In frontier communities like Illinois in the early 1800s, banks were regarded as agents for the painless provision of capital. In these pioneer communities, capital of all kinds was scarce, because there was seldom very much surplus capital. Banks were looked upon as a mechanism for increasing the supply.
Checks were almost unknown, outside of eastern cities, and few people except the wealthier merchants were familiar with bank accounts. If banks were to supply the community with either currency or capital funds, it had to be in the form of bank notes.
The Bank of Illinois at Shawneetown, chartered December 26, 1816, was the first bank established in Illinois. It was the first bank to issue bank notes. It issued between 1818-1823 bank notes in $1, $2, $3, $5, $10, and $20 denominations. In the period 1834 through 1842 $1, $2, $3, $5, $10, $20, $50, and $100 denominations were issued. All of these bank notes are rare, but those issued in 1818-1823 are really rare, and I have only seen pictures of them.
The next bank established in Illinois was The Bank of Edwardsville, chartered January 9, 1818. It issued 25¢, 50¢, $1, $2, $3, $5, $10, and $20 bank notes. These are very, very rare and, again, I have only seen pictures of them. They were issued in 1818 to 1823.
When The Bank of Illinois at Shawneetown and The Bank of Edwardsville suspended operation, they redeemed and destroyed the bank notes presented for payment, especially the notes issued prior to 1823.
At the same time the bank charter for The Bank of Edwardsville was issued, charters for banks to be located at Cairo and Kaskaskia were also approved. The investors at Cairo and Kaskaskia were not able to raise enough money to open either bank. A group of Englishmen bought the charter for the Bank of Cairo and opened it at Kaskaskia. This Bank of Cairo at Kaskaskia was operated soundly, and for several years furnished about 70% of all the small bank notes used in Southern Illinois. It issued denominations of $1, $2, $3, $5, and $10 notes in 1839, 1840, and 1841.
In the period 1821 – 1865, banks issuing bank notes were opened all over the state of Illinois as well as bank notes being issued by the State of Illinois to fund everything from the Illinois and Michigan Canal to internal improvements. Also a State Bank of Illinois was opened with five branches around the state, including Shawneetown and Vandalia, which was the State capitol at that time.
The banks and the locations of those issuing bank notes during the period of 1821-1865 throughout all of Illinois were so numerous, that in this article I will concentrate only on those in White, Hamilton, Saline, and Gallatin Counties.
Those banks issuing bank notes in White County were: Carmi – Peoples Bank 1853-1860, $1, $ 2, $5; Bank of Carmi 1858- 1861, $1, $2, $5, $10; Merchants Bank 1850-1861, $1, $2, $3, $5, $10. Grayville – Grayville Bank 1854-1861, $1, $2, $5, $10; and Southern Bank of Illinois, 1857, $1, $2, $5, $10
Those banks issuing bank notes in McLeansboro, Hamilton County were: Hamilton County Bank, 1855-1859, $1, $2, $5, $10; E. I. Tinkham & Co. Bank 1855-1862, $1, $2, $3, $5, $10, $20; Bank of the Republic, 1856-1861, $1, $2, $3, $5, $10, Hampden Bank, 1860-1861, $1, $2, $3, $5, $10; and Producers Bank 1860-1865, $1, $2, $5.
In Saline County those banks issuing bank notes were: Bolton (now Stonefort) – Bank of Southern Illinois, 1855-1861, $1, $2, $3, $5, $10. Galatia – Bank of Galatea (sic), 1855-1861, $5, $10; Bank of Indemnity, 1855, $5, $10. Harrisburg – Lake Michigan Bank, 1858-1861, $5, $10. Raleigh – American Exchange Bank, 1856-1861, $5, $10; Bank of Raleigh, 1856-1861, $5, $10; International Bank, 1856-1861, $5, $10.
In Gallatin County those banks issuing bank notes were: New Haven – Bank of Illinois, 1856-1860, $1, $2, $3, $5, $10; Commercial Bank, 1859-1861, $1, $2, $3, $5; Illinois State Bank, 1859-1862, $5, $10. New Market – New Market Bank, 1858-1862, $5, $10; Bank of the Metropolis, 1858-1863, $5, $10. Shawneetown – Bank of Illinois (listed earlier); State Bank of Illinois, 1854-1861, $1, $2, $3, $5, $10, $20. Equality – Illinois State Security Bank, 1859-1861, $10; The National Bank, 1855-1861, $1, $3, $5, $10.
People had lost confidence in the value of the local and state bank, notes since many were not backed up by deposits of silver or gold. These bank notes started being worth less than face value. Articles were printed in newspapers stating the value of these bank notes like stock values are now listed.
The federal government had stopped printing paper currency in 1792, but started again in 1861 at the beginning of the Civil War. The issuing of greenbacks and later national currency bank notes soon started to replace local currency. In 1866, a federal tax on state bank notes drove most of this currency out of circulation.
According to a State of Illinois Auditors report in 1869, only a face value of $531 worth of bank notes were outstanding in the state that had not been redeemed. This small amount of unredeemed notes accounts for the rarity of Illinois bank notes today. There are many bank notes, of which only one or two specimens are known to be held in collections. Most of the notes which have been preserved are cancelled notes, which somehow were not destroyed at the time.
Several publications have been printed listing records of bank notes that were issued as well as pictures of some from collections.
In my article “Shawneetown Bankers Turn Down Chicago Loan Requests” I mentioned that Chicago was just starting to be settled when the loan requests were made in 1825 and 1838. I found that in Perrin’s History of Illinois by J. Nick Perrin published in 1906, that Beck’s Gazetteer of Illinois and Missouri listed Chicago as being a village with a population of sixty or seventy in 1823. On August 4, 1830 the original plat of Chicago covered less than half a square mile. In 1832, it contained five small stores and 250 inhabitants. Thus it is no wonder that the bankers in Shawneetown turned down the requests for loans to Chicago.
The story of early Illinois will continue in future articles during the year of 2018, the Bicentennial of Illinois becoming a State.
If anyone has any information or pictures to share with the readers of these articles, please contact me at Edward Oliver, P. O. Box 456, Norris City, IL 62869, telephone 618- 378-3176, or email me at firstname.lastname@example.org.