Federal Reserve Note

A Federal Reserve Note (FRNs or ferns, commonly referred to as U.S. paper money, or bills, and not to be confused with "Federal Reserve Bank Note") is a type of banknote issued by the Federal Reserve System and is the only type of U.S. banknote that is still produced today.

Federal Reserve Notes are fiat currency, with the words "this note is legal tender for all debts, public and private" printed on each bill. (See generally usc|31|5103.) They are issued by the Federal Reserve Banks and have replaced United States Notes, which were once issued by the Treasury Department.

The paper on which the Federal Reserve Notes are printed is made by Crane & Co. of Dalton, Massachusetts.

History

The first institution with responsibilities of a central bank in the U.S. was the First Bank of the United States, chartered in 1791 by Alexander Hamilton. Its charter was not renewed in 1811. In 1816, the Second Bank of the United States was chartered; its charter was not renewed in 1836, after it became the object of a major attack by president Andrew Jackson. From 1837 to 1862, in the Free Banking Era there was no formal central bank. From 1862 to 1913, a system of national banks was instituted by the 1863 National Banking Act. A series of bank panics, in 1873, 1893, and 1907 provided strong demand for the creation of a centralized banking system. The first printed notes were Series 1914.

Value

The authority of the Federal Reserve Banks to issue notes comes from the Federal Reserve Act of 1913. Legally, they are liabilities of the Federal Reserve Banks and obligations of the United States government. Although not issued by the Treasury Department, Federal Reserve Notes carry the (engraved) signature of the Treasurer of the United States and the United States Secretary of the Treasury.

Federal Reserve Notes are fiat currency, which means that the government is not obligated to give the holder of a note gold, silver, or any specific tangible commodity in exchange for the note. Before 1964, some notes were "backed" by silver and before 1933, by gold: that is, the law provided that holders of Federal Reserve notes could exchange them on demand for a fixed amount of metal (although from 1934–1971, only "foreign" holders of the notes could exchange the notes for gold on demand). [cite web | author= Answers.com | url= http://www.answers.com/gold+standard?cat=biz-fin | title= Gold standard | accessdate=2008-02-17] Since 1964 (see Silver Certificate), Federal Reserve Notes have not been backed by any single specific asset, but are backed by all assets held in collateral by the Federal Reserve, and by the power of the government to collect assets in taxes. While usc|12|411 states that "Federal Reserve Notes . . . shall be redeemed in lawful money on demand" this means US coins. Thus today the notes are backed only by the "full faith and credit of the U.S. government"—the government's ability to levy taxes to pay its debts. In another sense, because the notes are legal tender, they are "backed" by all the goods and services in the U.S. economy; they have value because the public may exchange them for valued goods and services in the U.S. economy. [ [http://www.treasury.gov/education/faq/currency/legal-tender.html#q2 U.S. Treasury - FAQs: Legal Tender Status of currency ] ]

Production and distribution

Federal Reserve Notes are printed by the Bureau of Engraving and Printing (BEP), a bureau of the Department of the Treasury. [cite web | author= United States Department of the Treasury | url= http://www.ustreas.gov/organization/org-chart-122005.pdf | title= Organization chart of the Department of the Treasury | accessdate=2008-02-17|format=PDF] The Federal Reserve Banks pay the BEP only the cost of printing the notes (about 4¢ a note), but to circulate the note as new currency rather than merely replacing worn notes, they must pledge collateral for the face value, primarily in Federal securities.

Federal Reserve notes, on average, remain in circulation for the following periods of time: [cite web | author= Federal Reserve System | date= 2005-06-27 | url= http://www.federalreserve.gov/generalinfo/faq/faqcur.htm | title= Currency: Notes and Coin - Frequently Asked Questions | accessdate=2008-02-17]

Post-2004 Redesigned Series

Beginning in 2003, the Federal Reserve introduced a new series of bills, featuring images of the symbols of freedom. The new $20 bill was first issued on October 9, 2003; the new $50 on September 28, 2004; the new $10 bill on March 2, 2006; the new $5 on March 13, 2008 and the new $100 at a later time. [cite web | author= Bureau of Engraving and Printing | url= http://www.moneyfactory.gov/section.cfm/4 | title= The Redesigned Currency: Safer, Smarter, More Secure | accessdate=2008-02-17]

All small-sized bills measure 6.14 × 2.61 in = 155.956 × 66.294 mm.

ee also

*Bureau of Engraving and Printing

References

"This article incorporates text from the website of the [http://www.ustreas.gov/education/faq/currency/legal-tender.html#q2 US Treasury] , which is in the public domain."

External links

* [http://www.federal-reserve-notes.com Federal Reserve Notes]
* [http://www.moneyfactory.gov/ Bureau of Engraving and Printing]
* [http://www.friesian.com/notes.htm#reserve Six Kinds of United States Paper Currency]