Fractional currency
, with authorized denominations including silver dollars, half-dollars, quarters, dimes, half-dimes, and copper half-cents and cents for fractional values.[6] Production volumes remained low in the early decades due to limited mint capacity and bullion supply, leading to widespread circulation of foreign coins—such as the Spanish silver dollar (or "piece of eight") and its fractional pieces (reales)—which Congress recognized as legal tender until the Coinage Act of 1857 withdrew that status.[6] This reliance on specie ensured intrinsic value but constrained the money supply, as coins were subject to melting, export, or hoarding during economic fluctuations.[7] The absence of a central bank after President Andrew Jackson's veto of the Second Bank of the United States' recharter in 1832—effective 1836—ushered in the free banking era, characterized by state-chartered banks issuing their own paper notes backed variably by specie reserves or state bonds. By the 1850s, over 8,000 banks operated, producing more than 10,000 distinct note varieties in denominations typically starting at $1 or higher, often redeemable in specie on demand but prone to overissue and suspension during panics like those of 1837, 1854, and 1857.[8][9] The federal government refrained from issuing paper currency, instead implementing the Independent Treasury System via the act of 1846, which stored public funds in government vaults as specie to insulate fiscal operations from unstable private banks.[8] This decentralized structure fostered regional variations in note acceptance and reliability, with counterfeit notes and "wildcat" banks exacerbating distrust.[10] Fractional transactions below $1 suffered from persistent shortages of small-denomination coins, as mint output of coppers and silver fractions failed to meet everyday retail and wage needs amid population growth and trade expansion.[6] Economic pressures, including specie drains to Europe and domestic hoarding, prompted merchants, storekeepers, and even some banks to issue unofficial "shinplasters"—private scrip or notes in 5-, 10-, 25-, and 50-cent values—circulating as de facto small change despite lacking legal tender status and often depreciating or failing upon issuer insolvency.[11] States occasionally authorized limited shinplaster emissions, but federal efforts to regulate them, such as the 1834 act limiting notes under $5, proved ineffective amid the lack of uniform enforcement.[11] This patchwork of inadequate small change underscored systemic fragilities, reliant on voluntary redemption and vulnerable to counterfeiting, which intensified during the coin shortages preceding the Civil War.[10]Civil War Onset and Specie Hoarding
The American Civil War commenced on April 12, 1861, with the Confederate attack on Fort Sumter, triggering immediate economic disruptions in the Union, including diminished confidence in financial institutions amid fears of prolonged conflict and fiscal strain.[12] As war mobilization escalated borrowing needs—reaching $250 million in bonds authorized that summer—public apprehension over inflation and bank stability prompted citizens to hoard gold and silver coins, valued for their intrinsic metallic content over potentially depreciating paper alternatives.[13] By late December 1861, hoarding intensified, with gold coins rapidly vanishing from circulation as individuals and businesses stockpiled them against anticipated currency instability; New York banks suspended specie payments on December 28, 1861, marking the effective end of routine coin redemption for notes.[14] President Abraham Lincoln endorsed this suspension to facilitate war financing, as redeeming Treasury notes in specie would have depleted reserves further, but it accelerated the premium on metallic money and widespread export or melting of coins for bullion.[12] Silver coins followed suit, disappearing by late spring 1862, while even copper-nickel cents became scarce by summer, as hoarding extended to all denominations amid the diversion of base metals to military production.[15][16] This specie withdrawal created an acute shortage of small-denomination coins essential for retail trade, retail merchants, and daily commerce, forcing reliance on unofficial substitutes like private shinplasters—small-denomination notes issued by businesses—which proliferated but suffered from inconsistent acceptance and counterfeiting risks.[17] The premium on available cents reached 5-10% in some areas by early 1862, reflecting the hoarding's depth, as metallic currency's scarcity stemmed not only from public distrust but also from banks' inability to maintain reserves under wartime pressures.[18] Ultimately, this vacuum in fractional specie circulation necessitated federal intervention to restore liquidity in minor transactions, paving the way for emergency paper substitutes.[19]History of Issuance
Postage Currency as Emergency Measure (1862)
 During the American Civil War, widespread hoarding of gold and silver coins created an acute shortage of small-denomination currency for everyday transactions, leading merchants and individuals to rely on unreliable private-issued "shinplasters."[3] To address this crisis, Congress enacted legislation on July 17, 1862, prohibiting the circulation of privately issued notes under one dollar and authorizing the Post Office Department to use postage stamps as legal tender for fractional payments up to five dollars.[13][1] In response, U.S. Treasury Secretary Salmon P. Chase directed the issuance of paper notes dubbed "postage currency," despite the act's focus on stamps; these were the first federal fractional currency, printed in denominations of 5, 10, 25, and 50 cents starting August 21, 1862.[3][1] Produced by the American Bank Note Company under designs influenced by Treasurer Francis E. Spinner, who incorporated his own autograph signature for authentication, the notes measured approximately 2.5 by 4 inches and featured simple vignettes such as allegorical figures rather than portraits.[19] Total issuance exceeded 30 million notes by early 1863, providing immediate relief but suffering from rapid wear due to poor paper quality and lack of advanced security features.[1] These emergency notes circulated widely in the North as substitutes for coins, redeemable in lawful money or stamps, but their informal authorization under the postage act—technically stretching the law's intent—highlighted the Treasury's pragmatic improvisation amid wartime fiscal pressures.[20] By mid-1863, counterfeiting and deterioration prompted a transition to more durable second-issue fractional notes under the Legal Tender Act of March 3, 1863, rendering the postage currency obsolete after about 10 months of primary use.[3]Formal Fractional Note Series (1863–1876)
The formal fractional note series was authorized under the Act of March 3, 1863 (12 Stat. 709), which empowered the Secretary of the Treasury to issue non-interest-bearing notes in denominations below one dollar to mitigate the ongoing scarcity of subsidiary coinage caused by wartime hoarding and melting.[21] These notes supplanted the earlier postage currency, providing a more durable and secure medium for small transactions while redeemable in lawful money on demand.[22] Production marked the inaugural effort of the newly established Bureau of Engraving and Printing to handle the entire process of currency fabrication in-house, from engraving to printing, shifting away from reliance on private contractors.[5] Issuance commenced in October 1863 and persisted through five distinct series until February 1876, with total circulation peaking as coins gradually returned following the resumption of specie payments.[23] The initial series, released in late 1863, comprised 5-cent, 10-cent, 25-cent, and 50-cent notes featuring allegorical vignettes such as "America Seizing the Reins of Government" and lacking Treasury seals or uniform sizing across denominations.[1] Subsequent refinements addressed counterfeiting vulnerabilities observed in the postage currency: the second series (1863–1867) standardized note dimensions at approximately 65 by 47 millimeters, introduced perforated counterfeiting deterrents in some varieties, and added bronze powder frames around portraits.[1] Denominations remained 5 to 50 cents, with signatures of Treasury officials like Register Francis E. Spinner appearing in autograph form initially, later printed.[5] The third series (1864–1865) expanded to include a novel 3-cent denomination for ultra-small change, incorporated green-tinted paper and Treasury seals on higher values, and employed intaglio printing for enhanced detail in portraits of figures like Salmon P. Chase.[21] All series bore the legend "United States Fractional Currency" and stipulated redeemability in United States notes, functioning as legal tender for private debts except customs duties.[22] The fourth series (1869) omitted the 5-cent and 3-cent notes, introducing a 15-cent variety exclusively in this issue alongside 10-cent, 25-cent, and 50-cent notes, with full Treasury seals on every denomination and improved vignettes depicting historical persons like William M. Jennings.[1] The fifth and final series (1874–1876) reverted to 10-cent, 25-cent, and 50-cent denominations, featuring refined security elements such as silk fibers embedded in the paper and consistent green seals, reflecting matured anti-forgery techniques developed over the decade.[21] By 1876, as economic recovery facilitated coin minting and circulation—bolstered by the Specie Resumption Act of 1875—demand for fractional notes waned, leading to their redemption and withdrawal from use by July 1, 1876.[22] Across all series, over 400 million notes were produced, valued at roughly $368 million face amount, though precise figures vary by denomination and exact tallying methods employed by the Treasury.[1]Design and Production Features
Denominations and Varieties
The denominations of U.S. fractional currency ranged from 3 to 50 cents, specifically 3¢, 5¢, 10¢, 15¢, 25¢, and 50¢, issued across multiple series to address small-change needs amid coin shortages. Not every denomination appeared in all issues, with the 3¢ unique to the third issue and the 15¢ exclusive to the fourth issue. The first issue (postage currency, August 1862–May 1863) included only 5¢, 10¢, 25¢, and 50¢ notes, printed primarily by the American Bank Note Company and National Bank Note Company on perforated sheets resembling postage stamps for easy separation.[4][24] The second issue (October 1863–February 1867), produced by the newly established Bureau of Engraving and Printing, retained the same denominations (5¢, 10¢, 25¢, 50¢) but featured intricate black ornamental designs on light green paper without portraits or vignettes, emphasizing geometric patterns for security. The third issue (December 1864–February 1869) expanded to include the 3¢ alongside 5¢, 10¢, 25¢, and 50¢ notes; it introduced portraiture, such as Treasurer Francis E. Spinner on 10¢, 25¢, and 50¢ varieties, and marked the first use of intaglio printing for faces. Varieties within this issue included differences in signatures (e.g., penned versus overprinted) and colors (brown or green backs), with some 50¢ notes bearing Spinner's genuine autograph to deter counterfeiting.[1][25][26] The fourth issue (July 1869–February 1875) omitted the 3¢ and 5¢, issuing 10¢, 15¢, 25¢, and 50¢ notes with added Treasury seals in red or green and allegorical figures like Justice or America; the 15¢ denomination, featuring a bust of Columbia, was the scarcest and produced in the lowest quantities. A limited fifth issue (1875–1876) followed similar designs to the fourth but with refined perforations and seals, mainly in 10¢, 25¢, and 50¢, though circulation was minimal as coin resumption neared.[27][28][1]| Denomination (¢) | 1st Issue | 2nd Issue | 3rd Issue | 4th Issue | 5th Issue |
|---|---|---|---|---|---|
| 3 | No | No | Yes | No | No |
| 5 | Yes | Yes | Yes | No | No |
| 10 | Yes | Yes | Yes | Yes | Yes |
| 15 | No | No | No¹ | Yes | No |
| 25 | Yes | Yes | Yes | Yes | Yes |
| 50 | Yes | Yes | Yes | Yes | Yes |