The Federal Reserve Act of December 23, 1913 authorized the first issue of Federal Reserve Bank Notes. All denominations were issued from 5 to 10,000 Dollars. The notes from 5 to 100 Dollars are series of 1914. The higher denomination notes from 500 to 10,000 Dollars are series of 1918. With the establishment of the Federal Reserve System, a new type of currency came into existence. The notes issued under this system are the Federal Reserve Bank Notes and the Federal Reserve Notes.
The Federal Reserve Bank Notes were also inscribed “National Currency“; the Federal Reserve Notes are not so inscribed and are currency of the system as a whole rather than issued by individual banks in the system. The obverse designs of these two issues are markedly different while the reverses are similar.
The Federal Reserve Notes were issued by the United States to all twelve Federal Reserve Banks. The notes were not issued by the banks themselves (as were the Federal Reserve Bank Notes) and the obligations to pay the bearer were borne by the government, and not by the banks. Hence, these notes were not secured by United States bonds or other securities as had been the case with the National Bank Notes. In reality, the notes were secured, but the nature of the security is not certified on the actual notes. The obligation on the Federal Reserve Notes is completely unlike that on the Federal Reserve Bank Notes, and is as follows,
“The United States of America will pay to the bearer on demand Dollars . . . 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.“
There were two separate issues of the Federal Reserve Bank Notes, the series of 1915 and series of 1918. The first issue was authorized by the Federal Reserve Act of December 23rd, 1913 and consisted only of 5, 10 and 20 Dollar notes. These were not issued by all twelve banks in the system but only by the banks at Atlanta, Chicago, Kansas City, Dallas and San Francisco. The last-named bank issued 5 Dollar notes only. These notes are inscribed “National Currency” and are similar to the earlier National Bank Notes. The obligation to pay the bearer on demand is made by the specific Federal Reserve Bank and not by the United States. The obligation on the first issue of Federal Reserve Bank Notes is similar to that on the National Bank Notes. There is a slight variance in the wording but not in the meaning.
The second 1918 issue of Federal Reserve Bank Notes was authorized by the Act of April 23, 1918. The notes were issued by all twelve banks. Part of the obligation on this issue differs from that on the first issue, as follows,
“Secured by United States bonds or United States Certificates of indebtedness or United States one-year gold notes, deposited with the Treasurer of the United States of America. … “
Federal Reserve Bank Notes are all quite rare for most were redeemed. The Treasury Department records only a little more than $2 million dollars is still outstanding out of a total issue of nearly $762 million dollars. Obviously, such notes were redeemed most likely prior to 1934 and the confiscation of gold under Franklin D. Roosevelt. To reduce the cost of printing currency, the notes were reduced in size to the current format by the Act of July 10th, 1929. After the enactment of the Gold Reserve Act of 1933, the obligation was changed to read:
“This note is legal tender foe all debts, public and private, and 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.”
Of course gold was no longer lawful money domestically, so exactly what could the notes be redeemed for was at best coins.
