About Paper Money

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U.S. Postage and Fractional Currency

In 1862, the need for small coins to make change became acute. Following the suspension of specie payments by the large Northeastern banks and the federal Treasury late the previous year, coinage became widely hoarded and commanded premium values as compared to the government greenbacks. The result of this hoarding was extreme difficulty in making change for ordinary business transactions.

Private attempts to remedy the small change shortage were ingenious but proved futile. Municipal, corporate and private scrip could not completely replace the withdrawn subsidiary silver coinage on a nationwide scale and local expedients such as John Gault's encased postage were little more than temporary measures.

To relieve the citizenry of the "worthless paper trash" that was circulating, F.E. Spinner, treasurer of the United States, convinced Congress of the necessity for a federal, fractional paper currency. He proposed that the United States issue these small notes in values less than $1 and in sufficient quantities to meet the demand for small change. Congress responded with the Act of July 17, 1862, which monetized the postage and other stamps of the United States.

The immediate effect of the law was a run on the U.S. Post Offices to secure stamps for change. By Aug. 21, however, the first notes of the belated postage currency issue reached circulation. Privately printed, these notes bore the imprints of the contemporary 5- and 10-cent postage stamps. Jefferson appears on the 5- and 25-cent issues and Washington on the 10- and 50-cent notes. Both perforate and imperforate varieties exist.

The reverse obligation on these notes states, "Exchangeable for United States Notes by any Assistant Treasurer or designated U.S. Depositary in sums not less than five dollars. Receivable in payment of all dues to the U. [sic] States less than five Dollars."

Because of the prevalence of counterfeiting, the designs of the successive fractional note issues were changed frequently. The fractional currency, which succeeded the makeshift (and some students contend illegal) postage currency, was issued in four series under authorization of the Act of March 3, 1863, which also provided that the Treasury Department print its own notes.

The so-called "Second Issue" (first issue under the latter act) consists of four notes in the same denominations as the earlier issue, but all bearing a bust of Washington in a bronze oval frame on obverse.

The reverse obligation was altered to read, "Exchangeable for United States Notes by the Assistant Treasurers and designated depositaries of the U.S. in sums not less than three dollars. Receivable in payment of all dues to the United States less than five dollars except customs." As with the postage currency, these notes were also receivable for U.S. postage stamps.

The third general issue added a 3-cent denomination, and each denomination has a different design. Washington appears on the 3-cent note; Spencer M. Clark, on the 5-cent issue; Washington, on the 10-cent bill; William Pitt Fessenden, on the 25-cent note; and either a seated figure of Justice or F.E. Spinner on the 50-cent issue. The Spinner note also exists with two distinct back varieties. The proposed 15-cent Grant-Sherman essay also exists in the form of uniface specimens.

The fourth general issue includes only 10-, 15-, 25- and 50-cent denominations. The 10-cent note bears a bust of Liberty; Columbia appears on the 15-cent issue; Washington, on the 25-cent bill; and Lincoln, Edwin Stanton or Samuel Dexter appear on the 50-cent bill.

The short fifth issue is confined to three notes: William Meredith, on the 10-cent note; Robert Walker, on the 25-cent bill; and William Crawford, on the 50-cent issue.

The small notes continued to circulate until the Resumption Act of Jan. 14, 1875, provided for their retirement by subsidiary silver coinage. In all, nearly $370 million worth of these small bills were issued, but most have long since been redeemed or destroyed. It is estimated that less than $5,000 face value remains available to collectors.