Demand Note

2008/9 Schools Wikipedia Selection. Related subjects: Currency

Top row: The distinctive green ink used on the backs of Demand Notes gave rise to the term "greenbacks"
Bottom row: Prominent design elements used on the front of $5 and $20 Demand Notes (located respectively under their denomination); pictured in the middle is the front of a $10 Demand Note with prominent design elements listed

A Demand Note is a type of United States paper money that was issued between August 1861 and April 1862 during the American Civil War in denominations of 5, 10, and 20 dollars. The original legislation referred to the currency as " treasury notes." The term "Demand Note" was applied retroactively because the notes were redeemable on demand for gold coin. While Demand Notes were not the first type of paper money issued by the United States federal government, they were the first in wide circulation.

Demand Notes were created to serve as a means of monetary exchange in place of gold and silver coins that were vanishing from circulation at the time due to hoarding of commodities. The U.S. government used the notes to pay its incurred expenses and also to pay the salaries of its workers and military personnel. Once the public learned the notes were redeemable in gold coin, the notes began to circulate as widely as gold and silver coins had.

Because of the distinctive green ink used on the reverse of all Demand Notes, the notes were nicknamed "greenbacks". However, other U.S. government-issued notes of the time such as Interest Bearing Notes and the later Legal Tender Notes, which issued in larger quantities, were also known by this nickname. The obverse of the notes contained familiar elements such as the images of a Bald Eagle, Abraham Lincoln, and Alexander Hamilton; the portraits used on Demand Notes are different than the ones seen on U.S. currency today.

After Demand Notes were discontinued, they were replaced with Legal Tender Notes. Legal Tender Notes of the time, however, were not redeemable in coin like Demand Notes, and thus Demand Notes took precedence. As a result, many more Demand Notes were redeemed and not as many notes exist today.

Pre-issuance

After the outbreak of the Civil War in 1861, the Union needed funding for its war efforts and to pay its employees. Congress responded by passing the Act of July 17, 1861 which allowed for $250,000,000 to be borrowed on the credit of the United States. Of this sum, $50,000,000 was to be issued in non-interest bearing Demand Notes in denominations less than fifty dollars and not less than ten dollars. The notes were to be redeemable through the Assistant Treasurers' offices at Philadelphia, Boston, and New York. They were to be hand signed by the first or second comptroller of currency or the register of the treasurer; they were also supposed to be counter-signed by any other treasury officials designated by the Secretary of the Treasury. These signature provisions would later be altered several times. This act also stipulated that prior to December 31, 1862, an individual Demand Note could be re-issued into circulation after it was presented for redemption. This act, however, never specified what the notes could be redeemed for.

Another reason for Demand Notes issuance was the disappearance of gold and silver coins from circulation; these government-issued coins were the only form of legal tender at the time. The panic of war drove people to hoard coins due to their precious metal content. The reserves of gold and silver of the United States began to become depleted. Issuing paper money ensured that supplies could more easily be maintained. Also, gold and silver could be more readily available for international trade.

Just before they were to be released, the Act of August 5, 1861 stipulated several changes to the issuance of Demand Notes. It allowed for Demand Notes to be issued in denominations of not less than $5 and be redeemable through the Assistant Treasurer's office at St. Louis or the bullion depository in Cincinnati. This act also stated that Treasurer of the U.S. and Register of the Treasury or any treasury official appointed by the Secretary of the Treasury should sign the notes. Under this act, Demand Notes did not need to carry the Seal of the U.S. Treasury.

Because the Bureau of Engraving and Printing did not exist at the time, the American Bank Note Company and National Bank Note Company were contracted to create Demand Notes. Both companies were prominent printers of banknotes for private and state-chartered banks throughout the country. Most likely, the American Bank Note Company engraved the printing plates for $5 and $10 notes while the National Bank Note Company engraved the printing plates for the $20 notes. All of the Demand Notes were printed by the American Bank Note Company.

The idea of issuing paper money as a circulating medium in lieu of precious metal coins was not a new idea then. Only once, however, in 1815, had the U.S. Treasury issued non-interest bearing notes that were intended to circulate in the place of coinage. These are retrospectively referred to as "Small Treasury Notes". Some $3,392,994 were issued in denominations of $3, $5, $10, $20, and $50. This was far less of an amount than the 50 million dollars authorized for Demand Notes, however. Not only that, but Small Treasury Notes circulated almost exclusively to the Eastern United States. Banknotes issued by private and state-chartered banks, however, were rampant throughout the country at the time (with the exception of the Western United States where paper money generally was not very common and/or publicly accepted). These types of banknotes were predominantly only useful in a close proximity to the issuing bank. The value of a banknote was based upon its ability to be redeemed in coin; thus, a nearby bank location was essential. Demand Notes, on the other hand, would later be redeemable at five U.S. government locations throughout the country, thus making them nationally usable. This would enable Demand Notes to essentially become the first broadly-circulating non-interest bearing paper money issued by the United States federal government.

Post-issuance

Initially, various merchants, banks and especially the railroad industry accepted the notes at a discounted rate or did not accept them all. In order to ease public distrust in the newly issued notes, a circular was sent to the five payment locations and instructed the Assistant Treasurers to redeem the notes in gold coin if requested. This also created willingness of banks to redeem the notes for coin as well. This put Demand Notes on par with the value and purchasing power of gold coins; thus, the public was more willing to accept the notes. They could be redeemed for silver coinage as well.

Initially the notes were hand-signed by F.E. Spinner (Treasurer), and L.E. Chittenden (Register of the Treasury). However, this proved unfeasible, and Congress authorized the notes to be signed by procurators. Seventy women were hired at an annual salary of $1,200 to sign the notes. A distinction of "for the" was written after a signature to indicate that it was being used in place of Treasury officials. Apparently, some skilled women could even imitate the signature of F.E. Spinner. In late August "for the" was added to printing plates to simplify the hand-signing operation.

The American Bank Note Company stopped printing notes payable at St. Louis and Cincinnati several days after revising printing plates with "for the".

After December 28, 1861 a worsening economic situation forced banks to stop redeeming Demand Notes for gold coin. The notes then began to appear at Assistant Treasurers' offices in great numbers for redemption.

The Act of February 12, 1862 allowed for an additional $10,000,000 in Demand Notes to be issued. This act brought the final possible amount of Demand Notes that could be issued to a sum of $60,000,000. Not long after, on April 1, 1862, the full $60,000,000 in Demand Notes had been issued.

Issuance of Legal Tender Notes soon followed Demand Notes. The obverse of 1862- and 1863-issue $5, $10, and $20 Legal Tender Notes were very similar in design to the respective Demand Notes; various minor changes were made along with the addition of the U.S Treasury Seal. Legal Tender Notes, unlike Demand Notes, were not redeemable in coin, despite a statement of "Will pay to the bearer on demand" or "Promises to pay the bearer" on the note. Demand Notes, still on par with gold, then traded at a premium with Legal Tender Notes and also had greater purchasing power over the newly issued depreciated notes.

Once Legal Tender Notes were in circulation, the U.S. Treasury Department started to withdraw as many Demand Notes as possible from circulation. The advantage to this practice would be not having to redeem the notes for coin. A year after their issuance, Demand Notes became a rarity in circulation.

Production figures

Note:
†: 3,000 $10 notes were reissues of redeemed notes thus creating the $30,000 overage of the legislated $60,000,000

Design

Common features among denominations

The obverses of all denominations Demand Notes contained the following common features printed on them:

• A statement that the United States would pay the bearer the denomination on demand (written uniquely per denomination)
• A phrase stating the note was payable by the assistant treasurer (written uniquely per denomination)
• Stated location of payment (redemption):
  • New York
  • Boston
  • Philadelphia (abbreviated as Philad. on $10 and $20 notes)
  • Cincinnati
  • St. Louis
• "ACT OF JULY 17, 1861", the act that first authorized emergency Civil War paper money
• The phrase RECEIVABLE IN PAYMENT OF ALL PUBLIC DUES (meaning the notes were a form of monetary exchange for government payment)
• "AMERICAN BANK NOTE CO., NEWYORK", the company that printed Demand Notes
• "Washington" and the date "August 10th, 1861" printed in a cursive font (the date, however, was written uniquely per denomination)
• "Patented 30 June 1857." referring to a patent held by the American Bank Note Company for "Canada" green ink used on the obverse of the note
• The serial number printed only once in red ink
• Face plate letter – A, B, C, or D (indicating which metal plate was used to print the note)
• Lines above "Register of the Treasurer" and "Treasurer of the United States" where the officials' signatures would normally be
• Lack of an United States Treasury Seal (with the exception of fractional currency, this is unlike any other U.S. federally-issued currency)

The reverses of all Demand Notes contained UNITED STATES OF AMERICA, a large numeral of the denomination, and an indication of the denomination (as a small numeral or Roman numeral) repeated many times in a small geometric shape; all of the reverses were printed in green ink.

Common varieties among denominations

Variations of "For the" on a $10 Demand Note

• Either signatures of L. E. Chittenden and F. E. Spinner or signatures of authorized treasury personnel
• For the was used to indicate that a person was authorized to sign in place of treasury officials and is either hand written or engraved with the following varieties:
  • Handwritten as either "for the", "For the", or "For The" above the line for the signature
  • Engraved as either "For the" or "for the" next to "Register of the Treasurer" and "Treasurer of the United States"
• SERIES followed by a letter and period or no series indication at all

Collecting ability

Of the surviving Demand Notes, the vast majority are of the type with "For the" engraved on them and from the locations of New York, Boston, and Philadelphia. No notes are known with the actual signatures of F. E. Spinner and L. E. Chittenden. Because of their rarity, Demand Notes are mainly collected by acquiring a single example of the $5 and $10 denomination. Facsimile reproductions are also available.

The price and value of a Demand Note depend primarily on its rarity (which location and "for the" handwritten or engraved) and secondarily on its condition. The most common five dollar notes usually range in price and value from $1,000 to $40,000. Ten dollar notes of the most common varieties usually have a price and value range of $2,500 to $60,000. Price and value ranges of the twenty dollar notes with "for the" engraved and from New York, Boston, and Philadelphia usually vary from $17,000 up to $100,000. Apart from the most common types, Demand Notes usually sell at auction; the sole exception to this is the $5 New York notes with "for the" handwritten, which usually have price and value of $5,000 to $12,000.

Note: Most common is used as a relative term to describe the percentage of notes of the $5 and $10 denominations that remain today