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Lowest Red Seal Treasury Serial No. Discovered
 | By Peter Huntoon, Bank Note Reporter
February 11, 2008 |
The No. A251-1-A $5 Red Seal on The First National Bank of Paintsville, Ky., shown here is a remarkable and historically significant find. It was ferreted out by Kentucky collector Richard Deavers.
Notice that it bears Treasury sheet serial A251, the as-yet lowest recorded Red Seal Treasury serial number from any sheet combination. It is from the second printing of $5 Red Seals delivered to the Comptroller's office, a delivery that arrived on April 21, 1902, consisting of bank sheet serials 1 through 150. The first 100 of them were sent to the bank that same day.
The First National Bank of Litchfield, Minn., charter 6118, received the first printing of 5-5-5-5 Red Seals, delivered to the Comptroller on April 18. It was just a fluke that the $5 paperwork for the Litchfield bank preceded that of Paintsville.
The Paintsville note represents a couple of important firsts. Obviously, it is from the first sheet of $5 Red Seals printed for, and issued in, Kentucky, a fact that lofts it to stellar status among the Kentucky collecting community.
The First National Bank of Paintsville was also the first new bank in the country to issue Red Seals. The line between the Series of 1882 and 1902 was drawn between charters 6099 and 6100. The First National Bank of Volga, S.D., was the last bank to get Series of 1882 notes.
There are some odd things about the bank and this Red Seal note that require comment. Notice that the plate date on it is Dec. 11, 1901. This is the date of organization when the corporate life of the bank began. The bankers received their charter on Jan. 20, 1902.
The first Series of 1902 notes printed for any bank in the country were 10-10-10-20s, also Paintsville bank. These were made in March 1902, sent to the Comptroller on March 17, and shipped out to the bank that same day.
The 1902 act wasn't even passed until April 12. How could shipments of Series of 1902 Red Seals be printed and delivered to a bank before that date?
The fact is, the sole purpose of the Act of April 12, 1902, was to provide for a second 20-year extension of corporate life for existing old banks; specifically, banks organized way back in 1863 during the dawn of the National Bank Note era. The 1902 act specifically required that notes of a distinctive design be issued to those old banks once they received their second extension.
Why was The First National Bank of Paintsville - a new bank - even getting such notes?
The answer to all of this lies in the fact that William Ridgely, the Comptroller of the Currency at the time, knew the legislation was coming, and also that it would require a new series for the extending banks. Consequently, he authorized the Series of 1902, and had the Bureau of Engraving and Printing prepare appropriate dies well in advance.
He also did exactly what Comptroller John Knox had done 20 years earlier during the startup of the Series of 1882. Series 1882 was instituted to provide distinctive notes for banks undergoing their first extension. However, Knox decided to begin phasing out the Series of 1875, so he provided new banks with notes from the new 1882 series. Thus, the Series of 1875 would be gone in 20 years.
Ridgely did exactly the same thing in 1902. He began issuing Series 1902 notes to new banks instead of Series 1882. He also began issuing them to banks extending for the first time. Consequently, the Series of 1882 would vanish in 1922.
Ironically, Ridgely began to order the new series for new banks before the Act of 1902 was even passed! The result was that the Paintsville bank, with sparkling new charter 6100, received the very first printing of 10-10-10-20 Red Seals, and second printing of 5-5-5-5s.
The first bank to receive a second extension was The First National Bank of Findley, Ohio, charter 36. That extension was granted on July 14, 1902, three months after passage of the 1902 act, and almost four months after the Paintsville bank got its notes! By then the Series of 1902 Red Seals were old news!
Bank Officers
This note bears the pen signatures of Dan Davis, president, and John E. Buckingham, cashier. Davis was born in Kentucky in 1844 and died in Paintsville in 1919. He was a prominent banker, farmer and coal entrepreneur. During his lifetime, he held vast land holdings in Johnson County.
Buckingham became one of the most prominent bankers and businessmen in the history of Kentucky. He was born in Paintsville on Nov. 9, 1874, was admitted to the bar in 1895, and served as Paintsville postmaster in 1897-1901. He also was editor of the local newspaper.
He helped organize The Paintsville National Bank in 1901, and served as cashier until 1917 when he became president. He later organized and was president of the First National Bank of Jenkins, First National Bank of Fleming and the Bank of Wayland. He effected the consolidation of the Merchants Bank and Trust Company and Ashland National Bank, and served as president of Ashland National Bank in the 1920s.
In 1912, he was elected president of the Kentucky Bankers Association, and during the first administration of Gov. A.B. (Happy) Chandler 1935-1939, he served as Kentucky state treasurer. In 1957, Buckingham was awarded the Kentucky Governor's Medallion for distinguished public and private service to the state. He died in Frankfort Aug. 26, 1959, and is buried in the Ashland Cemetery.
Minimally Capitalized Banks
The Painstville bank owed its origin to the Republican inspired Gold Standard Act of March 14, 1900, famous for placing the nation firmly on a gold standard. This act was the darling of Eastern hard money interests who benefited from a constrained money supply and high interest rates.
For decades previously, populist Western and Southern Democrats had been rallying for unlimited silver coinage and what they called free banking. The tenant of the free banking movement was the perception that money was in short supply in the developing regions, so growth and prosperity were artificially constrained. The populists - monetary inflationists - sought to allow the unrestricted organization of banks which they felt would infuse their towns with cash. This, in turn, would facilitate local and regional economic development.
Unrestricted mintage of western silver into coin was seen as a way to provide the West with cheap money, so that everyone could have a little in their pockets, allowing all to gain a toehold on prosperity.
Passage of the Gold Standard Act is attributed to Republican William McKinley's popularity following the successful execution of the Spanish-American War, which carried with it a treaty ceding the Philippines, Cuba, Puerto Rico and Guam to our jurisdiction. The war had brought to the fore congressional debate over the wisdom of the United States assuming a role as an imperial power, forcing into the shadows the inflationists' agenda for unlimited silver coinage and issuance of Legal Tender Notes to cover costs of the war.
The act contained one major populist sop to the inflationists in order to bring some of them on board. It provided for the organization of national banks with capitals of $25,000 in towns with fewer than 3,000 people, half the capitalization previously allowed.
Democratic-Populist opposition was immediate. Five days after passage of the Gold Standard act, William Jennings Bryan, a Presidential candidate, called for unlimited coinage of silver, and substitution of greenbacks for National Bank Notes, at the Nebraska state Democratic-Populist convention. Although imperialism was an early campaign issue in the McKinley-Bryan contest, the election was decided on the merits of the gold standard and opposition to free silver coinage. Bryan ran at a disadvantage because the times were prosperous thanks to major federal spending on the war effort, rising agricultural prices, and net movement of gold to the Treasury from a favorable foreign trade balance.
However, national banks capitalized at $25,000 in small towns were now allowed, a provision that was one of the single worst in the national banking law that would wreak horrors upon emerging rural middle classes 20 years later.
Many hundreds of little national banks were organized in rural towns. They are easy to spot because the law required that they maintain circulations of at least 25 percent of their capitalization. This works out to be $25,000 x 0.25 = $6,250.
These $6,250 circulation banks are among the favorites of collectors because notes from them generally are the rarest, their rarity compounded by the fact that most such banks had short lives. One of the great benefits of Louis Van Belkum's 1968 brown book was the fact that many such banks could be found easily by scanning the circulation figures listed. If the bankers never raised their capitalization, their bank made Van Belkum's with a listing of $6,250. Astute collectors carried his book around and bought any note they could find from such banks!
The Paintsville bank was just such a bank. It wasn't the first, a couple of hundred had already been chartered before it, but it was an early example. The first, according the April 1900 Banker's Magazine, was The First National Bank of Ridgefield, Conn., charter 5309. That bank began by issuing Series of 1882 Brown Backs.
Fortunately, unlike most of its brethren, the Paintsville bank went on to prosper through good management. Within two years, its officers quadrupled their capitalization to $100,000. The bank became a pillar in its community.
In contrast, most such banks remained undercapitalized, and were marginally profitable business ventures. They often attracted less-than-talented managements because of their poor prospects. As long as times were good, and commodity prices were stable or rising, they did OK. Such conditions prevailed through World War I as the United States became the bread basket for Europe. The rural West and South were enjoying good times, and the farmers there were beginning to claw their way into the middle class.
However, agricultural prices cratered once the war ended. Europe was largely was left to its own devices regarding recovery, with insufficient money to import American farm products. The result in the rural West and South was devastating. Undercapitalized banks in small communities were wiped out by the hundreds as farmers and merchants defaulted on loans predicated on high commodity prices. In this era before federal deposit insurance, the depositors in the banks were wiped out, too.
No single factor caused more harm to the emerging middle class farmers in the Western and Southern farm belts than did this. Those now impoverished people were forced to leave their lands and join the huge migration to factory jobs in the budding industrial cities of the Upper Midwest, or to chase the rainbow in California.
It would take the massive federal spending of World War II to pull many of these people out of the hole some 10 years later. In the meantime, they lost their land and were socially dislocated.
John Hickman used to tout the romance of hometown banking as he sold the concept of National Bank Note collecting to an eager audience of numismatists in the 1960s and 1970s. His refrain was a bank in every small town in Iowa circulating colorful notes signed by prominent local personages that evoked local pride. He loved to call this Main Street banking, a notion that many older collectors remember well, and which still resonates and warms their hearts today.
Unfortunately, the dark underbelly of that vision was the devastating agricultural depression of the early 1920s, wherein large swaths of our rural population were seriously impoverished as those little banks failed, taking all those local savings accounts with them.
A significant share of the blame rested squarely at the feet of the ill-conceived provision of the 1900 Gold Standard Act, which allowed for the organization of huge numbers of undercapitalized national banks.
Yeah, when you discover a great note like Deavers' Paintsville, there is a lot more behind the glitter of some ink artfully splashed across a piece of paper! At least in this case, the story came out well.
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