In the summer of 1862 a grim mood gripped the northern portion of the
United States. The southern half of the nation was in armed rebellion.
Americans were killing Americans on the battlefield in increasing
numbers in one bloody battle after another. While the Union forces
were experiencing some success in the western theater, in the East the
Army of the Northern Virginia was proving to be more than a match for
the Army of the Potomac.
Citizens on both sides of the conflict, seeing no quick end to the
bloodshed, were worried, and their concerns were felt in the economy.
In December 1861, the banks had suspended specie payments for paper
money. The banks’ decision meant they would no longer redeem paper
money — those notes issued by state-chartered banks and the first
issues of the federal government — with silver or gold coin. Gold and
silver coinage, bearing an intrinsic value not found in paper notes,
quickly developed a premium over paper money and what coinage was in
circulation quickly disappeared, hoarded by a fearful populace seeking
to preserve their wealth.
Even copper-nickel Flying Eagle and Indian Head cents, each with an
intrinsic value of less than their face value, were pulled from
circulation. By the summer of 1862, the North was in the midst of a
coinage shortage as an estimated $25 million in small change had
disappeared, according to numismatist Fred L. Reed III. Something had
to be done.
Private ‘money’ issues
Lack of small change in commerce in 1862 was no minor hardship. As
Reed explains in his book Civil War Encased Stamps, “A quarter was a
good deal of money,” adding, “Three cents would buy a newspaper or a
stage ride. Five cents would buy a glass of beer and a lunch.”
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The Philadelphia Mint, the only facility striking cents, devoted
most of its production to that denomination, nearly tripling its
output compared to 1861 (10,100,000 cents in 1861, and 28,075,000
cents in 1862). However, the public still had to turn to several
alternative forms of money as government coinage disappeared:
➤ Postage stamps, already bearing denominational markings, became a
go-to alternative, to the point that the Post Office could not meet
the demand. Of small size and flimsy nature, the stamps were easily
crumpled, and their glue made them sticky and easily soiled, Reed explains.
Entrepreneurs introduced novel ways to protect the stamps during
their use as currency. Small envelopes were used for housing the
stamps as they went from transaction to transaction; and late in the
summer of 1862, John Gault’s small holders made of brass with a mica
window were pressed into service (creating the encased postage stamps
that are the focus of Reed’s book).
➤ Local municipalities and merchants alike issued local scrip notes
in various denominations.
➤ In the autumn of 1862, first in Cincinnati and then elsewhere
throughout the north, private cent-sized tokens with patriotic themes
and merchant advertising — the famed Civil War tokens — began to circulate.
However, a government response was needed beyond increased
production of cents. That response, the results of which would
probably astonish noncollectors today, was to print notes in
denominations of less than a dollar — first the postage currency and
then fractional currency notes.
From 1862 to 1876, the federal government released five separate
issues of notes bearing denominations of less than a dollar. These
notes became the primary small change in use in the United States for
about 14 years, through the Civil War and the Reconstruction period
that followed. While these notes were in use, an individual could go
into any business and pay for a purchase using small notes in
denominations as small as 3 cents and as high as 50 cents. Even today,
technically, one could legally attempt to spend these notes in
commerce, though doing so might draw a displeased reaction from
tellers and cash register operators and unwanted attention from local
law enforcement unfamiliar with the fractional notes.
Notes in the first of the fractional issues are officially called
“postage currency,” so named because they were essentially stamp
designs printed on security paper with additional inscriptions
identifying them as legal currency. Congress reacted to the acute
small change shortage on July 17, 1862, by authorizing payments in
stamps, officially sanctioning a practice already occurring. The Post
Office Department was required to supply stamps to the Treasury
Department, which would then issue them to the public. The Treasury
secretary asked that the stamps for this purpose be issued without
glue, because of the problems already resulting from the sticky
The Post Office worked with one of the private security printers
that it used, and the result were “small fractional notes” in
denominations of 5, 10, 25 and 50 cents, each bearing the imprints of
the stamps in daily use. The 5-cent notes bore a 5-cent Thomas
Jefferson stamp, with the 25-cent notes bearing five overlapping
imprints of the same stamp; the 10-cent note bore a single George
Washington stamp, the 50-cent note five of the Washington stamps. All
of the notes also bore inscriptions identifying them as POSTAGE
CURRENCY and defining how they could be used. Some of these small
notes were even perforated, just like the individual stamps.
Four more series
The postage currency and subsequent four issues of fractional
currency became one of the standard forms of small change for nearly
15 years. Congress also authorized a bronze 2-cent coin and
copper-nickel 3-cent and 5-cent coins, introduced in 1864, 1865, and
1866, respectively, which allowed reduced production of the cent after
1865 (more than 35.4 million 1865 cents were struck; in contrast,
mintage of 1866 cents dropped to 9.8 million pieces).
Since the postage currency issues were essentially an emergency
issue, the expedient use of stamp images as the primary design feature
made sense. However, when the Second Issue of fractional notes was
issued in the fall 1863, the designs were made a little more
elaborate. Though the central device remained a portrait of the type
used on stamps, it was now within an engraved oval frame; use of
actual stamp dies was ended. Beginning with the Third Issue (released
in December 1864), some of the fractional notes bore designs that
borrowed elements from the $1 and higher denomination notes in
circulation, including larger portraits in vignette style (no
surrounding frame). Fourth Issue notes (issued from July 1869 to
February 1875) gained elaborate Treasury Department seals, just like
the notes in denominations of $1 and higher, and several bore
nonportrait vignettes. The Fifth Issue, which circulated from February
1874 to February 1876, was the most elaborate yet in terms of designs.
In their dimensions, the first two series generated notes the same
size regardless of denomination (approximately 44 millimeters by 66
millimeters), but different sizes were used for each denomination
starting in the Third Issue.
As for the subjects of the portraits of actual persons used, the
first notes bore depictions of Founding Fathers Washington and
Jefferson. Later issues would bear portraits of momentarily important
early 19th century political figures destined for future obscurity,
and some of the notes portrayed living politicians, such as Edwin
Stanton, Lincoln’s secretary of war, and F.E. Spinner, treasurer of
the United States during the Civil War and Reconstruction era.
One portrait generated a fair deal of controversy and directly led
to passage of legislation that has since made it illegal to depict a
living person on a piece of U.S. paper money. The Third Issue 5-cent
note depicts Spencer M. Clark, first superintendent of the National
Currency Bureau (later the Bureau of Engraving and Printing), the
agency formed in 1862 to coordinate the printing of paper money. It is
unclear why Clark felt he was authorized to place his own portrait on
some of the notes he was charged with printing, though several stories
are told to explain how it came about. Whatever Clark’s reasoning, his
use of his own portrait drew political condemnation, and in 1866,
Congress made it illegal to depict a living person on a note, a law
still in enforcement today.
Some of the printing of the notes was done by contracted private
printers, notably the National Banknote Company and the American Bank
Note Company, which produced the First Issue postage currency. For
added security, the faces and backs of some First Issue notes were
printed at different firms; on the same sheets, one company would
printing the faces and another would print the backs. When the
National Currency Bureau began operations, printing of the fractionals
was moved there, starting with the Second Issue.
How should you collect fractionals? It is up to you.
You might, for example, focus on a single denomination, such as the
3-cent note or 5-cent note. You could collect one of each major design
in each series of your chosen denomination, and, if want a particular
challenge, you might pursue all of the many varieties identified for a
particular issue (varieties can be distinguished by inscriptions,
overprinted elements and even the kind of paper used).
Another focus could be a particular issue, collecting each of the
denominations or types in, say, the Fourth Issue series.
You could also seek to acquire one note of each denomination with no
emphasis placed on a particular issue. Such a collection would
comprise a single example each of the 3-, 5-, 10-, 15-, 25- and
The most challenging approach would be to collect everything — every
denomination and every major type in all five issues. Such a
collection would, at minimum, contain two dozen notes, and if you were
to pursue varieties, would total dozens of additional notes. That is a
challenge few have undertaken, the most famous collectors who went the
whole route being F.C.C. Boyd and John J. Ford Jr. (who acquired the
Boyd Collection after Boyd’s death).