Paper Money

History of paper money

Federal Reserve notes

Federal Reserve notes make up the majority of U.S. paper money in circulation today. The rest consists of U.S. notes and other currency still in circulation but no longer issued. The Bureau of Engraving and Printing (BEP), a division of the U.S. Treasury, prints Federal Reserve notes in denominations of $1, $2, $5, $10, $20, $50, and $100. Until 1946, it also printed $500, $1,000, $5,000, and $10,000 notes. These larger denominations circulated until 1969, when Congress discontinued them due to lack of use.

As the nation's central bank, the Federal Reserve issues, distributes, processes, and accounts for Federal Reserve notes in the United States and abroad. Congress passed the Federal Reserve Act in 1913, which mandated an elastic currency that would expand and contract based on public demand. The 12 regional Federal Reserve Banks, through their network of branches throughout the country, distribute Federal Reserve notes to the public through depository institutions. Federal Reserve assets are used as collateral for Federal Reserve notes in circulation. The Federal Reserve holds these assets chiefly in the form of U.S. Treasury, federal agency, and government-sponsored enterprise securities.

Former currencies

The U.S. Treasury issued demand notes in 1861 to finance the Civil War. Nicknamed "greenbacks" because of their color, they were the first paper currency to circulate in the United States after the Continentals (issued during the Revolutionary War). The following year, Congress authorized a new class of currency. Called United States notes—sometimes "legal tenders"—they ranged in denomination from $1 to $10,000. These notes, considered the first legal national currency, circulated alongside Federal Reserve notes until their issuance ended in 1971.

Other paper currency no longer in circulation includes national bank notes, which national banks issued from 1863 to 1935, and gold certificates, which the Treasury issued in exchange for gold coin and bullion. These notes circulated from 1865 to 1933. Silver certificates, authorized in 1878 and issued in exchange for silver dollars, accounted for nearly all of the $1 notes in circulation until November 1963, when the first $1 Federal Reserve notes were issued.

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