Fall 1999

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Rochester's Do-It-Yourself Solution

to a Budget Crunch


Gerard E. Muhl

High welfare costs, delinquent tax payments, rampant inflation, and a tight money supply-how could the City of Rochester solve these problems? It sounds like a recent headline, but actually it was the situation the city faced in 1862 as the Civil War was heating up.

Rochester was helping support a number of widows and dependent children of men lost in the fight. The city also paid bounties to men that volunteered for service, and picked up full pay of city employees who enlisted but who were still in military training. Added to this budget drain were numerous soldiers unable to pay their property taxes, and ever-rising prices due to war-time inflation.

Up to 1862 the only regular money issued by the federal government was gold or silver coins. The familiar greenback would not be issued for another year although local banks did fill the need for a circulating paper currency by issuing their own notes on the "full faith and credit" of their establishment. It didn't take an economist to see that the government's demand for tremendous amounts of wartime supplies would cause a scarcity of consumer goods and thus an ever increasing inflationary price spiral. As a hedge against this inflation, Rochester's citizens rushed to convert their paper banknotes into the hard currency of gold and silver.

Within a year of the outbreak of the Civil War all gold, silver, and even copper coins disappeared from circulation in main street shops. Merchants complained about an inability to make change. They tried postage stamps for small transactions but abandoned the idea when humid weather and sweaty hands turned many stamps into useless sticky clumps.

The City Council came to the rescue in July, 1862, when it voted to issue its own currency of 5, 10. 15, 25, and 50 denominations. Rochester could pay for its own operating costs, satisfy its welfare case load, and keep the merchants happy with one stroke of the pen. Although the Attorney General threatened to have any City Council member arrested if he voted for the project, necessity forced it along and no legal action was ever taken by federal officials. Perhaps having Rochesterian Freeman Clarke as Lincoln's Comptroller of the National Currency also helped the local cause.

Thus it was that by the summer of 1862 crudely printed currency in fractions of a dollar were being issued by the city and being charged to their account at the Monroe County Bank (later Monroe Savings). The simplicity of the designs allowed the city to get these notes into circulation quickly but also encouraged counterfeiting. Within weeks of the first issue warnings against counterfeit notes were being printed in local papers. The City Council reacted by authorizing a new issue of more complex design in December, 1862. These new fractional notes featured an engraving of George Washington and elaborately printed scroll-work designs on the borders. All bills were printed only on one side. City merchants accepted the new notes at par with silver and did not discount them. The newspaper of the day reported the bills circulating as far away as Elmira and Lockport. They were meeting a need.

As the fortunes of war turned and a Northern victory seemed only months away a few silver coins began to reappear in commerce. The federal government also experimented for a time by issuing its own fractional notes. By the early 1870's the national currency system was back on its feet and most of the Rochester notes were redeemed by Monroe Savings for gold, silver, or for the new "greenbacks." The city weathered the storm through the inventive initiative of its citizens and that of the City Council.

1999, Gerard E. Muhl
The original plates for the first series of notes are at the Rochester Historical Society.
Readers interested in the Rochester Numismatic Association are welcome to attend meetings
of the "Coin Club" held at the Eisenhardt Auditorium of the Rochester Museum Science Center
7:30 p.m.every Second and Fourth Tuesday from September through June.
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