When New Ulm had its own money

A Brief History of the New Ulm, Minnesota, Central Bank Banknotes - 1859-1861

Among the first laws of the Minnesota State Legislature when statehood was achieved in 1858, was an act to enable free banking in the state, with the privilege to issue currency / banknotes. These notes were backed by the newly formed Minnesota 7s … and what were known as the Minnesota railroad bonds or, since the bonds carried a coupon interest of 7 percent, the Minnesota 7s. One of these newly formed “banks” was the Central Bank of New Ulm, Minnesota, with a capital of $27,000.00 which was deposited in Minnesota State Bonds with the State Auditor.

The Central Bank was organized in May 1859 by John W. North of Northfield, and Franklin Steele of Minneapolis. It is said that North and Steele were more interested in the bond markets, and were not actual bankers. They hired August H. Wagner, a well-known New Ulm citizen/merchant to serve as vice-president, and Albert H. Merrick (sp?), a bookkeeper in St. Paul, to serve as the cashier (see advertisement from New Ulm “Pionier” newspaper for the Central Bank). It is said that the remote location of New Ulm at that time was deliberately chosen for the ‘Central Bank’ so as to reduce the likelihood that the banknotes would find their way to the home office for redemption … the home office being in New Ulm. The notes were redeemed by J. Jay Knox & Co. of St. Paul and by August H. Wagner of New Ulm. The Central Bank did not do a regular banking business but simply established a redeeming office, with no banking building.

Some sources indicate that the banknotes of the Central Bank actually did enjoy a short-lived acceptance and heavy circulation within the St. Paul community, with most of the notes that survived showing heavy wear. However, the short-lived acceptance did not last … sometime during 1860, the Central Bank had been acquired by brothers Henry and John Jay Knox of St. Paul. The brothers established the J. Jay Knox and Co., and became a prominent banking establishment in St. Paul.

The Knox brother had big plans for the New Ulm Central Bank, but the Civil War greatly pressured bonds of the northern states in the early summer of 1861. Banknotes suffered serious losses and forced the failure of banks nationwide. This was also the tipping point for free banking in Minnesota. Also, the hope that the Minnesota 7s would find their footing was extinguished. Henry and John J. Knox saw the writing on the wall and gave up their effort to issue more notes and supporting the circulation of the notes of the New Ulm Central Bank. The New Ulm Central Bank banknotes were presented for redemption, but the Knox brothers refused payment, and the state forced the bank into liquidation. The state auditor sold the bonds on deposit for a deep discount, leaving only enough hard money (silver/gold) to pay holders 30 cents on the dollar for the New Ulm Central Bank banknotes. The weight of the financial crisis forced the closure of the New Ulm Central Bank. According to the New Ulm Pioneer (“Pionier”) newspaper of July 6, 1861: “The owners of the Central Bank of New Ulm, J. J. Knox & Co. of St. Paul closed their doors June 26th …” It also stated that they could not stand the run made on them caused by the absolute depreciation of all Northwestern paper money and they were forced to close their office. At the time of closure, the banknotes still in circulation amounted to a little over $5,000.00.

NOTE: The only reference found indicating the Central Bank office was a small notation in the New Ulm Review newspaper of October 12, 1921: “The only bank in New Ulm in those days was the Central Bank located on German Street near Third North.” … probably a residence. Also, the Central Bank closed one year prior to the Dakota Uprising of 1862. There was no bank in New Ulm during the Dakota Uprising of 1862.

Two Dollar Banknote

The banknotes issued by the New Ulm Central Bank were, like most banknotes of the time, beautifully ornate. All of the New Ulm Central Bank banknotes were printed by the American Bank Note Company who was a high security engraving and printing firm in the years prior to the Civil War. The company produced paper money, postage stamps, stock and bond certificates. All of the New Ulm Central Bank banknotes were only printed on one side, being blank on the back side, and only four denominations were issued: $1, $2, $5, and $10. The dimensions of these notes varied since they were cut down from sheets, but the average size was approximately 170mm x 71mm (6.7 inches x 2.8 inches). All of the banknote shown are examples of uncirculated, unsigned, and cancelled notes (as can be seen by the punch holes).

ONE DOLLAR BANKNOTE: “New Ulm” is shown on the bottom center of the note. This is the only Minnesota banknote showing a Santa Claus vignette (ornamental illustration). Shows jovial Santa Claus seated in his sleigh with reindeer guiding him over the rooftop. The banknote also features, lower left, a portrait of Peter Stuyvesant, the last director-general of the colony of New Netherlands, now known as New York City. The tradition of Saint Nicholas … Santa Claus … Peter Stuyvesant go hand-in-hand, but not enough room here to elaborate. Peter Stuyvesant’s portrait is also shown on different Santa Claus notes. It is said that the German heritage of New Ulm was undoubtedly a factor in the selection of these images on the note.

TWO DOLLAR BANKNOTE: “New Ulm” is shown on the far-left center of the note. The center of the note illustrates a steamboat vignette heading down river with smoke coming from the stacks. The bottom corners show a paired set of seated female figures facing across the note. The left figure is an American Indian huntress and across in the right corner is a representation vignette of History.

FIVE DOLLAR BANKNOTE: “New Ulm” is shown lower left, below the red FIVE. The note is richly decorated with illustrated vignettes of an overall theme of agriculture, industry, transportation … with optimistic visions of the future.

TEN DOLLAR BANKNOTE: “New Ulm” is shown on the bottom center of the note … on the red “E.” The center vignette depicts the industrialization of America in the right background. ‘America’ is holding a shield, and points to the new way of life to the reclining American Indian huntress with her bow and quiver. The bottom corners have a matching pair of female vignettes each featuring / holding the horn of plenty … symbolizing prosperity, wealth, and abundance.

Five Dollar Banknote

Ten Dollar Banknote

Enlargement of Santa Vignette / From One Dollar Banknote


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