Produced by the Bureau of Engraving and Printing and issued by the 12 Federal Reserve Banks of the Unites States of America in accordance to the Federal Reserve Act of 1913, the Federal Reserve Notes are one of two remaining US paper currency in circulation which are off legal tender today.

Before obtaining the notes, the Federal Reserve Bank must first prove that it owns equal amounts of collateral in value as a guarantee. These are usually in the form of gold certificates, US securities, and other physical assets. This requirement, which was motioned by the United States Congress, is to ascertain that in case of the dissolution of the Federal Reserve System, the liabilities of these notes can be transferred and managed by the United States Government, after first attaining the warranted assets and collateral of the Federal Reserve Banks.

Being first printed in 1914, the Federal Reserve Notes of today are not exchangeable for any form of commodities, even gold and silver, and aren’t secured by anything either. This wasn’t always the case though, as it was redeemable for silver before the year 1964, and gold before the year 1933, both these years being the end of the silver and gold standards respectively. Today, in exception of what the notes will or can buy, it has no obligated value by itself. In simple terms, the Federal Reserve Notes will only buy you all the goods and services backed by the nations economy, a term also known as fiat currency.

Federal Reserve Notes are distributed to commercial banks belonging to the Federal Reserve System, and are issued by the Federal Reserve Banks as and when requested. In order to pay for the Federal Reserve Notes in full, these commercial banks are required to first draw down their accounts with the Federal Reserve Banks in their respective districts.

The other US paper currency which remains as legal tender today are the United States Notes, even though it is no longer placed in circulation since its issuance was discontinued in January 21, 1971, making it obsolete. The United States Notes, interestingly, was also the first paper currency issued in the United States of America, making its debut during the Civil War after it was approved by the Legal Tender Act of 1862.

The United States Notes was issued directly by The Treasury Department, under the watchful eyes of the Unites States Government. It was limited to an amount of only $300 million in circulation at any given time, an insignificant figure these days but a magnanimous sum during the Civil War. In prior to the year 1964, the United States Notes, like the Federal Reserve Notes, was also commonly exchanged for silver and gold.

The most significant difference between a United States Note and a Federal Reserve Note is that a United States Note was reassigned into circulation free of interest, or as a bill of credit, whereas the Federal Reserve Note will generate interest to banks and stockholders. These stockholders will then act as a lending agent between the Government and the people.

Another difference between these two types currencies is that the treasury seal and the serial numbers on the United States Notes are printed in red, while these features appears in green on the Federal Reserve Notes. The United States Notes have also been credited with originating the term “Greenback”, as the currency was first printed in a distinctive green reverse, giving birth to the famous moniker that US dollar bill is today known as.