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The Story of
Red Seal, United States Bank Notes
by Stan Klein The United States
government got into the paper money business by
necessity, a way of financing the Civil War
through money creation known as fiat money.
Congress authorized Legal Tender Notes by the
Acts of July 17 and August 5, 1861 (first day of
issue). They were colloquially called
"Greenbacks" due to their mono-green coloring on
the note backs and "Demand Notes" since the
first issue notes were redeemable for specie
(gold and silver coins) on demand. When specie
redemption was suspended on December 21, 1861
the value of these notes began to fall in terms
of federal coinage. The public soon accepted the
currency on faith that the new U.S. government
money would sustain its value in commerce. At
the same time, coinage, including copper coins,
were rapidly disappearing from circulation
The 2nd issue bears the date March 10, 1862 and
is the great-grandfather of the small size legal
tender notes with
red seals and red Treasury
seal that are still occasionally seen today. All
bank notes have an obligation that tells the
user how the note may be used. The first
obligation of Legal Tender notes states "This
note is legal tender for all debts, public and
private, except for dues on imports and interest
on the public debt, and is exchangeable for U.S.
six-percent, twenty-year bonds, redeemable at
the pleasure of the United States after five
years." This was soon replaced by an obligation
sans the reference to bonds, although it was
"receivable in payment of all loans to the
United States". The currency was money by
government decree.
Though the public looked askance at the new
currency, Legal Tender notes continued to be
issued in denominations of $1, $5, $10, $20,
$50, $100, $500, $1000, $5000 (1878 only) and
$10,000 (1878 only) long after the Civil War
ended. It wasn't until 1865 that gold
certificates were issued and not until 1886 that
redeemable paper money in the form of Silver
Certificates, and then later, Coin Notes, were
issued. Legal Tender issues continued with their
characteristic red Treasury seal and label of
"Legal Tender Note" or "United States Note."
By the 1920's, the Treasury Department launched
a cost saving measure by reducing the physical
size of the currency. Legal Tender notes
continued to be issued but only in denominations
of $1 (series 1928 only), $2 (1928, 1953, 1963),
$5 (1928, 1953, 1963) and $100 (series 1966
only). The 1966 $100 note was the last issue of
Red Seal notes and was used to satisfy the Act
of May 31, 1878 requiring that $346,681,016 of
Legal Tender notes always be in circulation.
This figure was technically a percentage of all
currency types in circulation in 1878. The Act
requiring Legal Tender notes was finally
discontinued in 1986. Of the small size
Red
Seals the series $1 note has an interesting
history. It was printed in April and May of 1933
but most were released only in Puerto Rico in
1948.
Today there is a dwindling supply of Legal
Tender notes in circulation. As they are
redeemed for Federal Reserve Notes, the notes
are returned to the Treasury for destruction.
Only collectors and dealers have preserved these
interesting notes for posterity. |