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Federal Reserve Notes


Federal Reserve Notes

"FRN" redirects here. For other uses, see FRN (disambiguation).

A Federal Reserve Note, also a United States banknote or U.S. banknote, is a type of banknote used in the United States of America. Denominated in United States dollars, Federal Reserve Notes are printed by the United States Bureau of Engraving and Printing on paper made by Crane & Co. of Dalton, Massachusetts. Federal Reserve Notes are the only type of U.S. banknote currently produced.[1] They are distinct from Federal Reserve Bank Notes, each of which was issued (until 1971) and backed by one, rather than all collectively, of the twelve Federal Reserve Banks.

Federal Reserve Notes are authorized by Section 16 of the

Federal Reserve Notes are money supply, either with the issuance of new Federal Reserve Notes or with the creation of debt money (deposits). This increase in the monetary base leads to larger increase in the money supply through the fractional-reserve banking as deposits are lent and re-deposited where they form the basis of further loans.


Prior to centralized banking, each commercial bank issued their own notes. 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, and banks issued their own notes again. From 1862 to 1913, a system of national banks was instituted by the 1863 National Banking Act. The first printed notes were Series 1914. In 1928, cost-cutting measures were taken to reduce the note to the size it is today.


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.

At the time of the Federal Reserve's creation, the law provided for notes to be redeemed to the Treasury in gold or "lawful money." The latter category was not explicitly defined, but included United States Notes, National Bank Notes, and certain other notes held by banks to meet reserve requirements, such as clearing certificates.[5] The Emergency Banking Act of 1933 removed the gold obligation and authorized the Treasury to satisfy these redemption demands with current notes of equal face value (effectively making change). Under the Bretton Woods system, although citizens could not possess gold, the federal government continued to maintain a stable international gold price. This system ended with the Nixon Shock of 1971. Present-day Federal Reserve Notes are not backed by convertibility to any specific commodity, but only by the legal requirement that they are issued against collateral.

Production and distribution

A commercial bank that maintains a reserve account with the Federal Reserve can obtain notes from the Federal Reserve Bank in its district whenever it wishes. The bank must pay the face value of the notes by debiting (drawing down) its reserve account. Smaller banks without a reserve account at the Federal Reserve can maintain their reserve accounts at larger "correspondent banks" which themselves maintain reserve accounts with the Federal Reserve.[6]

Federal Reserve Notes are printed by the Bureau of Engraving and Printing (BEP), a bureau of the Department of the Treasury.[7] When Federal Reserve Banks require additional notes for circulation, they must post collateral in the form of direct federal obligations, private bank obligations, or assets purchased through open market operations.[8] If the notes are newly printed, they also pay the BEP for the cost of printing (about 4¢ per note). This differs from the issue of coins, which are purchased for their face value.[6]

A Federal Reserve Bank can retire notes that return from circulation by exchanging them for collateral that the bank posted for an earlier issue. Retired notes in good condition are held in the bank's vault for future issues.[9] Notes in poor condition are destroyed[10] and replacements are ordered from the BEP. The Federal Reserve shreds 7,000 tons of worn out currency each year.[11]

Federal Reserve notes, on average, remain in circulation for the following periods of time:[12]

Denomination $1   $5   $10  $20  $50  $100
Years in circulation 5.9   4.9   4.2  7.7  3.7  15.0

The Federal Reserve does not publish an average life span for the $2 bill. This is likely due to its treatment as a collector's item by the general public; it is, therefore, not subjected to normal circulation.[13]


U.S. paper currency has had many nicknames and slang terms. The notes themselves are generally referred to as bills (as in "five-dollar bill") and any combination of U.S. notes as bucks (as in "fifty bucks"), or, much less commonly, bones or beans. Notes can be referred to by the first or last name of the person on the portrait (George for One Dollar,[14] or even more popularly, "Benjamins" for $100 notes).

See tables below for nicknames for individual denomination
  • Greenbacks, any amount in any denomination of Federal Reserve Note (from the green ink used on the back). The Demand Notes issued in 1861 had green-inked backs, and the Federal Reserve Note of 1914 copied this pattern.
  • "dead presidents", any amount in any denomination of Federal Reserve Note (from the portrait of a U.S. president on most denominations).
  • fin, finif (from the Yiddish word for five), or finski is a slang term for a five-dollar bill.
  • sawbuck is a slang term for a ten-dollar bill, from the image of the Roman numeral X.
  • double sawbuck is slang term for a twenty-dollar bill, from the image of the Roman numeral XX, and in some cases can be used to denote a pair of ten-dollar bills, which would be double sawbucks, depending on the situation and type and amount of currency on hand.
  • One hundred dollar bills are sometimes called "Benjamins" (in reference to their portrait of Benjamin Franklin) or C-Notes (the letter "C" is the Roman numeral 100).
  • One thousand dollars ($1000) can be referenced as "Large", "K" (short for "kilo"), "Grand" or "Stack", and as a "G" (short for "grand").
  • The popularity of the Saturday Night Live skit "Lazy Sunday" has led to $10 notes sometimes being referred to as "Hamiltons".
  • In Raymond Chandler's novel, The Long Goodbye, the protagonist Marlowe refers to a five thousand dollar bill as "a portrait of Madison", due to the president portrayed on the bill being James Madison.

Many more slang terms refer to money in general (green stamps, moolah, paper, bread, dough, do-re-mi, freight, loot, cheese, cake, stacks, greenmail, jack, rabbit, cabbage, pie, cheddar, scrilla, scratch, etc.).



Despite the relatively late addition of color and other anti-counterfeiting features to U.S. currency, critics hold that it is still a straightforward matter to counterfeit these bills. They point out that the ability to reproduce color images is well within the capabilities of modern color printers, most of which are affordable to many consumers. These critics suggest that the Federal Reserve should incorporate holographic features, as are used in most other major currencies, such as the pound sterling, Canadian dollar and euro banknotes, which are more difficult and expensive to forge. Another robust technology, the polymer banknote, has been developed for the Australian dollar and adopted for the New Zealand dollar, Romanian leu, Papua New Guinea kina and other circulating, as well as commemorative, banknotes of a number of other countries. Polymer banknotes are a deterrent to the counterfeiter, as they are much more difficult and time consuming to reproduce. They are said to be more secure, cleaner and more durable than paper notes.[15] One major issue with implementing these or any new counterfeiting countermeasures, however, is that (other than under Executive Order 6102) the United States has never demonetized or required a mandatory exchange of existing currency. Consequently would-be counterfeiters can easily circumvent any new security features simply by counterfeiting older designs.

U.S. currency does, however, bear several anti-counterfeiting features. Two of the most critical anti-counterfeiting features of U.S. currency are the paper and the ink. The exact composition of the paper is classified, as is the formula for the ink. The ink and paper combine to create a distinct texture, particularly as the currency is circulated. The paper and the ink alone have no effect on the value of the dollar until post print. These characteristics can be hard to duplicate without the proper equipment and materials. Furthermore, recent redesigns of the $5, $10, $20, and $50 notes have added EURion constellation patterns which can be used by scanning software to recognize banknotes and refuse to scan them.

The differing sizes of other nations' banknotes are a security feature that eliminates one form of counterfeiting to which U.S. currency is prone: Counterfeiters can simply bleach the ink off a low-denomination note, typically a single dollar, or a five dollar bill, which happened in most of the cases, and reprint it as a higher-value note, such as a $100 bill. To counter this, the U.S. government has included in all $5 and higher denominated notes of 1990 series and later a vertical laminate strip imprinted with denomination information, which under ultraviolet light fluoresces a different color for each denomination ($5 note: blue; $10 note: orange; $20 note: green; $50 note: yellow; $100 note: red).[16]

According to the central banks, the ratio of counterfeited bank notes is about 10 in one million of real bank notes for the Swiss franc, of 50 in one million for the Euro, of 100 in one million for United States dollar and of 300 in one million for Pound sterling.[17]


Critics, such as the American Council of the Blind, note that U.S. bills are relatively hard to tell apart: they use very similar designs, they are printed in the same colors (until the 2003 banknotes, in which a faint secondary color was added), and they are all the same size. The American Council of the Blind has argued[18] that American paper currency design should use increasing sizes according to value and/or raised or indented features to make the currency more usable by the vision-impaired, since the denominations cannot currently be distinguished from one another non-visually. Use of Braille codes on currency is not considered a desirable solution because (1) these markings would only be useful to people who know how to read Braille, and (2) one Braille symbol can become confused with another if even one bump is rubbed off. Though some blind individuals say that they have no problems keeping track of their currency because they fold their bills in different ways or keep them in different places in their wallets, they nevertheless must rely on sighted people or currency-reading machines to determine the value of each bill before filing it away using the system of their choice. This means that no matter how organized they are, blind people still have to trust sighted people or machines each time they receive US banknotes.

By contrast, other major currencies, such as the pound sterling and euro, feature notes of differing sizes: the size of the note increases with the denomination and different denominations are printed in different, contrasting colors. This is useful not only for the vision-impaired; they nearly eliminate the risk that, for example, someone might fail to notice a high-value note among low-value ones.

Multiple currency sizes were considered for U.S. currency, but makers of vending machines and change machines successfully argued that implementing such a wide range of sizes would greatly increase the cost and complexity of such machines. Similar arguments were unsuccessfully made in Europe prior to the introduction of multiple note sizes.

Alongside the contrasting colors and increasing sizes, many other countries' currencies contain tactile features missing from U.S. banknotes to assist the blind. For example, Canadian banknotes have a series of raised dots (not Braille) in the upper right corner to indicate denomination. Mexican peso banknotes also have raised patterns of dashed lines. The Indian Rupee has raised patterns of different shapes printed for various denominations on the left of the watermark window (20: vertical rectangle, 50: square, 100: triangle, 500: circle, 1,000: diamond).

Suit by sightless over U.S. banknote design

Ruling on a lawsuit filed in 2002 (American Council of the Blind v. Paulson), on November 28, 2006, U.S. District Judge James Robertson ruled that the American bills gave an undue burden to the blind and denied them "meaningful access" to the U.S. currency system. In his ruling, Robertson noted that the United States was the only nation out of 180 issuing paper currency that printed bills that were identical in size and color in all their denominations and that the successful use of such features as varying sizes, raised lettering and tiny perforations used by other nations is evidence that the ordered changes are feasible.[19]

Robertson accepted the plaintiff's argument that current practice violates Section 504 of the Rehabilitation Act.[20] The Treasury is appealing the decision. The judge ordered the Treasury Department to begin working on a redesign within 30 days.[18][21][22][23]

The plaintiff's attorney was quoted as saying "It's just frankly unfair that blind people should have to rely on the good faith of people they have never met in knowing whether they've been given the correct change."

Government attorneys estimated that the cost of such a change ranges from $75 million in equipment upgrades and $9 million annual expenses for punching holes in bills to $178 million in one-time charges and $50 million annual expenses for printing bills of varying sizes.[24]

On May 20, 2008, in a 2-to-1 decision, the United States Court of Appeals for the District of Columbia Circuit upheld the earlier ruling, pointing out that the cost estimates were inflated and that the burdens on blind and visually impaired currency users had not been adequately addressed.[25]

As a result of the court's injunction, the Bureau of Engraving and Printing is planning to implement a raised tactile feature in the next redesign of each note, except the $1 (which it is by law not allowed to redesign[26][27]) and the version of the $100 bill already in process. It also plans larger, higher-contrast numerals, more color differences, and distribution of currency readers to assist the visually impaired during the transition period.[28] The Bureau received a comprehensive study on accessibility options in July 2009, and solicited public comments from May to August 2010.[29]

Fiat currency

Former Congressman Ron Paul, and libertarians influenced by Austrian economics, criticize Federal Reserve Notes because they are a form of fiat currency and are not backed by tangible assets such as gold or silver. Such critics argue that Federal Reserve Notes can lose value easily and point to the currency's inflation rates as proof of this claim.[30]


Critics, including former U.S. Congressman Ron Paul,[31] allege that according to the U.S. Constitution, Article I, Section 8, that only the U.S. Congress has the ability

To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;[32]

and, according to section 10, that

No State shall... make any Thing but gold and silver Coin a Tender in Payment of Debts;[32]

and thus Federal Reserve banknotes are not legal tender, as they were not issued by Congress, states have no authority to recognize anything but gold or silver (including federal reserve notes), and the Federal Reserve does not have the authority to print or create money.[33] Though the printing of money is physically done by the Department of the Treasury, that agency is told by the Federal Reserve how much to print. The Federal Reserve also does "regulate the value" of the U.S. dollar through its various operations, as authorized by Congress.

Others contend that, since Congress passed the Federal Reserve Act, the Federal Reserve is constitutional as it was created by Congress and Congress retains oversight over the Federal Reserve System.[34] Congress retains the ability to delegate some of its legislative powers to other branches of the government or agencies based on the U.S. Supreme Court's interpretation of the nondelegation doctrine.

Anti–Federal Reserve argumentation generally ignores the established U.S. Supreme Court precedent McCulloch v. Maryland, which ruled constitutional the Second Bank of the United States, forerunner to the Federal Reserve. McCulloch v. Maryland explicitly states that Congressional delegation of these powers to chartered entities is valid under the Necessary and Proper Clause.

Design regulations

There are a few regulations to which the U.S. Treasury must adhere when redesigning banknotes. The state motto "In God We Trust" must appear on every banknote.[35] The bill requiring this, H.R. 619,[36] was introduced by Representative Charles Edward Bennett of Florida. The inclusion of the motto was meant to serve as a frequent claim that the country was founded upon faith in God as well as spiritual values during the era of McCarthyism. President Dwight D. Eisenhower signed this bill in 1955, but it was not until 1957 that banknotes bearing this motto were first circulated.[37][38]

The portraits appearing on the U.S. currency can feature only deceased individuals, whose names should be included below each of the portraits.[35] Since the standardization of the bills in 1928, the Department of the Treasury has chosen to feature the same portraits on the bills. These portraits were decided upon in 1929 by a committee appointed by the Treasury. Originally, the committee had decided to feature U.S. presidents because they were more familiar to the public than other potential candidates. The Treasury altered this decision, however, to include three statesmen who were also well-known to the public: Alexander Hamilton (the first Secretary of the Treasury who appears on the $10 bill), Salmon P. Chase (the Secretary of the Treasury during the American Civil War who appeared on the now uncirculated $10,000 bill), and Benjamin Franklin (a signer of the Declaration of Independence, who appears on the $100 bill).[39]

In 2001, the Legal Tender Modernization Act was proposed which would prohibit any redesign of the $1 bill.[40] This act would have superseded the Federal Reserve Act (Section 16, paragraph 8) which gives the Treasury permission to redesign any banknote to prevent counterfeiting.[41] More recently, the Omnibus Appropriations Act (2009) has stated that none of the funds set aside for either the Treasury or the Bureau of Engraving and Printing may be used to redesign the $1 bill.[42]

Series detail

Series overview

Large-size notes
Series Denominations Obligation clause[43]
1914 $5, $10, $20, $50, $100 This note is receivable by all national and member banks and Federal Reserve Banks and for all taxes, customs and other public dues. It is redeemable in gold on demand at the Treasury Department of the United States in the city of Washington, District of Columbia or in gold or lawful money at any Federal Reserve Bank.
1918 $500, $1000, $5000, $10,000
Small-size notes
Series Denominations Obligation clause Remarks
1928 $5, $10, $20, $50, $100, $500, $1000, $5000, $10,000 Redeemable in gold on demand at the United States Treasury, or in gold or lawful money at any Federal Reserve Bank Branch ID in numerals
1934 This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury, or at any Federal Reserve Bank Branch ID in letters; during the Great Depression
1950 $5, $10, $20, $50, $100 Slight design changes: branch logo; placements of signatures, "Series xxxx", and "Washington, D.C.",
1963, 1969, 1969A,1969B,1969C, 1974 $1, $5, $10, $20, $50, $100 This note is legal tender for all debts, public and private First $1 FRN; "Will pay to the bearer on demand" removed; Seal in Latin replaced by seal in English in 1969[13]
1976 $2 First $2 FRN, Bicentennial
Series Denominations Obligation clause
1977, 1977A, 1981, 1981A, 1985, 1988, 1988A $1, $5 This note is legal tender for all debts, public and private
1977, 1977A, 1981, 1981A, 1985, 1988A $10, $20
1977, 1981, 1981A, 1985, 1988 $50, $100
1990 $10, $20, $50, $100
1993 $1, $5, $10, $20, $50, $100
1995 $1, $2, $5, $10, $20
Large-portrait ($1 and $2 remain small-portrait)
1996 $20, $50, $100
1999, 2001 $1, $5, $10, $20, $50, $100
2003 $1, $2, $5, $10, $100
2003A $1, $2, $5, $100
2006 $5, $100
2006A $100
Color notes ($1 and $2 remain unchanged)
2004 $20, $50
2004A $10, $20, $50
2006 $1, $5, $10, $20, $50
2009 $1, $2, $5, $10, $20, $50, $100
2009A $100
2013 $1, $5, $20

Series 1928–1995

Small size notes
Image Value Description Date of
Obverse Reverse Obverse Reverse first series last series
$1 George Washington Great Seal of the United States 1963 current (2013)
$2 Thomas Jefferson Trumbull's Declaration of Independence 1976 current (2009)
$5 Abraham Lincoln Lincoln Memorial 1928 1995
$10 Alexander Hamilton Treasury Department Building
$20 Andrew Jackson White House
109px 109px $50 Ulysses S. Grant United States Capitol 1993
$100 Benjamin Franklin Independence Hall
$500 William McKinley "Five Hundred Dollars" 1934
$1000 Grover Cleveland "One Thousand Dollars"
$5000 James Madison "Five Thousand Dollars"
$10,000 Salmon P. Chase "Ten Thousand Dollars"

Series 1996–2006

Small size notes
Image Value Description series
Obverse Reverse Obverse Reverse first last
$5 As small-size, small-portrait notes 1999 2006
$10 2003
$20 1996 2001
$100 2006A

Post-2004 redesigned series

Beginning in 2003, the Federal Reserve introduced a new series of bills, featuring images of national 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. Introduction of a new $100 had been repeatedly delayed.[44] but was revealed on April 21, 2010. The one and two dollar bills still remain small portrait, unchanged, and unwatermarked.[45]

Color series
Images Value Background color Description Date of
Obverse Reverse Obverse Reverse Watermark first series Issue
$5 Purple President Abraham Lincoln; Great Seal of the United States Lincoln Memorial Two Watermarks of the Number "5" 2006 March 13, 2008
$10 Orange Secretary Alexander Hamilton; The phrase "We the People" from the United States Constitution and the torch of the Statue of Liberty Treasury Building Alexander Hamilton 2004 A March 2, 2006
$20 Green President Andrew Jackson; Eagle White House Andrew Jackson 2004 October 9, 2003
$50 Pink President Ulysses S. Grant; Flag of the United States United States Capitol Ulysses S. Grant 2004 September 28, 2004
109px 109px $100 Teal Benjamin Franklin; Declaration of Independence Independence Hall Benjamin Franklin 2009, 2009A October 8, 2013
These images are to scale at 0.7 pixels per millimeter.

All small-sized bills measure 6.14 in × 2.61 in (156 mm × 66 mm), with thickness of 0.0043 in (0.11 mm).

See also

Numismatics portal


This article incorporates text from the website of the US Treasury, which is in the public domain.

External links

  • Bureau of Engraving and Printing
  • Six Kinds of United States Paper Currency
  • Federal Reserve Act: Section 16—The Federal Reserve Board
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