials had passed the controversial Michigan free banking law of 1837. This first-in-the-nation legislation allowed anyone to establish a bank without a charter provided they had raised $50,000 (including 30 percent in specie) and followed certain guidelines. Almost overnight, nine state banks became forty, and their new bank notes flooded the nation. Monroe's free bank, the short-lived Merchants & Mechanics Bank, raised most of its supposed $150,000 in capital from mortgage values. It was yet another attempt to turn land into a viable currency and even their bank notes included the text: "Real Estate Security."

One editorial stated that the "confidence of the community in banking issues" was undercut by the new system because banks drew their capital from "artificial contrivances" rather than solid funds. Worse yet, were stories about scams perpetrated to trick state specie audits, such as when barrels of nails with a layer of silver on top were presented to auditors as a large quantity of hard money or when a handful of institutions shared a chest of coins and ferried them from bank to bank just in time for an inspection. The Mechanics & Merchants Bank closed soon after opening, just like more than forty other free banks, and the public was stuck with over $9,000 in worthless bills. Like other poorly capitalized Monroe banks, their tiny specie reserves could not convince anyone inside or outside of Michigan to trust their notes at face value.

During the heady days of the 1830s, Monroe's residents were caught between their need to run a local economy consistently short of cash and their failure to build banks that supplied a viable currency. Land-backed and small-scale specie-backed paper money did not always satisfy the demand, so sometimes business owners printed their own shinplasters, backed merely by the community's confidence that they should circulate. The experience of William Wells Brown, who arrived in Monroe in 1835 a year after he had escaped from slavery in Kentucky, is telling. In his 1852 European travel narrative, Three Years in Europe; or, Places I Have Seen and People I Have Met, Brown, against the backdrop of a visit to the majestic Bank of England in London, described his elaborate scheme to issue shinplasters and manipulate discounts on wildcat bills from his little barbershop in Monroe. In other words, he simultaneously shaved faces as he shaved bank notes. Through his insightful portrait of antebellum economics, Brown explained that, within the context of the dysfunctional Monroe money market, even an African American barber could find customers to instill value into his shinplasters with their confidence. Literary scholars and historians have debated how well Brown's real life matched up to his narrative; most have characterized his Monroe story as a tale that crossed the line between what was real and what was counterfeit, or as one study described it, "shinplaster fiction." Brown may have embellished his writing, but his specific knowledge of Michigan's monetary system grounded the anecdote.

William Wells Brown wrote that when he arrived in Monroe in the autumn of 1835, the lack of small change was particularly acute, providing him with an opportunity to boldly create paper money from nothing but the confidence of the community. Michigan prohibited bank notes under one dollar and the specie cash infusion from the Distribution Act and Specie Clause was over a year away. So Brown's story took place during a discrete moment when the specific regulatory regime had produced a crisis in the quantity, not just the quality, of money. Even his definition of shinplasters as notes that could be issued in any amount "from 6 to 75 cents in value" situated the small-denomination bills within Michigan's actual currency laws. This precise explanation clarified why members of the Monroe community would feel comfortable, or even eager, to take notes from a newly arrived, formerly enslaved man and why local authorities and bankers would not have been interested in preventing Brown's activities. Shinplasters capped at seventy-five cents did not compete with paper money legally in circulation and buttressed the supply of small change in the town. Brown even referenced the lack of specie when he concluded his narrative and brought the reader back to the clerks at the Bank of England "shoveling out the yellow coin upon the counters." William Wells Brown's final observation served to clearly contrast his shinplaster operation in Monroe, backed by nothing tangible, and the grand institution in London built on solid gold.

The experiences of Nathaniel Saltonstall Howe, Richard Varnum, and William Wells Brown show that monetary instability was the norm rather than the exception in 1830s Monroe. By 1840 the paper money shortage was worse than ever as fallout from the Panic of 1837 left the controversial River Raisin & Lake Erie Rail Road Company as the only institution in town that still printed notes. The common council responded with a new round of municipal shinplasters issued in small denominations by the "Treasurer of the City of Monroe" that were "Receivable for Taxes & all city dues." Ostensibly a temporary move by the town to help with the currency shortage, the bills perfectly encapsulated the problem of paper money in Monroe. The town printed the notes on the back of sheets of useless one-dollar bills from the defunct Merchants & Mechanics Bank. In the end, the value in these bank notes turned out to be from their paper, not their money.

Monroe's paper money market may have been a little more chaotic than other small towns, but the same variety of bank notes and shinplasters that confounded its residents on a daily basis circulated across the country. Importantly, the chaos did not alienate residents from monetary matters as much as it forced them to actively engage the currency available to them. This did not mean an equality of outcomes; it meant that merchants, religious prophets, and the formerly enslaved all had to accumulate financial knowledge and literally come to terms with their paper options to navigate the economic landscape. Not every early republic paper money transaction required an encyclopedic knowledge of bank note quality and regulatory guidelines, but the public had to be prepared because any transaction might.

While it was a necessity for all Americans to navigate complicated paper money transactions in the early republic, most had little control over the broader contours of the system. The public clamored for a substantial and stable currency, but unless they took William Wells Brown's initiative to issue their own bills, they relied on professional bankers to generate the notes that accounted for most of the nation's money supply. This was a risky practice. Bank officials conducted business along a spectrum of behavior from those who tried to prudently grow their deposits without too much risk to those who exploited the vagaries of the paper money system to turn a quick profit. Chapter 1 picks up on these themes to fully explore how banks produced notes and utilized a network of money brokers and carpetbaggers to circulate them profitably and efficiently throughout the nation.