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In November, the Banco Central Mexicano (Central Mexican Bank) at Mexico City failed. It had served as a central reserve bank for the chartered state banks, converting their notes into notes of the banks of Mexico City, or into metallic assets. In a sense, it was Mexico’s “Federal Reserve Bank”. With its collapse, state bank notes were heavily discounted in value leading to further problems with the monetary system.
In early December, a violent run on the Banco de Londres y México nearly caused it to fail too. In an attempt to prop up the banking system and restore confidence, the Huerta government decreed that only 33 percent backing by metallic assets was now required to support paper money. Coinage of silver had increased markedly during 1913, in part to provide increased metallic assets to be held by the federally chartered banks. The panic caused by the near-failure of the Banco de Londres y México precipitated runs on many of the banks of the nation, and a number of them failed. The country was facing monetary collapse.
Villa and his Division of the North followed the victory at Torreón with more brilliant victories at Ciudad Juárez and Tierra Blanca in the State of Chihuahua. On December 8, 1913, Villa occupied the capital city of Chihuahua. With his Torreón paper money running out, he needed more funds quickly. He knew that if he asked Carranza for more money, that he would get little or nothing. As Provisional Governor of Chihuahua, Villa ordered the issue of the Tesorería General del Estado (General Treasury of the State) series. Since the size of the notes grew larger as the face amount increased, they gained the nickname Sábanas de Villa (Villa’s Bed Sheets). Notes were issued in denominations of 5, 10, 25, and 50 centavos, and 1, 5, 10, 20, 50, and 100 pesos. All notes are dated December 10, 1913, and prominently bear the name “Gral. Francisco Villa”. |
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The simple design of these notes invited counterfeiting, and Villa was soon forced to look for a solution to the problem, other than shooting the counterfeiters.
Carranza was so upset by Villa’s action that he sent a delegation to Chihuahua to talk Villa out of issuing his own money. Villa met them cordially and listened carefully to what they had to say, then sent them back to Carranza with his answer — NO!
Villa’s refusal to allow Carranza to control the finances of the revolution widened the gap between the two. As Villa succeeded, both in battle and in winning new territories for the revolution, Carranza jealously increased his interference with Villa in an attempt to lessen his power as a potential political opponent. Carranza’s treatment of Villa could not be explained by anything other than personal pettiness and jealousy.
In addition to the Tesorería General del Estado issue, Villa ordered the organization of El Banco del Estado de Chihuahua (The Bank of the State of Chihuahua). This bank was to be a source of small business and agriculture loans for the people of Chihuahua. Notes were ordered from the American Bank Note Company of New York City in denominations of 5, 10, 20, 50, 100, and 500 pesos. The bank never officially opened or issued its notes, functioning instead as a holding company for both land and treasure confiscated from persons deemed to be enemies of the revolution. |
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On December 9, 1913, the day following Villa’s occupation of Chihuahua, General José Refugio Velasco, leading the federal counter-offensive against the Constitutionalists, attacked General Calixto Contreras at Torreón. Greatly outnumbered, Contreras elected to withdraw rather than fight. On the following day General Velasco occupied the cities of Torreón and Gómez Palacio. One of his first orders was to collect all of the Villista money (the “bank-on-bank” checks), and to stamp it FALSO or destroy it. |
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The general soon realized that he had acted hastily. Business in the two cities almost ground to a halt for lack of circulating currency. Although the federales had strongly criticized the villistas for their banking shell game, General Velasco was forced to do exactly what Villa had done. On December 18th, he ordered the issue of a number of 50 pesos “bank-on-bank” checks from the Banco de la Laguna, payable by the Banco de Coahuila.
As the year drew to a close, the monetary situation in Mexico was alarming. Virtually all circulating coinage had disappeared, state bank notes were heavily discounted from their face value, if the were accepted at all, and the entire banking system was on the verge of collapse. Revolutionary paper was readily accepted by those who had faith that the fight against Huerta would succeed, but it became necessary in some areas to decree forced circulation. |
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The Constitutionalist Movement - 2 |