Radio Script #1165

Little Talks on Common Things
May 14, 1978

Many of our older listeners are familiar with the kind of money called bank notes, the paper money issued not by the federal government, but by individual banks. Those paper bills were common until well into this century. They were abandoned about fifty years ago.

Every bank in Maine that was incorporated by the state as a commercial bank was authorized to issue its own bank notes, exactly like the paper money that came out of Washington, except that a bank note was just as valuable as its issuing bank was strong, and not always accepted by merchants at par value. Those old bank notes were put out in Portland, Bangor, Lewiston, Augusta, Waterville, and many other Maine communities that had at least one commercial bank. I have never seen one issued by the Waterville bank, started in 1808 as Waterville’s first banking institution. But I once did have a three dollar bill issued by the Calais Bank and a two dollar bill on the Bank of Bath. It has been a long, long time since any bank putout a three dollar bill.

It has been even longer since any bank has issued paper currency in denominations less than a dollar. But in the early years of the 19th century, 150 years ago, that was common. In fact the 50 cent and 25 cent bills were circulated by Maine banks even before Maine became a state, when banks in such places as Portland, Augusta and Bangor got their charters from the legislature of Massachusetts.

Paper currency issued by banks was so much more common in New England than in other parts of the early United States that it got the name of Down East paper money. The first known issue in Maine was by the Portland bank in 1799. Before the practice became unlawful and only the federal government was allowed to put out paper money, a total of 135 banks in this state alone had their paper bills in circulation. In one single year, 1835, there were 70 Maine banks putting out those bank notes.

For a short time the right to issue paper money was exercised even beyond banks. Commercial firms were permitted to print their own money. The Portland Iron Company, the Katahdin Iron Works, and the Calais Lumber Company issued their own currency. It was used for a time by Bliss Business College in Lewiston. Among the choice collector’s items of this kind is a five-cent paper bill issued in Portland and inscribed, “Payable at any junk store. If the designs of the many kinds of paper money of the 19th century make a study in itself. Besides pictures of persons and mythical characters like unicorns and dragons, the bills were embellished with flowers, animals, fish, trees, ships, swords, scythes, spears, armor and even snakes. A bill for 50 cents issued by Katahdin Iron Works carried the symbol of an arm and hammer, . a design made even more familiar for nearly a hundred years on, packages of Arm and Hammer soda.

It was the very diversity of this paper money that made it inefficient and of such varying value. Not all banks – to say nothing of commercial companies – were of equal strength. A very strong bank’s paper money might be exchanged for gold and silver coins, what people called hard money or hard cash, at 100 cents to the dollar, while others would be subject to discount from five to thirty percent. When a bank got really shaky, the paper might not be accepted at all. Of course, when a bank failed, a holder of any of its paper currency usually lost it all.

When a man had bank notes, he never knew what they were worth until he tried to use them. Merchants had to be unusually alert not to get stuck with heavily discounted bills. Sometimes a note would have as little value as the notorious Continental currency had in the early years of our republic. The old Continental Congress had printed paper money without sufficient gold and silver to back it up. Some of it was still in circulation in the early years of the 19th century after steam boats began to ply our major’ rivers. The story is told of two boats meeting about midway up the Mississippi. The boat headed down river was loaded with wood. The up-river boat needed wood to keep its boilers hot. The captain of the nearby boat asked the other captain if he would sell some wood. “What you got for money,” asked the other. “Continentals,” said the first captain, meaning paper currency of the old Continental Congress. “In that case,” said the captain with the wood, “I’ll trade you cord for cord.”

Exaggerated as that story may be it exemplifies a chaotic situation that had to be remedied. Hence eventually all paper money was made illegal except that issued by the federal government. Just as no one except the government could mint coins, no one except the government could any longer issue paper currency.

Another reason why the old bank notes had to be banned was because they were too easily counterfeited. Printed in an ordinary way on ordinary paper, they were easy to duplicate. The counterfeiters went so far as to print and circulate bills on banks that did not even exist. Numerals were easily changed, and other alterations quickly got by casual inspection.

What is American paper money worth today? Do you remember when a dollar bill used to say on its face that it was exchangeable into silver, and a $20 bill into gold? The Great Depression of the 1930s changed all that. It became illegal to possess gold coins, and their circulation ceased entirely. Bit by bit the percentage of silver in other coins was reduced until today it is very small.

With that situation, guaranteed exchange of U. S. paper money into coins ceased. Look at any bill in your wallet. You will find it says, “This note is legal tender for all debts public and private.” In other words, for any purchase or for any chargeable service, the vendor is obligated to accept it. Your paper money is just as good as the government – no better, no worse.

When we note the expense of attending college today, either in a private or a public institution, it is difficult to understand how simply, even penuriously our colleges were operated at the beginning of this century. At that time Harvard was already 265 years old, Bowdoin had been operating for more than a century, and Colby here in Waterville had been chartered for 88 years.

When Colby graduated its first class in 1822, the salary of a full professor was $500 a year. Eighty years later in 1902 the salary had risen to . only $1,600 a year, and the President of the college got only $2,800. Consider the expenditures today for athletic programs compared with their cost in colleges in 1900. In that year the Colby trustees appropriated $500 for all athletics. Of course that did not anywhere near meet the total cost at a time when football and track had become intercollegiate sports in addition to the much older baseball. In most colleges, the corporation did not handle the sports at all. They were run by associations of students and alumni, with each college officially making some contribution to keep up grounds. That explains Colby’s $500. Today almost every college in the nation assumes complete control of its athletic program. That did not happen at Colby until the administration of President Franklin Johnson in the 1930’s. As for the faculty, however popular a program might be and however strongly attached to the college where he taught, he sometimes felt obliged to seek greener pastures.

In 1901, Colby College faced a severe financial situation. For several years expenditures had exceeded revenue, and retrenchment just had to be made. One of Colby’s best professors, a man widely recognized for his scholarship, was William Bayley, Professor of Mineralogy and Geology. In 1901, it was proposed that his department be combined with chemistry, and he was told that in the ensuing year the total salaries in the combined department must not exceed $2,600. Bayley responded that he did not care to remain at Colby under any such arrangement. The administration backed down and Bayley stayed until 1905. Then offers from other colleges became too alluring and he left Colby to accept, instead of his $1,800 salary, one of $2,500 at another college.

In 1900 a student could attend Colby for $275 a year, including tuition, room rent, board, incidental fees, and books. That amount included all expenses except travel between home and college. Even travel was not very expensive. Few Colby students lived farther away than Boston, and two-thirds of them lived in Maine. One graduate of 1898 used to tell how he walked between the college . and his home in Belfast at every vacation’s beginning and end. He was lucky if if could hitch a buggy ride at intervals. Colby students felt hard pressed in 1900 when they found the general price of board raised from $2.75 to $3.00 a week in the town’s boarding houses. The college then operated no dining service except for the few girls in Ladies Hall, a converted residence that stood where Waterville’s new Post Office now stands. If that three dollars a week seems almost unbelievable today, let me add that, when I entered Colby in 1909. the cost of very good 21 meals a week – unlimited quantity – could be had in half a dozen excellent boarding houses in Waterville at four dollars a week, and a few places charged only $3.50!

I was deeply conscious of that fact because I worked as a waiter at what was then Waterville’s most fashionable boarding house, the Hanford in Post Office Square, run by a lady we all called ”Ma Jones.” I have read several times during the past year, in connection with the final closing of the old Hanford, that it was a boarding house for Colby students. Not so. Very few students ate there except those employed as waiters. The clientele was made up of Waterville residents who enjoyed their meals regularly by the week at the Hanford.

Year: 1978