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Counterfeiting

COUNTERFEITING

COUNTERFEITING. To counterfeit means to imitate with intent to defraud. Most counterfeit paper money can be classified in one of three categories: (1) notes that imitate legitimate notes; (2) alterations of legitimate notes, including notes raised from a lower to a higher denomination; and (3) spurious notes—that is, notes representing obligations of fictional institutions. Counterfeit notes of the period prior to the Civil War had to be distinguished not only from ordinary legal tender, but also from legitimate paper money circulating at a discount because it represented obligations of broken or failed banks. (Such notes were legal and worth whatever fraction of their face value the liquidated assets of the bank would permit.)

The circulation of both counterfeit notes and valid, but discounted, notes of commercial banks gave rise to the publication of pamphlets known as Bank Note Reporters and Counterfeit Detectors, published at any interval from semi weekly to annually by money brokers in centers of financial activity. These pamphlets gave up-to-date information on the validity and value of notes currently in use, and were used by any one who dealt in large amounts of nonlocal currency. After the effective end of state bank-note issues in 1867, the Bank Note Reporters became unnecessary because all bank-note and government-issued currency thenceforth circulated at par.

Counterfeiting is, of course, a crime, and for a long time many countries punished it with death. If, after a counterfeit note is passed the first time, it remains undetected, it becomes a part of the monetary system. At a time of full employment of resources it acts as a tax on the general public in favor of the counterfeiter. It raises prices By the percentage that the value of the counterfeit note bears to the total stock of money in the economy. If numbers of resources are unemploy ed, counterfeit notes have the effect of stimulating spending and, ultimately, reducing unemployment. Thus, at a time of less than full employment, the counterfeiter might be considered a public benefactor. Of course, counterfeit notes have never entered the monetary system in sufficient volume to make these general effects operable.

At least one case is recorded in which a responsible government legalized existing counterfeit issues—an action taken By the Confederate States of America during the Civil War. In an effort to spare the possibly innocent individual detected with a counterfeit note, the Confederate government legalized the acceptance of bogus notes late in the war. Indeed, the government had little choice. Because of the poor quality and multiplicity of issues of reputable Confederate notes, and also because of the masses of counterfeits in circulation—many originating in the North—hardly any one could tell the difference between real and fake money. Frequently the counterfeit notes were of better quality.

Counterfeiting in the twenty-first century is a minor part of total crime. The techniques, skills, and machinery required for effective counterfeiting are very costly and pay off well enough when used in legitimate enterprise with much less risk.

BIBLIOGRAPHY

Benner, Judith. Fraudulent Finance: Counterfeiting and the Confederate States, 1861–1865. Hillsboro, Tex.: Hill Junior College Press, 1970.

Dillistin, William H. Bank Note Reporters and Counterfeit Detectors, 1826–1866. New York: American Numismatic Society, 1949.

Johnson, David R. Illegal Tender: Counterfeiting and the Secret Service in Nineteenth-Century America. Washington, D.C.: Smithsonian Institution Press, 1995.

Richard H.TimberlakeJr./c. w.

See alsoBanking ; Banking: Bank Failures ; Currency and Coinage ; Mints, Private ; Money ; National Bank Notes .

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"Counterfeiting." Dictionary of American History. . Encyclopedia.com. 26 Sep. 2017 <http://www.encyclopedia.com>.

"Counterfeiting." Dictionary of American History. . Encyclopedia.com. (September 26, 2017). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/counterfeiting

"Counterfeiting." Dictionary of American History. . Retrieved September 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/counterfeiting

Federal Deposit Insurance Corporation

FEDERAL DEPOSIT INSURANCE CORPORATION


"Deposits insured by the FDIC." Many banks today promote the insurability of customer deposits with this simple slogan, but this wasn't always the case. Prior to 1933, people depositing their money into a bank had no guarantee that their money was safe. From the stock market crash of 1929 to the first years of President Franklin Roosevelt's (19331945) administration, nine thousand banks collapsed, and depositors lost $1.3 billion.

Public confidence in the banking system collapsed along with the banks. In the hard times of the Great Depression, the government needed to bolster public confidence and maintain financial stability in the nation. The Federal Deposit Insurance Corporation (FDIC) was an effort to do just that. When the Glass-Steagall Act became law in 1933, it provided for the creation of the FDIC, which provides insurance coverage for bank deposits.

The FDIC insures deposits in national banks, Federal Reserve member state banks, and state banks that have applied for federal deposit insurance and meet FDIC qualifications. After its inception, the FDIC tried to repay all deposits, regardless of whether they occurred at an insured bank or were over $100,000. This method was felt to be the best way to keep public confidence in the banking system high.

In the 1980s, however, the country experienced a savings and loan crisis. Between 1980 and 1990, 1,110 banks failed. Their failure was caused in part by bad loans in a weak real estate market and also by risky loans to developing countries. Until this time the Federal Savings and Loan Insurance Corporation handled insured deposits at savings and loan associations. With the FDIC Improvement Act of 1991, the FDIC was given authority to insure deposits at savings and loan associations and new restrictions were made on how the organization repaid lost deposits.

The FDIC now operates by a "least-cost" method. If an insured bank collapses, the FDIC pays up to $100,000 of a depositor's claim. It is not allowed to cover uninsured depositors unless the president, the secretary of the treasury, and the FDIC jointly agree that failing to do so would seriously effect the economic conditions of the nation or the community.

See also: Federal Reserve System, Glass-Steagal Banking Act

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"Federal Deposit Insurance Corporation." Gale Encyclopedia of U.S. Economic History. . Encyclopedia.com. 26 Sep. 2017 <http://www.encyclopedia.com>.

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"Federal Deposit Insurance Corporation." Gale Encyclopedia of U.S. Economic History. . Retrieved September 26, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/federal-deposit-insurance-corporation