Paper Money

1864 $500 interest-bearing note makes rare market appearance

A unique piece with numismatic and historic importance, and with an estimated selling price of up to half a million dollars, will be offered for the first time in 44 years when Stack’s Bowers Galleries puts it on the auction block during the Whitman Winter Expo held Nov. 4 to 6 in Baltimore. 

The $500 interest-bearing note, (Friedberg 212b) was unknown until the mid-1960s. The first five editions of Paper Money of the United States listed it as “Probably Issued – Unknown.” Its discovery was announced and first illustrated in the sixth edition in 1968. 

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Its first owner, according to the Gengerke Census (a list of notes compiled by William Gengerke), was William A. (“Mr. Phil”) Philpott, who provided the photograph for Paper Money of the United States. From there the note passed to Washington, D.C., dealer Phil Lampkin. It was last reported in the hands of San Antonio’s Bob Medlar who offered it for sale at $4,500 in the December 1971 issue of The Numismatist. 

No others are known, either in private or government possession. This note, which bore interest at the rate of 7.3 percent per year for three years, was issued with the date Aug. 15, 1864, under the authority of the Act of June 30, 1864. Both dates appear on the face of the note. 

The design features Alexander Hamilton at top center, a mortar firing at lower left, and a standing figure of Washington at the lower right. It bears the signatures of S.B. Colby and Francis E. Spinner. The Treasury serial numbers are printed in red. Amid the ornate green lathe-work on the reverse is the obligation, reading: “Convertible at the Option of the holder into bonds redeemable at the pleasure of the Government at any time after five years and payable twenty years from August 15, 1867 with interest at Six per cent per annum payable annually in COIN.”

The piece is graded by Paper Money Guaranty “Very Fine 25 Net. Restorations, Ink Lightened.” The light restorations, according to the catalog description, are primarily at the top and left margin only and appear to be tears that have some well-executed repair work. The “Ink Lightened” comment is probably the result of the payee’s name being removed by a light washing at some undetermined time in the past.

Interest-bearing notes form the rarest category of United States paper currency issues and owe their existence, as much early federal paper money does, to the financial emergencies created by the Civil War. 

The government released three issues, of one, two, and three years based on the length of time for which interest was calculated. All three-year notes, such as this one, were made payable to order with space above a line on the obverse for the insertion of a name. They were also transferable. 

They are also unique among U.S. paper currency in being issued with five coupons attached, each of which could be redeemed at progressive six-month intervals. The sixth and final payment (and redemption) could be made only with the surrender of the note, accounting for the extreme rarity of all interest-bearing notes. 

The example coming up for sale owes its existence today to the fact that its owner chose to forego, for whatever reason, the final interest payment and the $500 principle ($500 of 1867 dollars would be worth $8,064.52 in 2015). 

It is also the only unredeemed and uncanceled example in existence. 

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