USA Civil War Paper Money
FROM...
Coin World Newsletter.. October 14, 2009
Collecting the Civil War: United States issues the "Greenback" to fund the Civil War effort
By Pierre Fricke
Special to Coin World
EDITOR'S NOTE: This is the second installment of a multipart series by Pierre Fricke, an expert on Civil War numismatics. The series will provide an overview of the different collecting areas that the era offers.
With the threat of war hanging over the United States in the spring and early summer of 1861, the Lincoln administration sought to raise funds by selling long-term bonds. As these were not well accepted, the Union was faced with the challenge of funding a war effort, including paying soldiers and government employees, but without the export duties that the South's cotton export provided. Faced with these challenges, and following the lead of the Confederate States, the United States Congress passed the Act of July 17, 1861, which allowed for $250 million to be borrowed including $50 million to be issued as non-interest-bearing Treasury notes. We will explore the "Greenback" demand and legal tender notes in this article. The Union also issued fractional currency as well as interest-bearing notes during the Civil War.
Demand notes were "payable upon demand" - they could be redeemed with silver and gold coin - at one of several assistant treasurers' offices in New York, Philadelphia and Boston. The Act of Aug. 5, 1861, changed the demand notes in a few ways including adding Cincinnati (bullion depository) and St. Louis (Treasury office) as redemption offices and allowing for a $5 note. The American Bank Note Co. and National Bank Note Co. were granted the contracts to print the notes. The National Bank Note Co. also printed the Confederate Montgomery notes. The New Orleans office of the American Bank Note Co., renamed to Southern Bank Note Co., printed several beautiful 1861 Confederate types as well.
The demand notes began circulating in August 1861 but were not well accepted, as Americans had an innate distrust of paper money and with good reason, as most paper money traded at a discount to gold and silver coin and tended to lose much or all of its value over time. Figure 1 illustrates the face of a $10 demand note. Figure 2 shows the "green back."
To encourage adoption for commerce, Treasury Secretary Salmon P. Chase took his own salary in demand notes as well as issued communiqués to the Treasury offices and depositories to accept the demand notes at full face value for gold or silver coins. U.S. Gen. Winfield Scott also issued a communiqué to the soldiers, encouraging them to accept these pointing out their convenience to send some money home in this form. Demand notes became more acceptable to merchants and soldiers alike and were part of the monetary landscape in the Union throughout 1861.
A short, inexpensive war proved elusive with the Union defeat at Manassas, Va., in July and subsequent preparations far exceeded the initial 1861 acts funding limits. At first, the limit of demand notes was expanded to $60 million. However, this fell short of funding requirements as well, forcing the Union government to suspend specie payment and craft a new form of paper money - the legal tender notes (later renamed United States Notes) of 1862 and 1863.
The first Legal Tender Act, Feb. 12, 1862, authorized the federal government to issue up to $150 million of legal tender notes. These were issued in $1, $2, $5, $10, $20, $50, $100, $500 and $1,000 denominations dated 1862 and 1863. Figure 3 shows an example of a $2 legal tender note. Unlike demand notes, legal tender notes were not redeemable in silver or gold coins, nor could they be used to pay duties on imports. The amount of legal tender notes outstanding would be expanded and by June 30, 1863, nearly $400 million of legal tender notes had been issued compared with only $3.3 million in demand notes. Given this expansion of the legal tender paper money supply, people began to take legal tender notes at a discount to demand notes and an even larger discount to gold. Over time, the demand notes would be redeemed while the legal tender notes would continue to circulate at a discount to gold.
Today, demand notes are truly rare. A few hundred $5 notes survive, perhaps 150 to 175 $10 demand notes remain, and fewer than 30 $20 notes are accounted for today. Demand notes are usually collected by type, one of each denomination, but some collectors opt to collect an example from each Treasury Office of Depository (Boston, New York, Philadelphia, Cincinnati or St. Louis) by Friedberg number. Robert Friedberg created a classification system of United States paper money that is widely used today. The well-known Friedberg numbers are found in several books on United States paper money.
Some of these demand notes are excessively rare or not available. A type collection of Demand notes can range from $20,000 in low grade to more than $150,000 for condition census examples of each of the three denominations. The cost of a Friedberg number set incorporating all of the collectible examples could approach or exceed $1 million.
The legal tender notes are much more available, at least the lower denomination examples. In addition to the denomination types, different design types exist for the backs and lesser design differences appear on the faces, resulting from some being printed by the National Bank Note Co. and others by the American Bank Notes Co.
A basic, collectible denomination set would include the $1, $2, $5, $10, $20, $50 and $100 notes and could range in value from about $25,000 in Very Good to more than $250,000 for a condition census level set, most of which would be Gem Uncirculated save the $50 and $100 notes. Figure 4 illustrates the famous Spread Eagle $100 legal tender note. A more affordable short set would not include the $50 and $100 notes, bringing entry costs down to less than $3,000 for a low-grade set.
A complete Friedberg set of Civil War issued legal tender notes would cost significantly more than these ranges and would comprise more than 25 notes, a few of which are very rare. Only a tiny number of $500 and $1,000 legal tender notes survived and are missing from almost all collections.
It is a good time to begin collecting Civil War era Union paper money with the sesquicentennial (150th) anniversary of the Civil War approaching in 2011. Interesting and fun collections can be built for less than $3,000 consisting of many of the 1862 and 1863 legal tender types. One can expand beyond the Civil War into the beautiful, Reconstruction-era Rainbow legal tender notes of Series 1869 as well as subsequent issues to explore late 19th century monetary history in the United States. Have fun!
About the author: Pierre Fricke is the author of Collecting Confederate Paper Money - Comprehensive Edition 2005 and Collecting Confederate Paper Money - Field Edition 2008. He is currently working with George Tremmel on Confederate Depository Receipts and Exchange Certificates, due to be published in 2010 - part of a growing series on Confederate fiscal collectibles.
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