The Indiana Legislature met in 1852, intent on replacing the State
Bank of Indiana, which had maintained a virtual banking monopoly in
the state for nearly twenty years, with so-called Free Banks that
would be privately owned and founded by anyone who had the means to
open such an institution.
In addition, a group of investors worked to secure a charter for
the Bank of the State of Indiana to replace the old partially
state-owned institution. Although the name would suggest otherwise,
the Bank of the State of Indiana was also to be privately owned.
The Free Banks issued notes that were secured by state bonds that
were deposited with the state auditor who provided oversight to the
banks. Circulation could be issued on a dollar-for-dollar basis
against these bonds. Specie, equal to 12 percent of the circulation,
was to be kept on hand.
Bonds purchased at perhaps 75 cents on the dollar could serve as
backing for $1 worth of notes.
The bankers collected the interest on their bonds that were
deposited with the state auditor. The circulation was loaned out at interest.
Between 1852 and 1854, the number of banks skyrocketed in the state.
With a break in the financial markets in 1854 resulting from the
Crimean War, the demand for coin went up and banks were faced with
redemption demands for which they were ill suited. As a result a large
number of Free Banks in Indiana failed as specie calls and the
collapse in the prices of the underlying bonds took their toll.
During this time period the state auditor (the state official
responsible for oversight of the Free Banks) reused the printing
plates of failed or closed banks by having the engravers modify them.
The auditor’s 1857 plate register, for example, reports that the
plate for the Traders Bank of Terre Haute was changed to Indianapolis
and then again to Nashville, with the last plate residing in the
auditor’s office. But other times, for some reason, a plate wasn’t redone.
The Northwestern Bank of Bloomfield and the Great Western Bank of
Terre Haute were both founded in 1854 and perished the following year.
The illustrated notes were obviously printed from the same master
plate, but apparently a new plate was produced for one of the two
banks, because the auditor’s plate register reports that the 5-5-5-10
plate for the Terre Haute bank was in his office while the Bloomfield
bank’s 5-5-5-10 plate was in the engraver’s office on the East Coast.
The mystery is “Why?”
Wendell Wolka has been a paper money collector and educator for
more than 40 years. If you have questions or suggestions, you can
reach him by e-mail at firstname.lastname@example.org, or by mail at
Box 1211, Greenwood, IN 46142. Send a self-addressed, stamped envelope
if a written response is required.