By Bob Hibbs

Iowa City pioneers faced money problems every day, not just from being poor, but from a lack of coins and paper money in circulation. Barter was common. The merchant traded goods for a chicken later.

Uniform federal currency didn’t exist until Iowa City banker Ezekiel Clark recommended it to Abraham Lincoln’s treasury secretary Salmon P. Chase during the Civil War. Clark thus became the father of the U.S. greenback dollar bill.

During the pioneer era, paper money called script was issued by banks everywhere – except in Iowa for a time when it was outlawed by the first state constitution since the practice was so corrupted by fraud.

A St. Louis bank script denominated at $5 might be worthless if the bank no longer existed, something that occurred regularly. The $5 script might be worth a dollar or two when traded for goods; in other words, heavily discounted.

Silver dollars and foreign silver coins of like weight often were cut into eight pieces to provide small coins for use in everyday commerce. The pieces were called bits; thus two bits equaled a quarter. Also cut in even smaller pieces, half a bit provided the 6¼ cents one needed to ride the ferry across the Iowa River at Iowa Avenue or the other local landings in 1840.

If a coin wasn’t available, the ferry master probably would grant credit toward firewood, or for another wanted item. Short term credit to buy groceries – or a winter’s grub stake – was a frequent occurrence.

A group of Iowa City merchants banded together to issue 10¢, 20¢ and 50¢ notes for change, redeemable in merchandise at any of the stores, or in bank currency when presented in amounts totaling $1.

Iowa City was fortunate to have the territorial government in the person of Iowa City founder Chauncey Swan issuing script to workmen for wages, and to suppliers of materials used to build Old Capitol. Territorial script was considered safe if it could be held long enough for future payment.

During the national financial panic of 1857, Iowa City government issued script in $1, $2, $3 and $5 denominations to pay for materials and wages.  It was redeemed at face value in 1862 and destroyed, except for samples given the State Historical Society.

The 1857 panic was devastating in many of the same ways as was the Great Depression of the 1930s. It halted most activity, even in the remote frontier community of Iowa City.

Planned construction of Old Brick was sidetracked as local Presbyterians were unable to generate the resources necessary to undertake a project even though they were homeless after loss of their building to fire in 1856. A cornerstone for Old Brick was set in 1856, but it was 1865 before a building was produced and dedicated.

The panic coincided with the move of Iowa’s capital from Iowa City to Des Moines, providing a double blow to the local economy. The University of Iowa, nominally opened in 1855, was shut down in 1857 except for its high school classes, and not reopened for good until 1860.

An infant banking system came into being in 1858 with the opening of 15 offices of the State Bank of Iowa, including one in Iowa City run by “father of the greenback” Ezekiel Clark. The state required its banks to redeem their paper notes in coin on demand; thus the phrase, “Good as gold.”

The state banks in Iowa yielded to federal national banks during the later years of the Civil War, finally alleviating the problems presented by lack of a reliable currency in circulation, something taken for granted today.

Next time a coin is slipped into a meter or machine, recall how grateful the Iowa City area pioneer would have been just to have had one at all.

Next Saturday: Like ancient times, old building parts are recycled locally.

Bob Hibbs collects local postcards and researches history related to them. 

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