United States Notes / Legal Tender Notes (1862–1971)

United States Notes, authorized by the Legal Tender Act of February 25, 1862, were the first true fiat currency of the United States federal government — money not redeemable for gold or silver coin, whose value rested on government mandate and public confidence. They were colloquially called greenbacks because of their distinctive green-printed backs, a design element carried over from the Demand Notes of 1861.

The Legal Tender Act of 1862

The Legal Tender Act authorized $150 million in United States Notes (eventually expanded to $450 million) to finance the Civil War. The notes were declared legal tender for all debts public and private — meaning creditors were legally required to accept them, even if they would have preferred gold. This was a revolutionary step in American monetary history: the federal government was, for the first time, compelling acceptance of paper money as payment for debts.

The constitutionality of the Legal Tender Acts was challenged repeatedly. In Hepburn v. Griswold (1870), the Supreme Court initially ruled the acts unconstitutional as applied to pre-existing debts. President Grant then appointed two new justices, and the Court reversed itself in Knox v. Lee and Parker v. Davis (the Legal Tender Cases, 1871), upholding the constitutionality of paper money as legal tender.

Designs and Series

United States Notes were issued from 1862 through 1971 in many series and denominations. Large-size notes (before 1929) featured large, ornate vignettes and were printed on larger paper than modern currency. Small-size notes (1929 onward) matched the dimensions of modern bills. The red Treasury seal and serial numbers on United States Notes distinguish them from Federal Reserve Notes (which use green seals and serial numbers).

Denominations issued included $1, $2, $5, $10, $20, $50, $100, $500, $1,000, $5,000, and $10,000. The $1 and $2 denominations were issued as United States Notes into the 1960s and are common in circulation finds today.

The "Greenback" Political Movement

United States Notes became the center of one of the great political controversies of the 19th century. After the Civil War, the government began contracting the currency supply by withdrawing greenbacks from circulation, intending to return to a gold standard. This "hard money" policy benefited creditors (who would be repaid in more valuable dollars) but hurt debtors (who had to repay loans with scarcer, more expensive money).

Farmers and debtors organized the Greenback Party (active 1874–1884) and later the Populist Party to demand the reissuance of greenbacks and monetary expansion. Their arguments foreshadowed the later battles over silver coinage and, ultimately, the creation of the Federal Reserve. William Jennings Bryan's famous "Cross of Gold" speech at the 1896 Democratic National Convention was the culmination of this monetary populist tradition.

Discontinuation

United States Notes were gradually phased out after the Federal Reserve Notes became the dominant currency. The last United States Notes were issued in 1966 (Series 1963). A small amount ($346 million) was kept in circulation to satisfy a legal requirement until that requirement was repealed by the Riegle Community Development and Regulatory Improvement Act of 1994. United States Notes are still legal tender today but are worth significantly more to collectors than their face value.

Source: Bureau of Engraving and Printing: Other Currency Types