Fr 1226-1227 Americas Smallest Note

Most readers would be surprised that the United States once issued a note barely larger than some commemorative postage stamps that had a face value of only three cents. Even more surprising to some is that this Fr. 1226-1227 America’s Smallest Note is a valuable collectible note today.

Specifications

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Background
Near the end of the Civil War, the value of the Yankee greenback dollar had fallen to 46-cents by January, 1865. In other words inflation, caused by the large military expenditures of four years of armed combat, had so ravaged the northern economy that prices had doubled. Coins, except for the newly-minted 1864 bronze Indian cents and two cent pieces which were as yet still scarce in circulation, were virtually unavailable for small transactions.

Large numbers of private small change notes circulated, even though the government had tried to curtail their issue. These one-cent, two-cent and three-cent notes, issued by grocers, bakers, tram lines, bar keepers and other merchants, became the small change of the common man. The federal government also issued Fractional Currency in larger denominations of five- to fifty-cents.

Although these small merchant notes were by and large useful and the public had accommodated itself to their use, some refused bills issued by other merchants. Some of these notes were even repudiated by their issuers. These were not the two principal problems, however. First, these privately issued notes were often made of the cheapest lithography on insubstantial paper that literally “wore out” in circulation.

Second, even legitimate merchants often imposed redemption requirements that could not be met: for example, “redeemable in sums of one dollar.”  This meant that Susie Homemaker, attending to six children and keeping the hearth warm while her husband was a private in a volunteer regiment campaigning “down South” would have to come up with too many notes of a single merchant. She might find twenty different due bills in her purse, but they would be from a dozen different merchants.

As a further remedy to small change problems such as these, the federal government decided to issue an even smaller fractional note. This was to be the smallest denomination note our government had or would ever issue with a face value of only three cents. Although such a denomination might ring “odd” to modern ears, three cents was a very useful value at the time.

History
Before the war, our government had coined a three cent subsidiary silver coin ---the Mint began coining three cent pieces in 1851. It’s not necessary to get into the reasons why here now, but millions of pieces were in circulation until hoarding during the Civil War chased these small coins, nicknamed “trimes,” from the marketplace.

What would three cents buy before the war? A daily newspaper. A draught of beer. A meatless sandwich. Hundreds of small items were available for mere pennies in those days. Three cents would mail a letter, such as a “come home soon” missive to Private Homemaker on the march in South Carolina. But with these three cent coins gone, a void existed.

This need had been filled for a short while with those very same three-cent stamps early in the war. Since three-cents was the common first class letter rate at the time, a great many three cent stamps were spent as small change. When postal authorities closed the stamp windows to small change buyers, use of the cent was taxed even more.

Additionally, the post office would not accept a three cent bill from a millinery store, or a saloon for a stamp. So the issue of three cent notes by the federal government which were acceptable at the stamp office, and everywhere else around town, and redeemable by the government was a boon to merchants, to citizens laboring on the home front, as well as to soldiers in the field.

According to reports, these three cent notes were first issued Jan. 23, 1865, although they were not readily available until about mid-February. By then Atlanta and Savannah in Georgia had fallen to northern armies, and the handwriting on the wall foretold the imminence of the South’s “Lost Cause.” One can only surmise why it had taken the government so long to issue this useful denomination -- two and one-half years after it had begun issuing its other fractional bills.

Three cent government issue fractional notes measure a paltry 39 mm by 64 mm, or in scales we all can understand an inch and a half by two and one half inches approximately. An apt comparison is to quarter-fold a dollar bill horizontally, and you have almost precisely the size of these diminutive bills.

Unlike the similarly sized private notes of the period, these federal fractionals were (according to the legend on their back) “Exchangeable for United States Notes by Assistant Treasurers and Designated Depositaries of the United States.” They could buy stamps and could be spent everywhere. The only limitation on their use is that the government reserved the right to receive them for taxes in sums not less than three dollars, and like their larger denomination greenback cousins, they could not be used to pay customs fees.

Therefore these notes were not only mighty small, they were mighty useful, too, even if their “greenback value” when they first circulated measures up to only about a cent and a half!

Notes bear a portrait of George Washington on face, and the date of the authorization of Fractional Currency generally, March 3, 1863. Probably because of their small size limitations, the three center does not bear the facsimile signatures shown on larger denominations of Third Issue Fractional Currency. These notes were printed in sheets of 25.

Collecting
Once printing began these bills were rushed into circulation. Fractional currency expert Rob Kravitz says more than 20 million three cent fractionals were issued by April 5, 1865, by which time Congress had already authorized a small three cent copper nickel coin as a replacement.

Collectors recognize two slightly different varieties of this note. Fr. 1226 (like the note shown) is the so-called “light curtain” variety as contrasted to Fr. 1227, which has a “dark curtain” in the oval behind Washington’s head. Notes with the dark background are the scarcer of the two varieties, Catalog values range from $30-$100 for Fr. 1226. Values for Fr. 1227 range up into the low hundreds for crisp notes. A somewhat scarce variant of Fr. 1226 is the “no pearls” issue, which lacks the small chain of beads above the “L” in “Fractional.”

Due to their novelty value, uncut multiples bring more than equal numbers of single notes. Sheets of three cent fractionals are known. One was shown on the cover of Paper Money magazine, the award-winning bimonthly journal of the Society of Paper Money Collectors, on its Jan/Feb 2006 issue. That sheet brought about $2,000 at public auction.