by Harry Corrigan 

Anyone familiar with foreign currency knows that it is frequently color-coded. For example, in Canada five-dollar notes have a blue back, tens are purple, twenties are green. In the United States, of course, all notes have green backs - but that wasn't always the case. Until 1886 our currency had color-coded backs - it's just that it wasn't by denomination. It was coded by the legal obligation expressed on the note. Even though color-coding was mostly dropped after 1886, a vestige of it returned in the colors of the Treasury seals of small size notes.

But why was the type of legal obligation so important as to require color-coding? Those of us old enough to remember when Silver Certificates and United States Notes circulated know that no merchant cared whether your money had a blue, red or green seal. But in the era when federal money was first issued, that is, during the Civil War, it could matter a lot.

The first issue of federal money, the Demand Notes of 1861, are only a footnote in our monetary history. They were a very small issue only in circulation a few months before being retired and replaced with legal tender notes (or as they were later called, United States Notes.) But they did establish a color and nickname for legal tender notes - "Greenbacks."

The problem with legal tender notes is that that was all they were good for - a tender to pay a debt. You couldn't trade them at face value for gold or silver coin. Actually, during the Civil War you would on average have had to give about a dollar and a half of greenbacks to get a gold dollar. So when Gold Certificates were first issued in 1863, it probably seemed like a good idea to print the backs in gold ink to make sure you didn't accidentally spend it as a green-back. (The first Issue of Gold Certificates had a red seal and a green anti-counterfeiting overprint on the face - just like legal tender notes did, so the only really obvious difference was the color of the ink on the back of the note.)

The next issue of paper money - national currency - also had a distinctive back: a green border around a black vignette. But why was it important to distinguish nationals from legal tenders, since they circulated at equal value? Well, if your creditor demanded legal tenders in payment of a debt, and you only had nationals, you were in default - nationals were not legal tender. Your mortgage could be foreclosed because you had the wrong type of money. In additional national banks had to keep their reserves in greenbacks or coin, not national bank notes, not even those of another bank. So it was important for banks to separate nationals from greenbacks.

In 1870, national gold banks began issuing notes. Since these were payable in gold, not legal tenders, and gold was still at a premium, it was important to distinguish them from regular nationals. Thus the back border was printed in brownish-gold ink instead of green.

In 1878, silver certificates were first issued. Silver was still going at a small but meaningful premium over legal tenders or regular nationals, so being readily distinguishable was still important. Thus silver certificates were issued with a silver-gray back.

In 1879 came the "resumption of specie payments." That is, the U.S. Treasury would now redeem any legal tender notes presented to it in specie, i.e., gold coin. In effect, all money became interchangeable at par. So unless you needed legal tenders to pay off a debt, it really didn't matter what kind of banknote you carried.

Why then the last "color-coding" - the Second charter nationals "brownbacks" of 1882? I suspect it had to do with the legal fiction that the first charter banks were being liquidated and replaced with a distinct second charter bank - even though the building, the officers, even the depositors all remained the same. The old first charter nationals had to be retired when they came in, and the brown backs made it easy to identify which banknotes could be reissued.

Anyway, in 1886, when the next issue of silver certificates came out, they had green backs, as did all new issues of currency since, except for gold backs. (I'm not sure why - perhaps because we were now officially on the gold standard, or because so many contracts required payment in gold.)

And why, you may ask, didn't the merchant of the 1950's care whether he got a blue, red or green seal (or a brown or a gold seal, for that matter)? Well, it's because since 1935, all currency, whatever its type, has been legal tender. And gold clauses in contracts were no longer enforceable. Though the government continued to carefully distinguish currency type by seal color, they were now all the same. It made no difference to anyone, except a few Treasury accountants who had to balance the books. And since the write off of the last United States Notes, even they don't care.

ã Copyright Raleigh Coin Club   -  1999, 2000, 2001, 2002

The RCC grants permission to reprint any articles not copyrighted by the author for non-profit educational purposes only, provided the Raleigh Coin Club and the author are cited as the original source.