Phony as a $3 Bill

“Phony as a $3 bill.” Today, this phrase conjures up images of smarmy swindlers selling counterfeit merchandise. So I was surprised to learn that legitimate $3 bills, like the one seen here, once existed. So did bills in a variety of denominations that might seem strange to us today, from 1/2¢ on up.

In the early 1800s, the newly formed United States made several attempts to nationalize banking. Secretary of the Treasury Alexander Hamilton convinced Congress to create the First Bank of the United States in 1791. Its charter expired in 1811. To control inflation and pay debt from the War of 1812, Congress established the Second Bank of the United States in 1816. President Andrew Jackson vetoed its recharter in 1836, letting loose a banking free-for-all.

From 1836 to 1866, no Federal laws regulated banks. Each state chartered its own financial institutions, and each bank issued its own currency. According to one source, over 30,000 different bank notes were created during this 30-year time period. Not always backed by gold or silver and often easy to counterfeit, many of this wide variety of bills could prove worthless—or, as we say might today, phony as a $3 bill.

The U.S. government reestablished control of the banking system to finance the Civil War. In 1861, it began issuing bank notes. Then the National Bank Act of 1863 created a national banking system and uniform national currency, printed by private companies under contract to the U.S. government.  In 1865, the government levied a 10 percent tax on state bank notes, rendering them unprofitable for the banks to issue, thus ending what is now known as the free banking era. Since 1877, the U.S. Department of the Treasury has been responsible for printing all U.S. currency, and it hasn’t printed any $3 bills. But you can see this one at the National Heritage Museum, on view in “Curators’ Choice: Favorites from the Collection.”
 
Reference: Gene Hessler, The Comprehensive Catalog of U.S. Paper Money, 4/e (Port Clinton, OH: BNR Press), 1983.

Photo: Bank Note, 1800–1860. The Merchants and Planters Bank, Georgia; Bald, Cousland and Co., Philadelphia; Baldwin, Bald and Cousland, New York. Gift of Clinton E. Brooks, 78.17.1.