What Is a Federal Reserve Note?
A Federal Reserve Note is essentially the official paper currency of the United States. Federal reserve notes, or dollar bills, are printed by the U.S. Treasury under the instruction of Federal Reserve member banks. These banks also serve as a clearinghouse for smaller, local banks where checks and bills are exchanged in order to appropriately adjust the cash on hand at these local banks. Federal reserve notes should not be confused with Federal Reserve Bank Notes, which were only issued to individual Federal Reserve member banks, and which were eliminated in the 1930s.
Before 1971, Federal Reserve Note values were backed by an amount of gold, held by the U.S. Treasury, which was equivalent in value to each note. During the Nixon presidency, this gold value-backing, known as the "gold standard," was dropped as policy to create what is known as a "flat currency." From 1971 and onward, the value of Federal Reserve Notes have been backed by the U.S. government's assertion that paper money is legal tender.
Each Federal Reserve Note features a myriad of symbols and numbers in addition to the presidential portraits placed in the middle, or roughly in the middle, of the note in question. These symbols, notes and numbers serve as identifying features to more easily discern the legitimacy of the bill, the year the bill was printed and the Federal Reserve bank which issued the bill. The placement and appearance of these tiny notations changes after a number of years, mainly to discourage counterfeiting. An example of the most commonly and frequently altered Federal Reserve Note feature is the signature of the Secretary of the Treasury or the Treasurer of the United States who is in office when the bills are being printed. Other examples of changes in Federal Reserve Note features are the altering of the Treasury seal on the $100 bill from an Latin inscription to an English in 1966, and the words "In God We Trust" printed on all U.S. paper currency from 1963 onward.
To better identify the identity of the Federal Reserve Bank responsible for issuing a particular Federal Reserve Note, a system was instituted in 1996 which featured a universal seal that represented the entire Federal Reserve system. This seal features a serial number in the upper left area, and a small letter and number underneath which denote the identity of the Federal Reserve Bank from which the Federal Reserve Note was issued. For example, a universal seal which bears the letter and number "B2" underneath the serial number identifies the Federal Reserve Note as having been issued by the Federal Reserve Bank in New York City. The letter and number "F6" identifies the Federal Reserve Bank which issued the Federal Reserve Note as being located in Atlanta, GA.
The serial numbers present on Federal Reserve Notes are printed to denote the denomination and series which the note belongs to. Notes whose serial numbers are damaged during the printing process are required to be replaced in order to achieve a proper count for that particular series of Federal Reserve Notes. Notes which are replacements for damaged bills are designated by a serial number which is out of sequence with the other bills in that series, with a star placed after this serial number. These replacement bills are sometimes referred to as "star notes."
