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Series:FRB Atlanta CenFIS Working Paper  Bank:Federal Reserve Bank of Atlanta 

Working Paper
Government and private e-money-like systems: federal reserve notes and national bank notes
The period from 1914 to 1935 in the United States is unique in that it was the only time that both privately issued bank notes (national bank notes) and central-bank-issued bank notes (Federal Reserve notes) were simultaneously in circulation. This paper describes some lessons relevant to e-money from the U.S. experience during this period. It argues that Federal Reserve notes were not issued to be a superior currency to national bank notes. Rather, they were issued to enable the Federal Reserve System to act as a lender of last resort in times of financial stress. It also argues that the reason eventually to eliminate national bank notes was that they were potentially a source of bank reserves. As such, they could have threatened the Federal Reserve System's control of the reserves of the banking system and thereby the Fed's control of monetary policy.
AUTHORS: Weber, Warren E.
DATE: 2015-08-01

Working Paper
The efficiency of private e-money-like systems: the U.S. experience with national bank notes
Beginning in 1864, in the United States notes of national banks were the predominant medium of exchange. Each national bank issued its own notes. E-money shares many of the characteristics of these bank notes. This paper describes some lessons relevant to e money from the U.S. experience with national bank notes. It examines historical evidence on how well the bank notes?a privately issued currency system with multiple issuers?functioned with respect to ease of transacting, counterfeiting, safety, overissuance, and par exchange (a uniform currency). It finds that bank notes made transacting easier and were not subject to overissuance. National bank notes were perfectly safe because they were insured by the federal government. Further, national bank notes were a uniform currency. Notes of different banks traded at par with each other and with greenbacks. This paper describes the mechanism that was put in place to achieve uniformity. The U.S. experience with national bank notes suggests that a privately issued e-money system can operate efficiently but will require government intervention, regulation, and supervision to minimize counterfeiting, promote safety, and provide the mechanism necessary for different media of exchange to exchange at par with each other.
AUTHORS: Weber, Warren E.
DATE: 2015-03-01

Working Paper
The efficiency of private e-money-like systems: the U.S. experience with state bank notes
In the United States prior to 1863, each bank issued its own distinct notes. E-money shares many of the characteristics of these bank notes. This paper describes some lessons relevant to e-money from the U.S. experience with state bank notes. It examines historical evidence on how well the bank notes?a privately issued currency system with multiple issuers?functioned with respect to ease of transacting, counterfeiting, safety, overissuance, and par exchange. It finds that bank notes made transacting easier and were not subject to overissuance. However, counterfeiting of bank notes was widespread, bank notes were not perfectly safe, and notes of different banks did not exchange at par and rates of exchange were volatile. The paper also examines how bank notes were regulated and supervised and how that regulation and supervision affected the functioning of the system. The U.S. experience with state bank notes suggests that a privately issued e-money system can operate efficiently but only with appropriate government intervention, regulation, and supervision to minimize counterfeiting and to promote safety and par exchange.
AUTHORS: Weber, Warren E.
DATE: 2015-03-01

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