When U.S. needs money in Civil War, it turns to Lincoln and demand notes

By Jeff Starck



When the U.S. government got into the business of issuing paper money to support the nation during the Civil War, it relied on a well-known salesman to make the pitch.

Images courtesy of www.HeritageCurrency.com. Abraham Lincoln appears on the Series 1861 $10 demand notes, known also as "Greenbacks" for their colorful backs. The notes were part of an issue meant to fund the U.S. government's operation during the Civil War.
The $10 denomination of these Series 1861 non-interest-bearing notes, or demand notes, depict President Abraham Lincoln, a historical feat that was more than circumstantial.

Demand notes are notable for being the first federal paper money issued for circulation. The $5 and $20 demand notes depict allegorical figures but bear no portraits. Thus Lincoln's portrait made the $10 notes the first U.S. federal paper money to depict a living person.

Lincoln's appearance on these notes was a political act. Lincoln's portrait, engraved by Frederick Girsch based on a photograph by C.S. German, acted as "the visualization of a political myth into a commercial image," according to Fred Reed in Coin World (July 10, 2000, issue).

"On currency, we witness this materialization of metaphor: the federal government's money was valuable because it was identified with the president and the destiny of our federal Union."

It was a critical time for the Union as it approached bankruptcy while engaging in war.

Salmon P. Chase, secretary of the Treasury under Lincoln, proposed the production of non-interest-bearing notes to circulate as money to raise necessary funds.

According to Wesley Clair Mitchell in A History of the Greenbacks, in spite of doubts "that the government had the constitutional authority to issue paper money, Congress adopted Chase's plan in the Act of July 17, 1861, and the first U.S. government-issued paper money came into being."

The Acts of July 17 and Aug. 5, 1861, authorized the production of $60 million of the notes that became popularly known as "demand notes," a title based on certain provisions of their issuance.

Each note bears the promise to pay the bearer the designated number (five, 10 or 20) of dollars on demand. Payment, however, could be made by only the assistant treasurer of the United States at Boston, New York, Philadelphia, St. Louis or Cincinnati.

Demand notes were also nicknamed "Greenbacks" for the green ink used on the back.

According to Paper Money of the United States by Arthur L. and Ira S. Friedberg, the notes are additionally unique in U.S. currency in that "they alone bear neither the Treasury Seal nor the actual names of the Treasurer and Register of the Treasury. They also have the serial number imprinted only once."

Demand notes bear the dates July 17, 1861, and Aug. 10, 1861. The later date may represent the days the notes were first issued to the public.

An 1861 issue of notes totaling $50 million in face value was followed by an issue of $10 million in total face value in February 1862. The two issues were produced by both the American Bank Note Co. and the National Bank Note Co., each a private printer in New York under contract with the government.

The $10 note's face design features a bust of Abraham Lincoln to the left, a vignette of an eagle with draped shield in the top center and an allegorical female representing Art to the right.

On the back, the numeral 10 appears both to the right and left of a Roman numeral X, with ten dollars centered in the top and bottom of the bill.

According to Mitchell, demand notes were payable in gold on demand at the subtreasuries and receivable for taxes and custom dues.

The government suspended specie or in-kind payments after Dec. 28, 1861, and the new paper money could not be converted into coin, either silver or gold, explain the Friedbergs. Redemption was thus an empty promise, and the public was forced to accept the new currency purely on faith, believing that the money would be good.

That was a tough sell.

Merchants, store owners and railroad corporations refused them or restricted their use. Banks worried government money would drive their own issues from circulation, Mitchell states.

The notes gained some traction because the government used them to pay soldiers and creditors, and the secretary and other Treasury officials signed a paper agreeing to take them in payment of their salaries.

By 1862, demand notes had gained a foothold in the American consciousness, just as they were being withdrawn in favor of other paper money.

A small quantity of notes is extant, and Lincoln's image remains as a lesson in the politics of paper money during wartime.