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Financial Fitness: Counterfeiting and US Currency

By Texas Gulf Bank Staff

Paper money has been printed and used in the US since before the establishment of the United States as an independent nation. It has undergone many changes during the last two centuries and continues to evolve even today.  Most of the major changes, to some degree, have been influenced by the practice of counterfeiting.
 
During the early 1800’s, state-chartered banks in the US could issue currency. This not only created many problems with counterfeiting, but also with insolvent banks.  This made for a feeling of uncertainty about whether or not the currency you had was worth anything.  Eventually, this led to a currency panic and was the impetus for the creation of the National Currency Act, which was renamed the National Banking Act of 1864. This Act took banking out of the hands of individual states and into a network of federally chartered banks that could legally issue currency backed by the Treasury Department. The First National Bank of Philadelphia, Pennsylvania was the first to acquire a national charter.  Eventually, over 1,500 state banks were converted to federally chartered banks.
 
Even though they were federally backed, bank notes issued by federally chartered banks consisted of independent designs based on the institution. They held the names of the financial institutions that issued them, but universally incorporated the National Treasury Seal, which was intended as a deterrent to counterfeiting. There were different sized bills, typically larger than those we use today. Initially, the currency was printed by independent printing houses, but in 1876 currency printing for all national banks became the responsibility of the Bureau of Engraving and Printing, under the direction of the Department of the Treasury. Although the US Mint produces coins, paper money is still produced by the Bureau of Engraving and Printing today, with locations in Washington DC and Fort Worth, Texas.
 
Freeport National Bank, now known as Texas Gulf Bank, was chartered in 1913 and located in Freeport, Texas. It is just one example of the thousands of nationally-chartered banks that issued their own currency under the provisions of the National Currency Act. Examples of $5 and $20 bank notes issued by Freeport National Bank can be found on the Texas Gulf Bank history timeline.
 
The Federal Reserve Act of 1913 created the nation’s first centralized bank to regulate and produce money, called the Federal Reserve. It wasn’t until 1929 that the design of paper money was standardized. At that time, the bills were reduced in size to lower the cost of printing, and designs were standardized not only to reduce costs, but  to make it easier for the public to recognize counterfeited bills. Federal Reserve Notes are now the only US currency produced.
 
US Currency today continues to change, as the government strives to keep pace with the increasing sophistication of counterfeiting technology. Since 1990, bills have included micro-printing and a security thread to make counterfeit bills easier to detect. Over the last 10 years, bills with additional coloring and enhanced security features have been introduced.To date, every denomination has been redesigned except for the one dollar bill (although the new $100 bill has not yet been released due to manufacturing problems). Current projections are that it will be released during 2013. Security features are easily recognizable and can be checked to determine if a bill you have is authentic or counterfeit. Some of the security features currently in use on new currency include:
  • Watermarks that can be seen when the bill is held near a light source
  • A security thread that glows blue in ultraviolet light
  • Microprinting has been added that, because of its size, is difficult to replicate
  • 10, 20 and 50 dollar bills now also contain color-shifting ink that makes it easier to check the authenticity of money
  • The new $100 bill has a "bell in the inkwell” feature that shifts color and makes the bell located in the ink jar appear or disappear as the bill is tilted.
To learn how to verify that a bill is not counterfeit, and to find out why it is important to know, visit the Bureau of Engraving and Printing’s website dedicated to all things "new money”. As counterfeiting advances, what new features will be required in the future?
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