United States Note

• 1. Introduction

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  The United States Note was born from a crisis. On the 25th of February 1862, President Abraham Lincoln signed the First Legal Tender Act into law, creating a form of paper money unlike anything the country had officially issued before. It was not backed by gold. It was not redeemable on demand. It was fiat currency, printed and spent to keep Union armies in the field during the bloodiest war in American history.

  These notes would circulate for 109 years, outlasting the war that created them, surviving court challenges that nearly killed them, and enduring political battles that stretched across decades. They earned a nickname that stuck: greenbacks. The questions their existence raised were radical ones. Could a democratic government simply print money and call it real? Who gets hurt when currency loses its value? And what does it mean for the state to promise that a piece of paper is worth something, with nothing behind it but its own word?

• 2. War Finance and the First Greenbacks

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  Salmon P. Chase, Secretary of the Treasury in 1861, faced a stark arithmetic problem. The Union's war expenses far exceeded what taxation could cover, and borrowing had become the primary means of keeping soldiers paid. The Act of the 17th of July 1861 authorized Chase to raise fifty million dollars through Treasury Notes payable on demand. These Demand Notes went directly to creditors and soldiers.

  By December 1861, the arrangement had collapsed. Specie payments were suspended, meaning the government could no longer honor its promise to redeem the notes in hard coin. The notes began to lose value. Congressman Elbridge G. Spaulding, a Buffalo banker, saw the need for a more permanent solution. He had been drafting a bill based on New York's Free Banking Law, but that proposal would take months to pass. Instead, early in February 1862, he introduced a faster measure: allow the Treasury to issue notes as legal tender directly.

  The constitutional objection was immediate. The government had never before claimed the power to issue paper currency and compel its acceptance. Spaulding argued before the House that the bill was "a war measure, a measure of necessity, and not of choice," and that "extraordinary times" required "extraordinary measures." He framed the authority as flowing from Congress's enumerated powers to raise armies and maintain a navy. Despite fierce opposition, Lincoln signed the bill, and the United States Note came into existence.

• 3. What Legal Tender Actually Meant

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  Thaddeus Stevens, Chairman of the House Ways and Means Committee, was not satisfied with what the First Legal Tender Act produced. An earlier version of the act, which Stevens had helped draft, would have made United States Notes legal tender for all debts without exception. The version that passed left out two critical categories: customs duties on imports and interest payments on government bonds.

  Stevens denounced these carve-outs, calling the bill "mischievous." In his view, the exceptions deliberately degraded the currency for ordinary people while ensuring that banks who lent to the government received "sound money" in gold. The logic the government used to justify the exceptions was precisely the opposite of what Stevens believed. By keeping customs duties and bond interest payable in gold, officials argued, the government would preserve its credit-worthiness and generate the coin needed to service its debts. The notes could be deposited short-term at five percent interest or used to purchase twenty-year bonds at six percent interest at par, which the government hoped would anchor the notes' value.

  In practice, the greenback began trading at a substantial discount against gold. Congress passed the Anti-Gold Futures Act of 1864 in an attempt to stop speculation on that gap, but it was quickly repealed when it appeared to worsen the decline. The controversy Stevens identified in 1862 did not resolve until 1933, when the remaining exceptions to legal tender status were finally removed.

• 4. The Courts Weigh In

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  After the war ended, the constitutionality of the greenbacks went before the Supreme Court. The 1870 case Hepburn v. Griswold produced a remarkable result: a five-to-three decision finding that using greenbacks to pay debts established before the First Legal Tender Act was unconstitutional. What made the ruling extraordinary was who wrote it. Chief Justice Salmon P. Chase, the very Treasury Secretary who had championed the Legal Tender Acts during the war, authored the opinion striking down his own earlier actions.

  Chase had by then become a Democrat. The five-justice majority included Nelson, Grier, Clifford, Field, and Chase himself. But the Court's composition was about to change. Grier retired, and President Grant appointed two Republicans, Strong and Bradley. Joined by the three sitting Republicans Swayne, Miller, and Davis, the new majority reversed Hepburn five-to-four in the 1871 cases Knox v. Lee and Parker v. Davis.

  The story continued in 1884, when the Court, now controlled eight-to-one by Republicans, went further still. In Juilliard v. Greenman, the Court granted the federal government very broad power to issue legal tender paper in peacetime as well as war. Only Field, the lone remaining Democrat, dissented. The jurisprudential question Chase had tried to settle against himself had ended with a sweeping expansion of federal monetary authority.

• 5. Contraction, Panic, and Equilibrium

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  Henry Charles Carey was among the economists who argued after the war that the greenback system should be made permanent, treating fiat currency as a foundation to build on rather than an emergency to reverse. Secretary of the Treasury McCulloch held the opposite view: the Legal Tender Acts had been war measures, and the country should return to the gold standard. The House of Representatives voted overwhelmingly in McCulloch's favor.

  The Funding Act of the 12th of April 1866 authorized McCulloch to retire ten million dollars of greenbacks within the first six months, then up to four million dollars per month after that. By February 1868, he had reduced the outstanding supply significantly. Then the economy turned. Harvests were poor, a financial panic in Britain triggered a recession in the United States, and falling prices were blamed on the shrinking money supply. Debtors organized, and Congress halted the retirement.

  In the early 1870s, Treasury Secretaries George S. Boutwell and William Adams Richardson discovered what they called a discretionary "reserve": Congress had set a minimum circulation level, but old Civil War statutes authorized a higher maximum. Senator John Sherman's Finance Committee disputed this interpretation but passed no legislation to close the loophole. Boutwell and Richardson used the reserve to counteract seasonal currency demand and, in response to the Panic of 1873, expanded the greenback supply. Congress finally capped greenback circulation in June 1874, and the Specie Payment Resumption Act of January 1875 set a path back to gold convertibility. On the 1st of January 1879, the government stood ready to redeem greenbacks for gold on request. The public, finding greenbacks now at parity with gold for the first time since the Specie Suspension of December 1861, accepted them voluntarily and did not rush to exchange them. The circulation level was fixed on the 31st of May 1878 and held at that level for nearly a hundred years.

• 6. Decline and Destruction

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  The Federal Reserve Act of 1913 created a new instrument for managing currency supply: the Federal Reserve Note. During the Panic of 1907, President Theodore Roosevelt had tried to increase market liquidity by authorizing more greenback issuance, but the Aldrich-Vreeland Act provided the needed relief through National Bank Notes instead. The perceived need for an elastic currency was now met by a different system, and active attempts to adjust the United States Note supply effectively ended.

  In 1933, private ownership of gold was banned, and all surviving types of circulating currency became redeemable only for silver. When even silver redemption ended in June 1968, the distinction between a United States Note and a Federal Reserve Note became invisible to most people carrying them. The only consistent visual marker was color: United States Notes carried red Treasury seals and red serial numbers, while Federal Reserve Notes used green. Public circulation of the small denomination United States Notes was discontinued in August 1966 and replaced with Federal Reserve Notes. Series 1966 and Series 1966A notes were printed through 1969. On the 21st of January 1971, distribution into public circulation officially ended.

  In September 1994, the Riegle Community Development and Regulatory Improvement Act released the Treasury from its obligation to keep United States Notes in circulation at all. The Treasury had briefly considered releasing its large stockpile of unissued notes, but concluded that having two visually different notes appear simultaneously would cause public confusion, especially alongside the newly redesigned Series 1996 Federal Reserve Note. In 1996, the Treasury announced that the remaining stock of United States Notes had been destroyed.

• 7. Greenbacks in Politics

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  Western states that stayed loyal to the Union during the Civil War nevertheless carried hard money sympathies. Throughout the specie suspension from 1862 to 1878, states in the far west used the gold dollar as their unit of account wherever possible and accepted greenbacks only at a discount. Gold certificates and National Gold Bank Notes, the latter created specifically to address California's preferences, were the favored paper instruments in that region.

  In the 1870s and 1880s, the Greenback Party built its entire platform around expanding United States Note circulation, working from the quantity theory of money: more notes in circulation meant higher prices, which benefited debtors. As silver's market price fell relative to gold during the later 1870s, the inflationist coalition found a new vehicle in the Free Silver movement, and opposition to the 1879 specie resumption became correspondingly quieter.

  The southern Democrats who had held Jacksonian hard money views were absent from Congress when the Legal Tender Acts passed during the war, their absence a direct consequence of secession. When they returned, those views shaped the post-war resistance to the greenback system. The Jacksonian tradition's preference for metallic money and distrust of paper currency ran through the legal challenges, the congressional debates, and the regional distinctions that characterized the greenback era. A hundred and thirty-two years after the First Legal Tender Act, Section 5119(b)(2) of Title 31 of the United States Code was amended by the Riegle Act to state that the Treasury was not required to reissue United States Notes upon redemption, a quiet statutory acknowledgment that the era of the greenback had permanently closed.